What Kansas state and local use tax did out-of-state vehicle lessors collect beginning August 1, 1994?

Plain-English summary

Beginning with vehicle lease payments billed on or after August 1, 1994, out-of-state vehicle dealers and lessors had to collect Kansas state and local compensating use tax when the vehicle was or would be registered in Kansas at an address where local sales tax applied.

The state compensating-use-tax rate stated in the notice was 4.9%. The additional local rate equaled the city and county retailers' sales-tax rate in effect at the vehicle's Kansas registration address. The notice said local rates then ranged from 0.5% to 2.5%, while some jurisdictions imposed no local tax.

Covered vehicles were those required to be registered for highway use under K.S.A. 8-126 et seq., including automobiles, trucks, truck tractors, trailers, semitrailers, and motorcycles.

The rule did not change collection by in-state dealers and lessors. They continued collecting state and local retailers' sales tax based on the dealer's or lessor's place of business.

An out-of-state lessor administering a lease entered outside Kansas and later registered in Kansas had to submit the Department's supplemental registration application. After registration, the Department would send returns for reporting and remitting the tax.

The notice superseded earlier Department notices, rulings, private letter rulings, and other advice concerning vehicle leases.

What this means for you

An out-of-state lessor could not collect only the Kansas state rate. For each payment billed from August 1, 1994, the lessor needed the vehicle's Kansas registration address to determine whether a city or county tax also applied and at what rate.

Common questions

Q: Which address determined the local rate?
A: The address where the leased vehicle was registered in Kansas.

Q: Did the notice apply only to automobiles?
A: No. It also identified trucks, truck tractors, trailers, semitrailers, motorcycles, and other highway-registered vehicles.

Q: Did an in-state lessor use the registration-address rule?
A: No. The notice says an in-state dealer or lessor continued collecting retailers' sales tax at its place of business.

Q: When did the collection change begin?
A: For lease payments billed on or after August 1, 1994.

Citations and references

• K.S.A. 8-126 et seq. — vehicles required to be registered for highway use.
• Kansas Notice 94-05 — local compensating use tax on out-of-state vehicle leases.

Subject

Use Tax on Leased Vehicles

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 94-05

Original ruling text

Notice
Notice Number: 94-05
Tax Type: Kansas Compensating Tax
Brief Description: Use Tax on Leased Vehicles
Keywords:
Effective Date: 08/01/1994

Body:
NOTICE 94-05

TO: Out-of-State Vehicle Dealers and Vehicle Lessors

FROM: Kansas Department of Revenue

RE: Imposition of Local Compensating (Use) Tax On Vehicle Leases

DATE: July 8, 1994

                     This notice is directed to out-of-state vehicle dealers and lessors who lease vehicles to Kansas
                     residents. Please disregard the notice if you do not engage in such retail activities.


  Kansas law imposes local compensating (use) tax on vehicles leased from out-of-state dealers and lessors. Effective August 1,
  1994, out-of-state vehicle dealers and lessors must charge and collect local compensating (use) tax on all vehicle lease
  payments when the leased vehicle is or will be registered in Kansas at an address where local sales tax is imposed. All lease
  payments billed on or after August 1, 1994 are subject to state and local compensating (use) tax. This notice does not affect
  in-state vehicle dealers and lessors who shall continue to collect the state and local retailers' sales tax that is imposed at
  the dealer's or lessor's place of business.

  The local compensating (use) tax imposition is in addition to 4.9% Kansas state compensating (use) tax imposition. Local
  compensating (use) tax is imposed at a rate equal to the city and county retailers' sales tax in effect at the address where the
  vehicle is registered. Local retailers' sales tax rates currently range from .5% to 2.5%. Some jurisdictions do not impose local
  retailers' sales tax.

  State and local compensating (use) tax is imposed on leases of vehicles that are required to be registered for highway use
  pursuant to K.S.A. 8-126 et seq. Such vehicles include automobiles, trucks, truck tractors, trailers and semi-trailers,
  motorcycles and various other vehicles.

  Lessors and dealers administering leases of vehicles that are leased outside the state of Kansas and subsequently
  registered in Kansas must complete and return the enclosed "SUPPLEMENTAL REGISTRATION APPLICATION
  FOR VEHICLE LESSORS". A return envelope is enclosed for your convenience. The department will register your
  business for purposes of reporting the appropriate retailers' sales and retailers' compensating tax, upon our receipt of
  your completed registration application. Once you are registered, the department will periodically mail you returns for
  reporting and remitting the tax.

  This notice supersedes all previous Department of Revenue notices, revenue rulings, private letter rulings or other advice that
  concern vehicle leases entered into by Kansas and out-of-state dealers and lessors. It applies to lease payments billed on or
  after August 1, 1994.

  If you have any questions about this notice or other state tax matters, please write to the Taxpayer Assistance Bureau, Kansas
  Department of Revenue, Topeka, Kansas, 66625-0001 or call (913) 296-0222.

Date Composed: 10/02/1997 Date Modified: 10/09/2001

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