Which Kansas state and local sales-tax rate should an online retailer collect when goods are shipped to a Kansas customer?

Plain-English summary

A retailer building online-sales websites asked how to charge tax on sales originating in Kansas and shipped to Kansas residents. The Department said Kansas used destination-based sourcing.

For goods shipped within Kansas, the retailer collected the combined state and local rate at the ship-to address. The letter's example required a Wichita retailer shipping to Topeka to use the Topeka destination rate.

If the customer instead took possession at a Wichita address, the combined rate at that Wichita delivery location applied. The Department directed retailers to its sales-and-use-tax locator, address and ZIP+4 lookups, downloadable databases, and web services for the applicable local rates.

For goods sent by the U.S. Postal Service or a common carrier to a buyer in another state, the letter said the Kansas seller should not collect Kansas sales tax. It added that, under the 2005 rule it described, the seller had to register and collect the destination state's tax if it operated a business there, sent salespeople there, or had another physical presence there.

The out-of-state collection discussion is historical guidance tied to 2005 law. Current interstate registration duties should be checked separately.

What this means for you

Kansas online retailers

For Kansas deliveries, use the destination where the buyer receives the goods to select the state and local rate.

Billing-system developers

The Department expected retailers to incorporate address-based rate data into their systems rather than apply only the seller's location rate.

Multistate sellers

Do not use this 2005 letter as a current statement of when another state may require collection. Its physical-presence discussion reflects the rule stated at that time.

Common questions

Q: A Wichita seller ships goods to Topeka. Which local rate applies?
A: The combined state and local rate at the Topeka ship-to address.

Q: What if the buyer takes possession in Wichita?
A: The rate at the Wichita delivery address applies.

Q: Should the seller collect Kansas tax on goods shipped by common carrier to another state?
A: The letter says no.

Q: Is the letter's physical-presence rule current?
A: The opinion states the Department's 2005 position. Current out-of-state collection duties must be checked under current law.

Citations and references

• Kansas Sales and Use Tax Locator and Department rate databases — tools identified in the opinion for destination rates

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: O-2005-004

Original ruling text

Opinion Letter

Body:

Office of Policy & Research

August 31, 2005

XXXX
XXXX
XXXX

RE: You e-mail received on August 29, 2005

Dear XXXX:

Thank you for your recent e-mail. You are in the midst of setting up web sites to conduct retail business on line. You ask how to charge sales taxes on retail sales that originate in Kansas and are shipped to a Kansas resident.

Kansas has destination-based sourcing, which means that Kansas retailers are required to collect sales tax based on the Kansas ship-to address. In other words, if a retailer is located in Wichita and ships retail goods to a buyer in Topeka, the retailer is required to collect the state and local sales tax in place at the ship-to address in Topeka. If the same retailer delivers goods to the buyer in Wichita, the retailer is required to collect the state and local sales tax in place at the Wichita address where the buyer takes possession of the goods. The different local rates are contained in a database that can be accessed on department's web site.

To find out how to incorporate the local sales tax rate database into your program, please visit our web site at www.ksrevenue.org. Click on "Kansas Sales and Use Tax Locator" under "Your Business" This takes you to a web page that contains the following:

· Lookup Tax Rate By
· Address
· Zip + 4
· Coordinates
· Wellhead
· Tax Databases
· Upload Retailer Databases - Registered retailers can get the appropriate local sales tax rates applied to their customer database through this secure application.
· Web Services - Registered users can get direct access to the Department of Revenue's sales rate tables for customizing your system.
· Registration, Specifications and Information
· Register now
· Upload/Return File Format Information
· Web Services Description Language (WSDL)

The links to these items provide retailers with step-by-step directions on how to incorporate the databases into a billing program. The individual sites are linked to pop-up screens that you can use to e-mail the department if you need help with the programming.

Please note that if you're selling good from a business in Kansas and delivering the goods to a buyer in another state by use of the United State Post Office or a common carrier like UPS, you should not collect Kansas sales tax. However, you will be required to register for and collect the sales tax imposed by the ship-to state if you operate a business there, send salesmen into the state, or have some other physical presence there.

If you have problems with incorporating the data bases into your program, please explain the difficulty you're having in the link labeled "Assistance" so that associates in our information systems section can assist you.

Sincerely,

Thomas E. Hatten

Attorney/Policy & Research

Date Composed: 09/01/2005 Date Modified: 09/01/2005

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