Does a multi-level marketing company owe Kansas sales tax on sales of stressless, pain-relief, and stop-smoking capsules?

Plain-English summary

A multi-level (network) marketing company asked whether its sales of "stressless capsules, pain relief capsules, and smokers help capsules" are subject to Kansas sales tax.

The answer is yes. The Department advised that "the Kansas sales and use tax law does not provide an exemption from sales tax on the sale of stressless capsules, pain relief capsules, and smokers help capsules. Therefore, your company would be obligated to collect and remit the appropriate Kansas sales/use tax(es) on said sales."

The statute. K.S.A. 79-3603(a) imposes sales tax on "[t]he gross receipts received from the sale of tangible personal property at retail within this state." These capsules are tangible personal property, and no statute exempts them, so the general imposition rule controls.

The rate. "The sales/use tax rate in the state of Kansas is 4.9%. In some instances, local sales tax(es) may also apply." (The 4.9% state rate is the rate as of the 1999 ruling; Kansas's state rate is higher today — always confirm the current combined state-plus-local rate for the delivery location.)

Bottom line: selling health or wellness capsules through a network-marketing program does not change the result — they are taxable retail sales of tangible personal property, and the seller must register, collect, and remit Kansas sales/use tax.

What this means for you

"Supplement" or "wellness" labeling does not create an exemption

Kansas taxes the retail sale of tangible personal property unless a specific exemption applies. There is no general exemption for dietary supplements, herbal capsules, or stress/pain/stop-smoking products, so these sales are taxable like any other retail goods.

Network-marketing sellers still have to collect tax

Selling through a multi-level marketing structure does not shift or remove the sales-tax obligation. The company making the retail sales in Kansas must collect and remit the tax. (In some MLM arrangements the marketing company agrees with the Department to collect and remit on shipments to Kansas members — but absent such an arrangement, the seller is responsible.)

Charge the correct combined rate

Tax is due at the Kansas state rate plus any applicable local sales tax for the location. Confirm the current combined rate rather than relying on the 4.9% figure quoted in this 1999 ruling.

Common questions

Q: Are pain-relief or stop-smoking capsules exempt as health products?
A: No. The Department stated the law "does not provide an exemption from sales tax" on these capsules, so they are taxable.

Q: Does selling through a multi-level marketing company change the tax result?
A: No. The sales are still taxable retail sales of tangible personal property; the seller must collect and remit Kansas sales/use tax.

Q: What rate applies?
A: The Kansas state rate (4.9% at the time of this ruling) plus any local sales tax that applies at the sale's location. Verify the current combined rate.

Citations and references

• K.S.A. 79-3603(a) — imposes Kansas retailers' sales tax on the gross receipts from the retail sale of tangible personal property within the state.
• K.A.R. 92-19-59 — the regulation authorizing private letter rulings; this ruling was issued under it and binds the Department only as to the requesting taxpayer.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1999-143

Original ruling text

Private Letter Ruling

Body:

Office of Policy and Research

June 23, 1999

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Dear Ms. TTTTTTT:

We wish to acknowledge receipt of your letter dated May 22, 1999, regarding the application of Kansas Retailers’ Sales tax.

K.S.A. 79-3603(a) imposes a sales tax upon: “The gross receipts received from the sale of tangible personal property at retail within this state. . .”

Please be advised that the Kansas sales and use tax law does not provide an exemption from sales tax on the sale of stressless capsules, pain relief capsules, and smokers help capsules. Therefore, your company would be obligated to collect and remit the appropriate Kansas sales/use tax(es) on said sales. The sales/use tax rate in the state of Kansas is 4.9%. In some instances, local sales tax(es) may also apply.

This is a private letter ruling pursuant to K.A.R. 92-19-59. It is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to an accurate determination by the department, this ruling is null and void. This ruling will be revoked in the future by the operation of law without further department action if there is a change in the statutes, administrative regulations, case law, or published revenue ruling, that materially effects this private letter ruling.

If I may be of further assistance, please contact me at your earliest convenience at (785) 296-7776.

Sincerely yours,

Thomas P. Browne, Jr.
Tax Specialist

TPB

Date Composed: 07/07/1999 Date Modified: 10/11/2001

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