When is a Kansas retailer's out-of-state shipment exempt from Kansas sales tax, and what proof of delivery is needed?

Plain-English summary

A retailer asked when it must collect Kansas sales tax on goods shipped out of state. The Department drew the line at how the goods leave Kansas.

Not taxed when shipped out of state. The Department advised that "when the seller ... is obligated to deliver said property to a point outside the state or delivers the respective property to an interstate common carrier or the mails for transportation to a point outside this state, the Kansas sales tax(es) does not apply."

Taxed when handed over in Kansas. By contrast, "where tangible personal property pursuant to a sale is delivered in this state to the buyer or his agent other than a common carrier, the sales tax applies, notwithstanding that the buyer may subsequently transport the property out of this state." In other words, if the customer (or the customer's own driver) picks the goods up in Kansas, the sale is taxable even if the goods are headed out of state.

Acceptable proof of export. The Department listed the "most acceptable proof of transportation outside the state": (1) a waybill or bill of lading made out to the seller's order calling for delivery; (2) an insurance or registry receipt from the U.S. postal department, or a post office receipt; or (3) a trip sheet signed by the seller's delivery agent showing the signature and address of the out-of-state person who received the goods.

The holding. On the facts described, "Retailer 'A' would not be required to collect Kansas sales tax(es)" on the transaction.

Bottom line: it is the method of delivery, not the buyer's out-of-state address, that controls. Ship by common carrier/mail (or deliver out of state yourself) and keep the export proof; hand goods to the buyer in Kansas and you must charge tax.

What this means for you

Retailers making interstate sales

To treat a sale as an exempt out-of-state shipment, deliver the goods to a common carrier or the mails for transport outside Kansas, or deliver them yourself to an out-of-state point — and keep the documentation (bill of lading, postal receipt, or signed trip sheet). Without that method and proof, an in-state hand-off is taxable.

Customer pickup in Kansas is taxable

If the buyer or the buyer's own agent takes possession in Kansas, charge Kansas tax — the buyer's plan to haul the goods to another state does not change the result.

Keep the export records with the invoice

The three proofs the Department named are what it will accept. File the waybill/bill of lading, registry receipt, or signed trip sheet with the sale so you can support the exemption on audit.

Common questions

Q: Are goods a Kansas retailer ships out of state taxable?
A: No, when the seller is obligated to deliver out of state or delivers to an interstate common carrier or the mails for out-of-state transport, Kansas sales tax does not apply.

Q: What if the customer picks the goods up in Kansas?
A: Then the sale is taxable, even if the customer later transports the goods out of state.

Q: What proof of out-of-state delivery does the Department accept?
A: A waybill or bill of lading to the seller's order, a postal insurance/registry receipt, or a trip sheet signed by the seller's delivery agent showing the out-of-state recipient's signature and address.

Citations and references

• Interstate-shipment rule — the Department applied Kansas's rule that goods delivered to a common carrier or the mails for out-of-state transport are not taxed, while in-state delivery to the buyer or the buyer's non-carrier agent is taxable (stated without a specific K.S.A. subsection).
• K.A.R. 92-19-59 — the regulation authorizing Kansas private letter rulings.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2001-138

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

December 18, 2001

TTTTTTTTTTT
TTTTTTTTTTT
TTTTTTTTTTT
TTTTTTTTTTT

Dear Mr. TTTTTTTTT:

We wish to acknowledge receipt of your letter dated December 17, 2001, regarding the application of Kansas Retailers’ Sales tax.

Please be advised that when the seller of tangible personal property is obligated to deliver said property to a point outside the state or delivers the respective property to an interstate common carrier or the mails for transportation to a point outside this state, the Kansas sales tax(es) does not apply. However, where tangible personal property pursuant to a sale is delivered in this state to the buyer or his agent other than a common carrier, the sales tax applies, notwithstanding that the buyer may subsequently transport the property out of this state.

The most acceptable proof of transportation outside the state will be:

1) A waybill or bill of lading made out to the seller’s order calling for delivery; or
2) An insurance or registry receipt issued by the United States postal department, or a post office department’s receipt; or
3) A trip sheet signed by the seller’s delivery agent and showing the signature and address of the person outside the state who received the delivered goods.

In closing, Retailer “A” would not be required to collect Kansas sales tax(es) on the transaction that you have described in the above referenced letter.

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, or 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: 12/27/2001 Date Modified: 12/28/2001

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