Does a personal shopper who buys and delivers items for a customer charge Kansas sales tax on the service fee?

Plain-English summary

A person starting a personal-shopper business in Wichita asked whether she must collect Kansas sales tax on the charges to her customers. She would buy and deliver groceries, gifts, restaurant food, flowers, toys, and other items according to the customer's directions, contracting only with the buyer — not with the retailers she buys from, and adding a fee on top of the items' cost. The Department's answer: these services are not subject to sales tax.

Why. The Kansas retailers' sales tax act applies to sales of tangible personal property and to certain enumerated services. Personal shopping is not an enumerated taxable service. So the shopper:

• does not need to register as a retailer or collect sales tax on the service fee; and
• pays sales tax on the items she buys from Kansas retailers (she is the consumer of those purchases), then re-bills that purchase amount including the tax to the customer, adding her service charge on top.

The important limit — who you act for. This result holds only while the shopper acts for the buyer. The Department warned that if she instead begins to deliver items at a retailer's request, the analysis changes: the retailer must then include the delivery charges in its taxable "selling price." Under the Kansas definition of "selling price," transportation from the retailer to the customer is part of the price. For example, if a restaurant charges a customer for a pizza and its delivery, the delivery charge is part of the pizza's selling price and is taxable. Because here the retailer sells to the shopper (with no agreement between the shopper and the retailer), there is no taxable delivery charge — but if she starts providing delivery services for retailers, those services become taxable and the retailer should include her charges in the customer's bill as a taxable charge.

Bottom line: a personal shopper acting for the buyer provides a nontaxable service and simply pays tax on her own purchases; but delivering for a retailer turns the delivery into part of the retailer's taxable selling price.

What this means for you

Personal shoppers, concierge and errand services

If you contract with the customer (not the store), buy items as the customer's agent, and add a fee, your service fee is not taxable in Kansas — personal shopping isn't an enumerated service. Don't register to collect tax on the fee; instead, pay sales tax on what you buy and pass that tax-paid cost through to your customer.

The line that makes delivery taxable

The moment you deliver on a retailer's behalf (an arrangement with the store, not just the customer), your delivery is transportation from the retailer to the customer and becomes part of the retailer's taxable selling price. Restaurants, florists, and stores that pay you to deliver should include those charges in the taxable amount billed to the customer.

Keep your role clear

Whether you're the buyer's agent or the retailer's delivery service determines the tax result. Document that you contract with the customer, with no agreement with the retailer, if you want the nontaxable treatment.

Common questions

Q: Does a personal shopper charge sales tax on the service fee?
A: No. The Department advised that personal shopping is not an enumerated taxable service, so no tax is collected on the fee when the shopper acts for the buyer.

Q: Who pays the sales tax on the items?
A: The shopper does, as the consumer buying from Kansas retailers, and then re-bills that tax-paid cost (plus a service charge) to the customer.

Q: When does delivery become taxable?
A: When you deliver at a retailer's request. Then the delivery is part of the retailer's "selling price" (transportation from retailer to customer) and is taxable — like a restaurant's charge for a pizza and its delivery.

Q: Do I need to register as a retailer?
A: Not for nontaxable personal-shopping services performed for the buyer. If you begin providing taxable delivery services for retailers, different rules apply.

Citations and references

• Kansas retailers' sales tax act — taxes sales of tangible personal property and certain enumerated services; personal shopping is not among the enumerated taxable services.
• Kansas definition of "selling price" — includes transportation from the retailer to the customer, so a retailer's delivery charges are part of its taxable selling price (the ruling illustrates this without citing a subsection number).
• 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-2002-026

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

March 18, 2002

XXXX
XXXX
XXXX

RE: Your letter of March 13, 2002

Dear XXXX:

Thank your for your letter. You are starting a business in Wichita and ask whether or not you are required to collect sales tax on charges to your customers. You will act as a personal shopper. This means that you will buy and delivery groceries, gifts, restaurant food, flowers, toys, and other items according to the directions of the person who hires you. Normally you would deliver the items to that person. You only contract with the buyer --- not with any of the retailers that you buy from. You add a fee to the selling price of the items that you buy and deliver. These services are not subject to sales tax. Accordingly, you do not need to register as a retailer and collect sales tax. You simply need to pay sales tax on all of your purchases.

The Kansas retailers' sales tax act applies to sales of tangible personal property and to certain enumerated services. Personal shopping services are not services that are enumerated as being taxable. This means that you should not charge sales tax on the fee that you charge customers for the service. When you purchase items from Kansas retailers, sales tax does apply on the sale from the retailer to you. You then re-bill the purchase amount including the tax to your customers and add a service charge on top of purchase amount including taxes.

Please note that this opinion only controls when you are acting for the buyer. If you change your business practices and begin to deliver items at the retailer's request, the retailer must include the delivery charges in the tax base on which sales tax is charged to the customer. This is because the Kansas definition of "selling price" includes transportation from the retailer to the customer. Thus, if a restaurant charges a customer for a pizza and its delivery, the delivery charges are part of the pizza's selling price and are subject to Kansas sales tax.

Under your current business practice, the retailer sells to you and you charge the customer for the service. There is no agreement between you and the retailer. As long as this is practice continues, you should not collect sales tax on the delivery charges. However, if you begin to provide deliver services for retailers, the services will become taxable and the retailer should include your charges in their customer's billing as a taxable charge.

I hope that I have answered you questions. If you need to discuss anything further, please call me at 785-296-3081. This private letter ruling is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to make an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects this private letter ruling.

Sincerely,

Thomas E. Hatten
Attorney/Policy & Research

Date Composed: 03/29/2002 Date Modified: 03/29/2002

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