Are telephone answering services subject to Kansas sales tax?

Plain-English summary

A provider of telephone answering services asked whether its services are taxable. It noted that one customer refuses to pay the tax it bills, and that a competitor bills no tax at all on the same services. The Department's answer is clear: telephone answering services are subject to Kansas sales tax.

The statutory basis. Kansas imposes sales tax on telephone services under K.S.A. 79-3603(b), and it specifically taxes answering services under K.S.A. 79-3603(t), which reaches:

"(t) the gross receipts received for telephone answering services, including mobile phone services, beeper services and other similar services."

The Department called this "a clear imposition on telephone answering services." The tax is lawfully due from the customer, and the provider was told it could give a copy of this letter to the customer who refuses to pay.

On the competitor. The Department added that if the provider supplies the name of the competitor that does not collect the tax, the Department will review whether to audit that business. It observed that businesses that properly collect the tax are put at a competitive disadvantage by those that unlawfully don't collect the tax lawfully due.

Bottom line: answering-service charges (including for mobile phone, beeper, and similar services) are taxable in Kansas, and the obligation to pay runs to the customer, with the provider responsible for collecting it.

What this means for you

Telephone answering / messaging service providers

Your service charges are taxable under K.S.A. 79-3603(t) — collect Kansas sales tax on telephone answering services, including mobile phone, beeper, and similar services. This is an enumerated taxable service, not a gray area.

If a customer refuses to pay

The tax is lawfully due from the customer. You can provide the customer a copy of the Department's ruling to show the tax is required; your job is to collect and remit it.

Competitors who don't collect

A competitor not collecting the tax is violating the law and creating an unfair advantage. The Department invited the provider to report such a competitor for possible audit — non-collection is an enforcement matter, not a lawful business choice.

Common questions

Q: Are telephone answering services taxable in Kansas?
A: Yes. The Department advised that telephone answering services are subject to Kansas sales tax under K.S.A. 79-3603(t) (with telephone services taxed under 79-3603(b)).

Q: What exactly does the statute cover?
A: The gross receipts from telephone answering services, including mobile phone services, beeper services, and other similar services.

Q: A customer won't pay the tax — what can I do?
A: The tax is lawfully due from the customer; you can provide them a copy of this ruling showing the tax is required, and you remain responsible for collecting and remitting it.

Q: A competitor isn't charging the tax — is that allowed?
A: No. The Department said non-collection violates the law and invited the provider to report the competitor for possible audit.

Citations and references

• K.S.A. 79-3603(b) — imposes Kansas sales tax on telephone services.
• K.S.A. 79-3603(t) — imposes sales tax on the gross receipts from telephone answering services, including mobile phone services, beeper services, and other similar services.
• 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-2002-050

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

June 3, 2002

XXXX
XXXX
XXXX

RE: Your letter dated May 23, 2002

Dear XXXX:

Thank you for your recent letter. You ask if the telephone answering services that you provide are taxable. You indicate that one of your customer refuses to pay the tax that you bill and that a competitor bills no tax at all on the same services. Please be advised that telephone answering services are subject to Kansas sales tax. Kansas imposes sales tax on telephone services at K.S.A. 79-3603(b). Kansas imposes sales tax on answering services at K.S.A. 79-3603(t):

(t) the gross receipts received for telephone answering services, including mobile phone services, beeper services and other similar services;

This is a clear imposition on telephone answering services. You should provide a copy of this letter to the customer who refuses to pay the tax on your billings. The taxes are lawfully due from the customer.

If you provide us with the name of your competitor who does not collect sales tax on its services, we will review whether or not to audit that business. Businesses like yours that collect sales tax on its service charges are put at a competitive disadvantage by businesses that violate the law by not collecting the sales tax that is lawfully due from their customers.

I hope that I have answered all of 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: 06/18/2002 Date Modified: 06/18/2002

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