Must a company that answers calls and gives advice for healthcare providers collect Kansas sales tax on those services?

Plain-English summary

A company that provides services to healthcare providers in Kansas asked whether it had to collect sales tax on those services. Its work was not just running a phone line — beyond receiving, answering, and transferring/forwarding calls, it also supplied qualified staff to give advice and answer patient inquiries.

The Department ruled the company does not have to collect sales tax. Kansas taxes only the specific "enumerated services" listed in K.S.A. 79-3603; because this company's services go beyond the mere receiving, transferring, and answering of phone calls, they are not enumerated services and are therefore not taxable.

The company had also argued its services were sourced to its out-of-state call centers (where it received the calls). The Department said that reading of the sourcing rule in K.S.A. 79-3670(a)(1) is incorrect — a patient's call is first received by the Kansas healthcare provider at its Kansas location before being routed onward, so the service is sourced to Kansas. But the Department stressed this sourcing point was only "a point of clarification for the future," because the services are not enumerated (and thus not taxable) in the first place.

What this means for you

Answering services, call centers, and BPOs serving Kansas clients

A service that combines call handling with substantive work — trained staff giving advice or handling patient inquiries — is not a Kansas "enumerated service" and is not subject to sales tax. Kansas taxes services only when they appear on the enumerated list in K.S.A. 79-3603.

Multistate service providers

Don't rely on the location of your own facility to conclude a service isn't Kansas-sourced. Under K.S.A. 79-3670(a)(1) the Department looks at where the customer first receives the service. Here that was the Kansas healthcare provider — though it did not matter because the service was nontaxable.

Common questions

Q: Does a company have to collect Kansas sales tax on answering-and-advisory services for healthcare providers?
A: No. The Department ruled these services go beyond mere call handling and are not "enumerated services" under K.S.A. 79-3603, so no sales tax is due.

Q: What makes a service taxable in Kansas?
A: Kansas taxes only services specifically enumerated in K.S.A. 79-3603. Services not on that list — like the advisory work here — are not taxable.

Q: Can I treat the service as sourced to my out-of-state call center?
A: The Department said no — under K.S.A. 79-3670(a)(1) the service is first received by the Kansas customer, so it is Kansas-sourced. That point was moot here because the service was nontaxable.

Q: Can another business rely on this ruling?
A: No. A Kansas private letter ruling binds the Department only as to the requesting taxpayer's stated facts and cannot be cited as precedent by anyone else.

Citations and references

• K.S.A. 79-3603 — imposes Kansas sales tax on specifically enumerated services. The Department held the company's services are not enumerated because they go beyond merely receiving, transferring, and answering calls.
• K.S.A. 79-3670(a)(1) — the sourcing rule stating that when a product is received by the purchaser at a business location of the seller, the sale is sourced there; the Department used it to explain the service is first received at the Kansas healthcare provider's location, not the out-of-state call center.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2014-001

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

April 10, 2014

XXXX
XXXX
XXXX
XXXX

RE: Your letter dated November 21, 2013

Dear XXXX,

Thank you for your recent letter. In it you request a private letter ruling regarding sales tax collection duties in connection with your company’s services to healthcare providers within the state of Kansas. The answer to your question is as follows:

In your letter you state that your company provides services to healthcare providers that not only consist of the receipt, answering and transferring/forwarding of calls, but also provide qualified staff to give advice and to answer patient inquiries. The state of Kansas broadly taxes enumerated services under K.S.A. 79-3603. However, because the services you provide are beyond the mere receiving, transferring and answering of phone calls, they are not considered to be enumerated services. Therefore you are not required to collect sales tax on those services that take place within the state of Kansas.

You also stated in your letter the reason you felt your company should not be required to collect sales tax in regard to the services you provide. This is because in your perspective, the XXX Answering Services are received at the sellers’ business location, meaning XXX’S call centers outside of the state. For clarification, this would be an incorrect interpretation of the sourcing requirements under KSA 79-3670(a)(1) which state:

“a) The retail sale, excluding lease or rental, of a product shall be sourced as follows: (1) When the product is received by the purchaser at a business location of the seller, the sale is sourced to that business location;”

In your case, you are providing services to healthcare providers that are within the state of Kansas. When a patient initially calls their healthcare provider, while the phone call is eventually sourced to your location, the call is first being received by that healthcare provider at their Kansas location. The actual receipt of service is not at your out of state call center location but when the patient first calls their Kansas location and the call is then sourced to one of your centers. This is what is considered the “primary place” of business for sourcing rules. However, as mentioned above, this is not applicable to you because your services are not considered to be enumerated services under K.S.A. 79-3603. This is just a point of clarification for the future.

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,

Mark Ciardullo
Tax Specialist

Date Composed: 04/10/2014 Date Modified: 04/10/2014

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