Private Letter Ruling

Ruling Number:P-2000-057
Tax Type:Kansas Compensating Tax; Kansas Retailers' Sales Tax
Brief Description:Processing fees subject to sales and compensating tax.
Approval Date:11/08/2000

Office of Policy & Research

November 8, 2000

Your letter has been given to me to answer. In it, you ask if processing fees that you bill to customers on small orders are subject to Kansas sales and use tax. The processing fee is a flat charge added to small orders in order to recoup part of the office and handling expenses associated with small orders. You intend to set the fee out as a separate line item on the invoice. Please be advised that these charges are taxable.

Kansas sales tax is levied on a retailer’s gross receipts. See K.S.A. 79-3603. The act provides the following two definitions in K.S.A. 79-3602:
These definitions provide that the tax base is “the total cost to the consumer.” Part of the consumer's cost is your processing fee and shipping charges, even though these charges are separately stated line items on your invoice. The costs are, by definition, made part of the selling price and the taxable gross receipts. The same rule applies for Kansas use tax. I hope that this discussion answers all of your questions. If not, please call me and we can discuss them. Attorney/Policy & Research

Date Composed: 11/13/2000 Date Modified: 10/10/2001