Opinion Letter

Letter Number:O-2005-003
Tax Type:Kansas Retailers' Sales Tax
Brief Description:Transfer of assets that are in Kansas from one corporation or LLC to another corporation or LLC.
Approval Date:08/31/2005

Office of Policy & Research

August 31, 2005


Thank you for your recent e-mail. You ask how one of the exceptions in K.S.A. 79-3603)(o) applies. Under this section, Kansas sales tax is imposed on:

You ask if subsection (2) applies to a transaction where all of assets of a corporation or LLC that are in Kansas are transferred to another corporation or LLC. The answer is no. This exception applies only if all of the assets, including those in Kansas and in other states, are transferred.

Under Kansas law, sales tax exemption statutes are strictly construed in favor of imposing tax and against exemption. In re Atchison, Topeka & Santa Fe Ry Co., 17 Kan. App. 2d 794 (1993). It is a fundamental rule of statutory construction that sales tax exemption statutes will not be extended by implication and should not be read to include things that are not readily found within their plain terms. Director of Taxation v. Kansas Krude Oil Reclaiming Co., 236 Kan. 450, 454 (1984). There is nothing in this exception that indicates that it applies when only Kansas assets are transferred.

K.S.A. 79-3606 catalogues over fifty Kansas sales tax exemptions. These exemptions reflect that the Kansas legislature has not hesitated to limit exemptions to Kansas entities and not to those of other states. For example, K.S.A. 79-3606(b) and K.S.A. 79-3606(d) apply to only those political subdivisions that are in Kansas, K.S.A. 79-3606(s) is limited to groundwater districts organized under Kansas law; K.S.A. 79-3606(z) is limited to port authorities organized under Kansas law; K.S.A. 79-3606(ll) is limited to mental health organization organized under Kansas law; K.S.A. 79-3606(kk) is limited to manufacturing facilities "in this state"; K.S.A. 79-3606(tt) is generally limited to Kansas chapters of the listed national organization; and K.S.A. 79-3606(fff) is limited to warehouses and distribution facilities "in this state."

Had the legislature intended the exception in K.S.A. 79-3603(o)(2) to apply to transfers that involved the sale of all of the Kansas assets of a corporation, it would have enacted limiting language as it did in the various subsections in K.S.A. 79-3606. As noted, tax exemptions and exceptions should not be read to include things that are not readily found within their plain terms. This includes reading "all of the assets of such corporation" to mean "all of the Kansas assets of such corporation" in K.S.A. 79-3603(o)(2).

Date Composed: 09/01/2005 Date Modified: 09/01/2005