Opinion Letter

Letter Number:O-2002-016
Tax Type:Kansas Retailers' Sales Tax; Vehicles Rental Excise Tax
Brief Description:Sales tax and vehicle rental excise tax application to a truck rental company's billings.
Approval Date:08/19/2002

Office of Policy & Research

August 19, 2002


Thank you for your recent letter on truck rentals. You ask a series of questions about how sales tax and the vehicle rental excise tax apply to a truck rental company's billings. The vehicle rental excise tax imposition is found at K.S.A. 79-5117(a):

K.S.A. 79-5101 excludes vehicles that are subject to tax under K.S.A. 79-5117(a) from property tax. However, the 3.5% tax is figured on the same tax base as sales tax and is in addition to the state and local tax rates that the rental agency should be charging on its vehicle rentals. The local sales tax that should be charged is the local tax that is in place at the location of the business.

Both the retailers' sales tax and the motor vehicle excise tax are levied on "gross receipts." This means that the tax base for sales tax and the tax base for vehicle excise tax are identical. This was discussed in the original notice issued in 1991 to implement the law:

The vehicle excise tax is imposed by adding the 3.5% tax rate to the rate that is in effect for state and local sales tax. Please note that the motor vehicle excise tax is imposed only on vehicle rentals. It does not apply to rentals of other tangible personal property. These rentals are only subject to state and local sales tax.

As noted the tax base for both taxes is identical. The state sales tax base for rentals is discussed in K.A.R. 92-19-55a(b)(3):

Under this regulation, the tax base for both taxes include any charges by a rental company for fuel, personal liability insurance, damage waiver fees, permit charges, post-use cleaning, and IFTA charges, since the IFTA charges are part of the fuel cost. This regulation provides the answer to all or part of your numbered questions, one through eight.

Your other questions concerns rentals of dollies and pads. As noted, these charges are subject to Kansas state and local sales tax act, but not to the vehicle rental excise tax. Accordingly, only state and local sale tax is due on these charges if they are separately stated as line items on the billing. As discussed, state and local sales tax and the motor vehicle excise tax is due on the rental charges for the trucks.

I believe that, as discussed, K.A.R. 92-19-55a(b)(3) answers all of your questions. If you have any additional questions, please call me at 785-296-3081.

Date Composed: 08/26/2002 Date Modified: 08/26/2002