Questions and Answers
Kansas Retailers' Sales Tax
Are Fuel Surcharges Charges Taxable
Are fuel surcharges charges taxable?
Due to the current high cost of fuel, many retailers are adding a "fuel surcharge" to customer invoices for goods or services. Kansas sales tax is imposed on the "selling price" of goods and services. By definition, "selling price" includes the retailer's cost of delivering goods or services to its customers.
K.S.A. 2007 Supp. 79-3602(ll).
A fuel surcharge is a delivery charge and is taxed as part of the selling price like any other delivery charge. Some retailers refer to the fuel surcharge as a "mileage charge." For purposes here, "mileage charge" and "fuel surcharge" have the identical meaning and are interchangeable.
For most transactions, two maxims can be applied to determine the taxability of delivery charges including fuel surcharges. They are:
Delivery charges for taxable goods and services are taxable.
Delivery charges for exempt goods and services are not taxable.
Both in-state and out-of-state retailers may apply these maxims when they sell and deliver goods to a Kansas address or when they charge for taxable services that are performed or sourced here. These maxims should not be applied to determine the taxability of charges for FOB shipments, contract-carrier shipments, or shipments that contain both taxable and exempt goods.
See K.A.R. 92-19-29 and Kansas Department of Revenue Q & A-Shipping Charges, for explanations about how these transactions are taxed.
Separately stating a delivery charge or a fuel surcharge on an invoice or issuing one invoice for goods or services and another for delivery or fuel does not change how sales tax applies to a retailer's delivery charges and fuel surcharges for taxable goods or services.
Goods that a Kansas retailer delivers to an address outside Kansas and services that are performed in another state are not subject to Kansas sales or use tax. Because Kansas does not tax these transactions, any associated delivery charges or fuel surcharges are not subject to Kansas tax. However, some or all of these charges may be taxed by the State where delivery is made or the services performed.
See K.A.R. 92-19-29.
A Kansas retailer that does business in another state should contact that State's revenue department to determine whether it is liable for collecting and remitting that State's sales tax.
A fuel surcharge is an election by the retailer to pass its increased fuel costs on to its customers. Retailers should not characterize the charge as being a Kansas fuel surcharge or a state fuel surcharge. The State of Kansas does not impose or collect these surcharges.
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