Opinion Letter

Letter Number:O-1999-15
Tax Type:Kansas Compensating Tax
Brief Description:Nexus determination relating to a joint venture between a Tennessee publisher and a Kansas law firm to publish a monthly newsletter on employment law.
Keywords:
Approval Date:06/28/1999



Body:
Office of Policy and Research


June 28, 1999


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Re: Kansas Compensating (Use) Tax

Dear XXXXX:

Thank you for your letter regarding whether a Tennessee business has nexus with Kansas for purposes of retailer’s compensating tax.

One document you provided is a copy of an agreement between a publisher which has agreed to “provide the money necessary to launch [a monthly newsletter on employment law]”, and a Kansas law firm which “will have total responsibility for and control over the editorial content of the monthly issues.” According to the agreement, “The venture will not pay any compensation to [the Kansas law firm] for your editorial work or to [the publisher] for our publishing expertise. But when the newsletter achieves a positive cash flow, which should occur at or shortly after the beginning of year two of publication, we will divide the cash flow 50 percent for your law firm and 50 percent for this company.”

For purposes of the Kansas compensating (use) tax, K.S.A. 79-3702 defines a “retailer doing business in this state” as follows:
The statute is interpreted, in part, by K.A.R. 92-20-7. The regulation provides, in subsection (a), as follows:
Based on the information provided in the agreement you submitted, it appears the Tennessee publisher and Kansas law firm are engaged in a joint venture with regard to the publication of the newsletter. As a result, the offices and activities of the law firm in the state of Kansas satisfy the physical presence requirement of both the statute and the regulation. Therefore, we believe the Tennessee publisher does have nexus with the state of Kansas for purposes of the retailer’s compensating use tax.

I trust this information is of assistance. If I can be of further service, please feel free to contact me.

Sincerely,



Jim Weisgerber
Attorney
Tax Specialist

JW:jw


Date Composed: 07/07/1999 Date Modified: 10/10/2001