Opinion Letter

Letter Number:O-2010-005
Tax Type:Kansas Retailers' Sales Tax
Brief Description:Kansas sales tax as applied to application service providers (ASP's).
Keywords:
Approval Date:06/22/2010



Body:
Office of Policy & Research


June 22, 2010

XXXX
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XXXX Dear XXXX:

Thank you for your recent e-mail. You have been unable to locate Kansas Information Guide EDU-71, Sales Tax Guidelines: Taxing Charges for Computer Products and Services and Internet Related Sales and Services, on the department's web site. Please be advised that EDU-71 was rescinded by the department and removed from the department's policy library. EDU-71 contained statements that were imprecise or inconsistent with the requirements of the Kansas sales tax law. Other sections of EDU-71 correctly state the law.

The department is in the process of revising EDU-71 and hopes to have a revised version published this summer. Please note that while EDU-71 has been rescinded by the department, it is still published on tax databases such as CCH or RIA. If you have a specific question about how Kansas sales tax applies to computer software, please submit it to the department in writing and we will answer it. You cannot rely on the rescinded version of EDU-71 for answers to any of your questions.

You also ask how the department treats ASP providers. The department has issued a number of letter rulings that state that ASP services are not subject to Kansas sales tax.

As with many evolving computer-based services, there is no universal definition of ASP services. Wikipedia provides the following discussion of ASP services: This description of ASPs appears to be consistent with the description of ASP services in your e-mail and with other ones found on the Internet. The department has said that a number of separately stated fees charged by a ASP provider to its customers for ASP services are not subject to sales tax. These include: recurring monthly charges, set up fees, support fees, training fees, data migration fees, and forms programming fees.

If an ASP sells canned software to a client that can be used independently of the ASP service, the charge is subject to sales tax. Similarly, charges for additional service manuals and software backup that are separately billed to a customer are subject to sales tax. Service manuals and provider software are not subject to sales tax when they are provided to the customer as part of the ASP service package.


Date Composed: 06/23/2010 Date Modified: 06/23/2010