Private Letter Ruling
Kansas Compensating Tax; Kansas Retailers' Sales Tax
Application of Kansas sales and compensating tax on the lease of a motor vehicle by a Kansas resident from an out-of-state dealer.
Office of Policy & Research
August 16, 1999
I have been asked to respond to your letter dated June 29, 1999. In it, you ask for clarification on the application of Kansas sales and compensating tax on the lease of a motor vehicle by a Kansas resident from an out of state dealer.
In your letter you stated:
We request a written opinion with regard to “drive-off charges.” If the lessee pays a down-payment, document fees, first lease payment, etc. when taking possession of the vehicle, taxes are of course due upon these amounts. Tax remittance can be accomplished one of two ways: (1) the dealer can simply remit the tax funds it received from the lessee, or (2) the financial institution, which normally pays the dealer the sales price of the vehicle less any down payment, can “shortfund” from its payment these tax amounts and remit the difference to us so that we, as registered owner, can remit these funds.
Kansas requires leasing companies to register, collect and remit sales or compensating tax on the gross receipts from the renting or leasing of tangible personal property for use in Kansas.
In your scenario, a Kansas resident is leasing a motor vehicle. The lease is originating outside Kansas. The motor vehicle dealer is acting as the agent for the leasing company. If the leasing company extends a lease arrangement that is accepted by the lessee, The leasing company then purchases the motor vehicle exempt from tax and simultaneously enters into a lease with the lessee. The gross receipts from this transaction are subject to state and local compensating tax in Kansas. The gross receipts for this lease would include all charges including “drive-off charges” whether paid to the dealer or to the leasing company. The leasing company, not the dealer, is required to report these amounts and remit the tax.
This is a private letter ruling pursuant to K.A.R. 92-19-59. It is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to an accurate determination by the department, this ruling is null and void. This ruling will be revoked in the future by the operation of law without further
department action if there is a change in the statutes, administrative regulations, or case law, or published revenue ruling, that materially affects this private letter ruling.
Mark D. Ciardullo
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