Information Guide

Identifying Information:Application of Kansas Sales Tax to the Sale of Propane
Tax Type:Kansas Retailers' Sales Tax
Brief Description:Application of Kansas Sales Tax to the Sale of Propane
Keywords:
Approval Date:09/10/2009


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APPLICATION OF KANSAS SALES TAX TO THE SALE OF PROPANE*

I. Sales of Propane – General Rule: The retail sale of tangible personal property (propane) within the state of Kansas is subject to Kansas Retailers’ Sales Tax.
A “retail sale” is a sale to the end user / consumer of the propane. Sales to other retailers are “wholesale” sales and are not subject to Kansas Sales Tax. When selling to other retailers – the seller needs to obtain a Kansas Resale Exemption Certificate from its customer and retain it for at least three (3) years. See Publication KS-1520, p. 43.
A sale that is delivered to a customer outside of Kansas is not subject to Kansas sales tax. The delivery can be made by the seller or someone that the seller directs to make the delivery. The seller will want to retain a shipping document or invoice with a “ship to” address outside of Kansas in their records for at least three (3) years. When an out-of-state customer picks up the propane in Kansas it is subject to Kansas sales tax unless, the customer commissions someone who holds themselves out to the public as a hauler/shipper (a common carrier) to pick up the propane in Kansas and deliver it to a point outside of Kansas for them. Taking possession of propane in Kansas by an out-of-state customer, or their employees, friends, relatives or personal agent is taxable. The person taking possession of the propane on direction of the customer must be a bona fide shipper of goods, and the delivery must be made to a point outside of Kansas – in order for the sale to be exempt.

II. Sales outside of Kansas. As stated above, sale of propane delivered to a point outside of Kansas is not subject to Kansas retailers’ sales tax. However, a compensating use tax may be due to the state in which the propane was delivered. All states that impose a sales tax also impose a compensating use tax. A compensating use tax is generally due when an item of tangible personal property is purchased in one state and used, stored or consumed in another state.
Kansas propane marketers selling and making deliveries into another state are typically responsible for collecting and remitting compensating use tax to that other state. Federal law requires sellers to collect the other state’s compensating use tax when the seller has a “nexus” – a substantial physical presence - in the state to which they are selling. A seller typically has a nexus with the other state when they: 1) Own or rent real estate in the other state, or 2) have employees or agents in the other state, or 3) make deliveries with their own vehicles into that other state.
Kansas propane marketers selling and making deliveries into another state with their own trucks or in trucks driven by their employees or agents typically have a nexus with the state in which they are making deliveries and must collect that state’s compensating use tax. For example, a Kansas propane marketer routinely makes delivery with the company truck into Nebraska. As a general rule, Nebraska has legal authority to require the Kansas propane dealer to collect, report and remit the Nebraska compensating use tax. Furthermore, the state of Nebraska would have legal authority to audit the Kansas propane dealer and assess tax, penalty and interest on all sales of propane (or any other item of tangible personal property) sold into Nebraska. Thus, Kansas propane marketers/dealers making sales into another state should contact that other state regarding their compensating use tax responsibilities to that state.
Deliveries made into another state by an entity that holds itself out to others as a hauler/shipper to the general public would not create a nexus. For example, if a Kansas propane dealer was to hire a common carrier to haul propane for him into another state, this alone would not create a nexus with the other state.

III. Kansas Exemptions – some of the more common exemptions:
2. fire starters 4. powering irrigation equipment
5. powering tractors, combines and other farm implements
6. weed control
7. grain drying

IV. Other Taxable Transactions: V. Gross Receipts
*This guide does not apply to the sale of propane delivered through lines, mains or pipes to customers – as different rules apply when the propane is delivered to customers through the use of lines, mains or pipes. See K.S.A. 79-3603(c) and K.S.A 12-189a. This guide sets out the rules for sales of propane delivered to customers via trucks or for sales where the customer takes delivery at the seller’s place of business.

HANDY CHART:
Propane Use
State
Local
Tax Stitus*
Ag Use
Exempt
Exempt
N/A
Commercial Use
Taxable
Taxable
Where the Customer Takes Delivery
Consumed in Production
Exempt
Exempt
N/A
Residential Use
Exempt
Taxable
Where the Customer Takes Delivery
Recreational Vehicles or BBQ Grills
Taxable
Taxable
Where the Customer Takes Delivery
Revised Sept 10, 2009.



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Date Composed: 01/11/2008 Date Modified: 04/28/2009