Opinion Letter

Letter Number:O-2011-009
Tax Type:Kansas Retailers' Sales Tax
Brief Description:Purchase of training videos.
Keywords:
Approval Date:09/01/2011



Body:
Office of Policy & Research


September 1, 2011

XXXX
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XXXX Dear XXXX:

Thank you for your recent letter. Your business is located in Blue Summit, Missouri. It buys training videos produced by XYZ. XYZ is located in Kansas City, Kansas. XYZ has been charging Kansas sales tax on these sales. You ask if this is correct. Taxability of these sales depends on how and where your business takes delivery of the videos.

If XYZ delivers the videos to an ABC facility in Missouri by common carrier, the United States Postal Services, or a XYZ employee or agent, the sale is not subject to Kansas sales tax. If the training videos are transferred to ABC electronically, Kansas tax does not apply as long as the videos are never transferred to ABC in Kansas on a tangible medium such as a DVD or tape.

If a training video is delivered to an ABC facility in Kansas, the sale is subject to Kansas sales tax. If a ABC employee or agent enters Kansas from Missouri and takes delivery of a video here, the sale is subject to Kansas sales tax.

Sales of training videos are taxable in Kansas. In 2005, the department published a Q & A that summarizes how Kansas sales tax applies to photographers, and how taxes on their sales of photographs, CD's, DVD's, video tapes, and other goods are sourced. The Q & A provides in parts relevant here: Many businesses in the Kansas City metropolitan area charge Kansas tax on their Kansas sales and Missouri tax on their Missouri sales. If ABC takes delivery of the training videos in Missouri, XYZ Productions may have charged and collected Missouri tax on some of the invoices. If Missouri tax was charged, Missouri law will determine the lawfulness of the charges. This issue isn't raised by the invoice you enclosed with your letter since the invoice contains a line-item charge for "Kansas state sales tax (8.65%)."

A number of other states have specifically ruled charges for training videos are taxable charges for the sale of tangible personal property rather than nontaxable charges for the service of producing the video. See e.g. Ruling of Commissioner, P.D. 05-85, Virginia Department of Taxation, June 8, 2005; Arteffects, Inc. Advisory Opinion, Feb. 21, 1966; New York State Commissioner of Taxation and Finance; Minnesota Sales Tax Fact sheet No. 143. Some of these rulings note a manufacturer can claim a resale exemption on printed instruction booklets and training videos it buys and packages with its manufactured goods.


Date Composed: 09/02/2011 Date Modified: 09/02/2011