Notice

Notice Number:10-02
Tax Type:Kansas Compensating Tax; Kansas Retailers' Sales Tax
Brief Description:One Percent State Sales Tax Rate Increase Enacted by Senate Substitute for House Bill 2360
Keywords:
Approval Date:06/22/2010


Body:
KANSAS DEPARTMENT OF REVENUE
NOTICE 10-02

ONE PERCENT STATE SALES TAX RATE INCREASE
ENACTED BY SENATE SUBSTITUTE FOR HOUSE BILL 2360
Revised June 22, 2010

New legislation increases the state sales and use tax rate from 5.3% to 6.3% on July 1, 2010. The new law does not change the scope of sales or use tax. Goods and services now subject to tax remain taxable, but at the higher state rate. Kansas retailers must charge and remit the 6.3% state tax on taxable sales of goods and services that occur on and after July 1, 2010.
When this Notice explains that a retailer should collect sales tax at the 5.3% or 6.3% state rate, it means the retailer is required to charge customers the combined sales tax rate that equals the sum of the 5.3% or 6.3% state rate plus all applicable local sales tax rates. When used in this Notice, "goods" means "tangible personal property" as defined at K.S.A. 2009 Supp. 79-3602(pp). The "July return" discussed here is the return for the July 2010 reporting period that is due on or before August 25, 2010.

Transition from the 5.3% to the 6.3% state rate - The following transition rules determine how sales tax applies to taxable sales transactions that begin before July 1, 2010, and are completed on or after July 1, 2010:
Use tax - A 6.3% state use tax, plus the applicable local use tax, is imposed on the use in Kansas of any taxable tangible personal property on which Kansas use tax has not been paid. Kansas use-tax law provides a credit for sales taxes paid to another state. For purposes of determining whether Kansas use tax is owed when another state's sales tax is being credited against the Kansas use tax owed, the 6.3% state rate should be applied if the first use of the property in Kansas occurs on or after July 1, 2010.
When an out-of-state retailer incorrectly charges the 5.3% state rate instead of the 6.3% state rate on property delivered to a Kansas business on or after July 1, 2010, the business should report the addition 1% state use tax on its consumers' use tax return. If no Kansas tax is collected by an out-of-state retailer, the Kansas business is required to report both state and local use tax on the purchase. The date a Kansas business accepts delivery determines whether the 5.3% or 6.3% state rate applies.

Reporting the tax - Most retailers will report the correct amount of state sales tax on their July return if they bill their customers in accordance with the directives in the section Transition from the 5.3% to the 6.3% state rate, and program the rate increase into their accounting software in a timely manner. These retailers can complete their July return that applies the 6.3% state rate in the same way they completed earlier returns.
Some retailers may report some receipts on their July return from customer payments for charges that were correctly invoiced at the 5.3% state rate. These include retailers that: (1) use cash basis accounting; (2) provide services on a month-to-month basis, such as utility providers, cable companies, and telecommunications providers; (3) charge taxable dues; and (4) lease or rent property. These retailers must adjust their July return to avoid overpaying sales tax. How this is done will be explained in Notice 10-03, Instructions for Reporting Sales Tax Receipts on the Sales Tax Return Filed for July 2010, which will be posted on the Department website prior to July 1, 2010.

This June 3, 2010 revision is intended to clarify, rather than change, the requirements discussed in the earlier version of Notice 10-02 that was sent to retailers with their June 2010 sales tax returns. The earlier Notice is rescinded by this revision.

Taxpayer Assistance. Additional copies of this Notice, and other department forms or publications, may be download from our web site, www.ksrevenue.org. If you have questions about this rate increase and how it applies, please contact:




Date Composed: 05/17/2010 Date Modified: 06/22/2010