Notice

Notice Number:13-05
Tax Type:Kansas Compensating Tax; Kansas Retailers' Sales Tax
Brief Description:Changes to requirements for certain remote retailers to register and collect and remit Kansas retailers’ sales or use tax
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Approval Date:05/10/2013


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KANSAS DEPARTMENT OF REVENUE
OFFICE OF POLICY & RESEARCH
Notice 13-05
(May 2013)

Changes to requirements for certain remote retailers to register and collect and remit Kansas retailers’ sales or use tax

During the 2013 Legislative Session, Senate Bill 83 was passed and signed into law. Changes made by the Bill in Sections 9 and 18 affect the duty of certain remote retailers to register with the Department, and collect and remit Kansas retailers’ sales or use tax on taxable sales of tangible personal property for use, consumption or storage in this state, effective July 1, 2013.

Section 9 of Senate Bill 83 provides:

(a) On and after July 1, 2013, if any person sells or leases
tangible personal property to the state, a state department, a state agency
or an agent thereof, that person and any affiliated person shall, as a pre-
requisite for any such sale or lease, register with the department of rev-
enue as a retailer and comply with all legal requirements imposed on a
retailer, including the requirement to collect and remit sales or use tax
on all taxable sales of tangible personal property to customers in this state.
(b) Any ruling, agreement or contract, whether written or oral, ex-
press or implied, between a retailer and this state’s executive branch, or
any other state agency or department, stating, agreeing or ruling that the
retailer is not required to collect sales and use tax in this state despite the
presence of a warehouse, distribution center or fulfillment center in the
state that is owned or operated by the retailer or an affiliated person of
the retailer shall be null and void, unless it is specifically approved by a
majority vote of each of the chambers of the Kansas legislature.
(c) As used in this section, ‘‘affiliated person’’ means any person that
is a member of the same ‘‘controlled group of corporations’’ as defined
in section 1563(a) of the federal internal revenue code as the retailer or
any other entity that, notwithstanding its form of organization, bears the
same ownership relationship to the retailer as a corporation that is a mem-
ber of the same ‘‘controlled group of corporations’’ as defined in section
1563(a) of the federal internal revenue code.

Section 18 of Senate Bill 83, effective July 1, 2013 (except that the newly enacted provisions contained in subparagraph (h)(2)(C) in this section will become effective on October 1, 2013), amends the definition of “retailer doing business in this state” at K.S.A. 2012 Supp. 79-3702(h)(1) as follows (deleted language shown as strike-through, added new language shown in italics):

(h) (1) ‘‘Retailer doing business in this state’’ or any like term, means:
(A) Any retailer having or maintaining in this state, permanently, tem-
porarily, directly or indirectly through a subsidiary, agent or representa-
tive, an office, distribution house, sales house, warehouse or other place
of business;
(B) any retailer having utilizing an employee, independent contrac-
tor, agent, representative, salesperson, canvasser or, solicitor or other per-
son operating in this state either permanently or temporarily, under the
authority of the retailer or its subsidiary, for the purpose of selling, deliv-
ering, installing, assembling, servicing, repairing, soliciting sales or the
taking of orders for tangible personal property;
(C) any retailer, including a contractor, repair person or other service
provider, who enters this state to perform services that are enumerated
in K.S.A. 79-3603, and amendments thereto, and who is required to se-
cure a retailer’s sales tax registration certificate before performing those
services;
(D) any retailer deriving rental receipts from a lease of tangible per-
sonal property situated in this state;
(E) any person having a franchisee or licensee operating under its
trade name if the franchisee or the licensee is required to collect the tax
under the Kansas retailers’ sales tax act;
(F) any person regularly maintaining a stock of tangible personal
property in this state for sale in the normal course of business; and
(G)(F) any retailer who has any other contact with this state that
would allow this state to require the retailer to collect and remit tax under
the provisions of the constitution and laws of the United States.
(2) A retailer shall be presumed to be doing business in this state if
any of the following occur:
(A) Both of the following conditions exist:
(i) The retailer holds a substantial ownership interest in, or is owned
in whole substantial part by, a retailer maintaining a sales location in
Kansas; and
(ii) the retailer sells the same or a substantially similar line of products
as the related Kansas retailer and does so under the same or a substantially
similar business name, or the Kansas facilities or Kansas employees of the
related Kansas retailer are used to advertise, promote or facilitate sales
by the retailer to consumers.
(B) The retailer holds a substantial ownership interest in, or is owned
in whole or in substantial part by, a business that maintains a distribution
house, sales house, warehouse or similar place of business in Kansas that
delivers property sold by the retailer to consumers.
(C) For purposes of paragraphs (A) and (B):
(i) ‘‘Substantial ownership interest’’ means an interest in an entity that
is not less than the degree of ownership of equity interest in an entity
that is specified by Section 78p of Title 15 of the United States Code, or
any successor to that statute, with respect to a person other than a director
or officer; and
(ii) ‘‘ownership’’ means and includes both direct ownership, and in-
direct ownership though a parent, subsidiary or affiliate. Any person, other
than a common carrier acting in its capacity as such, that has nexus with
the state sufficient to require such person to collect and remit taxes under
the provisions of the constitution and laws of the United States if such
person were making taxable retail sales of tangible personal property or
services in this state:
(i) Sells the same or a substantially similar line of products as the
retailer and does so under the same or a substantially similar business
name;
(ii) maintains a distribution house, sales house, warehouse or similar
place of business in Kansas that delivers or facilitates the sale or delivery
of property sold by the retailer to consumers;
(iii) uses trademarks, service marks, or trade names in the state that
are the same or substantially similar to those used by the retailer;
(iv) delivers, installs, assembles or performs maintenance services for
the retailer’s customers within the state;
(v) facilitates the retailer’s delivery of property to customers in the
state by allowing the retailer’s customers to pick up property sold by the
retailer at an office, distribution facility, warehouse, storage place or sim-
ilar place of business maintained by the person in the state;
(vi) has a franchisee or licensee operating under its trade name if the
franchisee or the licensee is required to collect the tax under the Kansas
retailers’ sales tax act; or
(vii) conducts any other activities in the state that are significantly
associated with the retailer’s ability to establish and maintain a market
in the state for the retailer’s sales.
(B) Any affiliated person conducting activities in this state described
in subparagraph (A) or (C) has nexus with this state sufficient to require
such person to collect and remit taxes under the provisions of the consti-
tution and laws of the United States if such person were making taxable
retail sales of tangible personal property or services in this state.
(C) The retailer enters into an agreement with one or more residents
of this state under which the resident, for a commission or other consid-
eration, directly or indirectly refers potential customers, whether by a
link or an internet website, by telemarketing, by an in-person oral pres-
entation, or otherwise, to the retailer, if the cumulative gross receipts from
sales by the retailer to customers in the state who are referred to the
retailer by all residents with this type of an agreement with the retailer
is in excess of $10,000 during the preceding 12 months. This presumption
may be rebutted by submitting proof that the residents with whom the
retailer has an agreement did not engage in any activity within the state
that was significantly associated with the retailer’s ability to establish or
maintain the retailer’s market in the state during the preceding 12 months.
Such proof may consist of sworn written statements from all of the resi-
dents with whom the retailer has an agreement stating that they did not
engage in any solicitation in the state on behalf of the retailer during the
preceding year, provided that such statements were provided and ob-
tained in good faith. This subparagraph shall take effect 90 days after the
enactment of this statute and shall apply to sales made and uses occurring
on or after the effective date of this subparagraph and without regard to
the date the retailer and the resident entered into the agreement described
in this subparagraph. The term ‘‘preceding 12 months’’ as used in this
subparagraph includes the 12 months commencing prior to the effective
date of this subparagraph.
(D) The presumptions in subparagraphs (A) and (B) may be rebutted
by demonstrating that the activities of the person or affiliated person in
the state are not significantly associated with the retailer’s ability to es-
tablish or maintain a market in this state for the retailer’s sales.
(3) The processing of orders electronically, by fax, telephone, the in-
ternet or other electronic ordering process, does not relieve a retailer of
responsibility for collection of the tax from the purchaser if the retailer
is doing business in this state pursuant to this section.
(i) ‘‘Director’’ means the director of taxation.
(j) As used in this section, ‘‘affiliated person’’ means any person that
is a member of the same ‘‘controlled group of corporations’’ as defined in
section 1563(a) of the federal internal revenue code as the retailer or any
other entity that, notwithstanding its form of organization, bears the same
ownership relationship to the retailer as a corporation that is a member
of the same ‘‘controlled group of corporations’’ as defined in section
1563(a) of the federal internal revenue code.

Pursuant to K.S.A. 79-3705e, it is the duty of every retailer doing business in this state making taxable sales of tangible personal property for use, storage or consumption in this state, to collect from the purchaser the Kansas state and local use tax due on the transaction. Each retailer collecting such tax shall timely report and remit it to the Department pursuant to K.S.A. 2012 Supp. 79-3706.
Taxpayer Assistance

Additional copies of this notice, forms or publications are available from our web site, www.ksrevenue.org. If you have questions about income tax, please contact:
Taxpayer Assistance Center
Kansas Department of Revenue
915 SW Harrison St., 1st Floor
Topeka, KS 66612-1588
Phone: 785-368-8222
Hearing Impaired TTY: 785-296-6461
Fax: 785-291-3614




Date Composed: 05/10/2013 Date Modified: 05/10/2013