Form Pub. Ks-1510 - Kansas Sales Tax And Compensating Use Tax Page 26
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42local sales tax paid in another state is less than the total
tax rate at Kansas buyer’s location, only the difference
COMPENSATING
is due to Kansas.
USE TAX
Use Tax and Your Business
Many Kansas businesses are not aware of their
Since 1937, Kansas has imposed a use tax on goods
consumers’ use tax obligation until they are audited by
purchased by Kansans (individuals and businesses)
KDOR — a costly oversight. As a business, you owe
from outside Kansas and used, stored, or consumed in
use tax as the final consumer of the equipment, fixtures,
Kansas on which no sales tax was paid, or a sales tax
tools, and other taxable non-inventory items purchased
less than the Kansas rate was paid. The purpose of
from vendors located outside of Kansas.
this tax is to protect Kansas businesses from unfair
competition from out-of-state retailers who sell goods
You order garment racks shipped from a
tax-free. It also ensures fairness to Kansans who
firm in St. Louis for your Salina clothing
purchase similar items in Kansas and pay sales tax on
store. The St. Louis retailer cannot legally
them. There are two types of compensating use tax:
charge you Missouri sales tax because the
racks are being shipped across the state line. If the
C
’ U
T
— paid by Kansas consumers
ONSUMERS
SE
AX
direct to KDOR (Kansas Department of Revenue).
retailer does not collect Kansas Retailers’ Use Tax, you
must pay the Kansas Consumers’ Use Tax on the total
cost of the garment racks. Had you ordered the racks from
R
’ U
T
— collected by retailers in other
ETAILERS
SE
AX
a Kansas retailer shipped to you in Salina, the Kansas
states from their Kansas customers.
retailer would have charged you the total Salina tax on them
All the states that have a general sales tax also have
as well.
the companion use tax. Items purchased in or from
Alaska, Delaware, Montana, New Hampshire, and
A Dodge City CPA orders software from
Minneapolis, Minnesota. The CPA will owe
Oregon are automatically subject to use tax since these
Kansas Consumers’ Use Tax at the rate in
five states do not have either a general sales or a use
effect in Dodge City on the cost of the
tax. (For example, Montana applies a sales tax to only
software, including shipping and handling, if the
a few selected transactions).
Minnesota retailer does not charge Kansas Retailers’
Use tax is due on out-of-state purchases whether
Compensating Use Tax on the order.
the property is shipped into Kansas or picked up in
Linda needs to replace the dough mixer
another state and brought back to Kansas. It applies
in her Anytown, Kansas bakery which
only to tangible personal property — labor services are
imposes a 7.3% sales/use tax rate. She
not subject to use tax. Like sales tax, compensating
orders one from Tulsa and can save an
use tax is based on the total cost of the goods
purchased, including postage, shipping, handling, or
additional 10% by picking it up in Tulsa. She is charged
transportation charges.
the cost of the mixer, less her discount, plus Oklahoma
sales tax of 5%. Upon returning to Kansas, she owes
Kansas consumers’ use tax of 7.3%. She is allowed a
Like instate sales tax transactions, the Compensating
credit of the 5% she paid to Oklahoma - leaving a net
Use Tax rate imposed is the same rate as the sales tax
2.3% consumers’ use tax due to Kansas.
rate in effect where the customer takes delivery or
possession, according to the same “sourcing” rules
Use Tax on Non-Business Purchases
discussed herein. The net effect is that for both sales
and compensating use tax - the same rate of tax applies
Individual Kansas consumers buying goods in other
to a taxable item purchased by a Kansas consumer,
states or through catalogs, mail-order companies, over
whether purchased locally, delivered to the Kansas
the Internet, or from TV, magazine, and newspaper ads
consumer by a Kansas retailer, or shipped by an out
must pay Kansas consumers’ use tax on these
of-state retailer.
purchases if the seller does not charge the Kansas
Retailers’ Compensating Use Tax percentage for the
CONSUMERS’ COMPENSATING USE TAX
consumer’s location. The following examples illustrate
typical purchases on which Kansas residents owe
Consumer’s Compensating Use Tax is due when
Consumers’ Compensating Use Tax to KDOR.
Kansas residents buy goods or merchandise for their
Evelyn buys a place setting of china from
use or consumption in Kansas from vendors in other
states on which a state and local sales tax rate equal to
the manufacturer’s web site. It is shipped
that of the Kansas buyer has not been paid. When a
to her Goodland, Kansas address; sales
taxable item is purchased in Kansas, then state and
tax is not charged on the order. She owes
local sales tax is due; when that taxable item is
8.55% Kansas state and local use tax in effect in
Goodland on the total cost of the china (purchase price
purchased outside Kansas for use in Kansas (not
plus shipping and handling).
resale), state and local use tax is due. If the state and
26
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