Form Pub. Ks-1560 - Kansas Business Taxes For Schools & Educational Institutions Page 25
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37Consumers’ Compensating Use Tax
OTHER KANSAS TAXES
The Consumers’ Compensating Use Tax is due when
Kansas residents buy goods or merchandise for their
use or consumption in Kansas from vendors in other
states on which a state and local sales tax rate equal to
that of the Kansas buyer has not been paid.
COMPENSATING USE TAXES
A school’s exemption from sales tax also applies to
the compensating use tax. Therefore, only the items
When an item is taxable or exempt, it applies to both
that are taxable when purchased in Kansas by a school
the application of sales and compensating use tax.
would be subject to use tax when purchased in another
Kansas state and local sales tax is due if the buyer and
state by a Kansas school. The most common example
seller are both in Kansas; if the seller is in another state,
would be equipment and furniture for dormitories or
Kansas state and local compensating use tax is due.
residence halls. If purchased from a Kansas vendor,
The tax base for computing use tax is the same as for
you must pay state and local Kansas sales tax on them;
sales tax. See The Sales Tax Base.
if purchased from a vendor in another state, you will
owe state and local Kansas compensating use tax on
Compensating use tax compensates for the lack of
them. The state and local sales or use tax rate is
sales tax on a taxable transaction. A compensating use
determined by where you take delivery (the destination)
tax is due when a Kansas resident buys goods or
of the items.
merchandise for use, storage or consumption in Kansas
from vendors in other states on which a state and local
The Kansas state and local sales tax rate
sales tax rate equal to that of the Kansas buyer has not
at your college’s location is 7.8%. The
been paid. It applies to any kind of tangible personal
desk/chair sets you need for your dorm
property purchased outside Kansas that would be
rooms are available from a retailer in your
subject to sales tax if purchased in Kansas. If the state
city for $85 each - delivery and set-up is free. They are
and local sales tax paid in another state is less than the
available from a retailer in another Kansas city for $82.50
combined Kansas state and local sales rate in effect at
plus $5 shipping, and you find the same set on-line
the customer’s Kansas location, only the difference is
from an Oklahoma vendor for $70 plus $10 shipping.
due to Kansas.
If you buy the desk/chair set locally, each will cost
Local (city, county and/or special taxing district) use
you $85 plus 7.8% sales tax of $6.63, for a total of
taxes now apply to any type of tangible personal
$91.63. If purchased from the other Kansas retailer,
property shipped from a retailer outside of Kansas to a
each will cost you $87.50 plus 7.8% sales tax of $6.83,
Kansas resident for use, storage or consumption. Like
for a total of $94.33. If you buy them from the Oklahoma
in-state sales tax transactions, the local use tax rate is
retailer, each will cost you $80 plus 7.8% use tax of
imposed according to the same destination-based
$6.24 for a total cost of $86.24. In each transaction,
sourcing rules discussed in the section Collecting Local
the tax rate (sales or use) remains the same - the rate
Sales Tax.
in effect where the delivery is taken.
Retailers’ Compensating Use Tax
Kansas has imposed a use tax on goods purchased
by Kansans (individuals and businesses) from outside
This use tax is collected by retailers in other states
Kansas since 1937. The purpose of this tax is to protect
who are registered with KDOR to collect this tax from
Kansas businesses from unfair competition with retailers
their Kansas customers.
in other states by equalizing the rate of tax due on a
taxable sale of tangible personal property purchased
Retailers based in other states that also have a
by a Kansas resident. Although established in 1937,
physical presence in Kansas (retail store, warehouse,
compensating use tax is probably the tax most often
delivery into Kansas, etc.) are required to register to
unpaid by Kansas individuals and businesses.
collect Kansas Retailers’ Compensating Use Tax. Out-
of-state retailers that do not have a physical presence
There are two types of state and local use tax:
in Kansas are not required to register and collect
Kansas use tax, but many do so voluntarily as a
Consumers’ Compensating Use Tax: paid by Kansas
convenience for their Kansas customers.
individuals and businesses on imported goods direct
to KDOR; and
Your technical college is ordering building
materials from Nebraska. The state and
Retailers’ Compensating Use Tax: collected by
local sales and use tax rate in your city is
businesses outside Kansas on goods delivered or
6.3%. These supplies will be used in a new
shipped to Kansas residents.
home being built by your carpentry and mechanical
25
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