Form Pub. Ks-1526 - Kansas Business Taxes For Motor Vehicle Transactions Page 12
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44A Kansas dealer donates a car to an
Situation 3. Mr. Gordon did not redeem the vehicle, and it
was subsequently sold by the bank to Ms. Cruz. The bank
annual charity auction. Title to the car will
will collect the state and local sales tax on the gross receipts
be transferred from the dealer to the
it receives, and issue a sales tax receipt (ST-8) to Ms. Cruz.
highest bidder at the charity auction. The
If the bank is not registered to collect sales tax, Ms. Cruz will
dealer will collect sales tax on the car from the highest
pay the sales tax to the County Treasurer at the time of
bidder based on the auction price.
registration.
A fund raising organization obtains title to
a car from a dealer (at cost) with the intent
EXEMPT SALES
to raffle the car. Kansas sales tax is paid
by the organization to the dealer. The
subsequent transfer to the winner of the raffle is not
subject to sales tax, as the transfer qualifies as a gift.
EXEMPTION CERTIFICATES
Repossession
Kansas vehicle dealers are responsible for collecting
When title to a vehicle is transferred to the holder of
the full amount of sales tax due on each vehicle sold to,
an encumbrance (lien) as a result of the buyer’s failure
or serviced for, the final user or consumer in Kansas.
to pay the installments due (repossession) under the
(See also Retailer Responsibilities herein.) A dealer is
terms of a written agreement entered into at the time of
only relieved from collecting and remitting the sales tax
original purchase, the transfer is not a sale and is not
if, at the time of the purchase, the dealer obtains the
taxable. However, any registration or subsequent sale
required information contained on an exemption
of the vehicle by the encumbrance holder is taxable,
certificate, and keeps the certificate as part of its sales
unless the vehicle is redeemed by the original owner of
tax records for three (3) years. (K.S.A. 79-3651).
the vehicle pursuant to the provisions of K.S.A. 84-9-
506. See Revenue Ruling 19-1997-1.
An exemption certificate is a document completed
by the buyer that shows why sales tax is not due on an
Lien Foreclosure
otherwise taxable sale of goods or services. The
A lien holder may also acquire title to a vehicle
certificates commonly needed for vehicle transactions
through a court-ordered foreclosure of a mechanic’s
are included in this guide. As discussed previously, the
lien, landlord’s lien, storage lien, or other statutory lien.
Affidavit of Delivery of a Motor Vehicle (ST-8B) serves
The sales tax rules for a lien foreclosure are the same
as the exemption certificate when a motor vehicle,
as for a repossession.
semitrailer, pole trailer or aircraft is sold to a nonresident
who will register and title it outside Kansas.
1) The transfer of title to the lien holder is not taxed
provided that the lien holder does not register
You will also use exemption certificates when buying
the vehicle.
the vehicles, parts and labor services that you intend
to sell, rent or lease to customers. See Exempt
2) Any registration or subsequent sale of the
Purchases herein. Dealers should obtain a copy of Pub.
vehicle by the lien holder is taxable.
KS-1520, Kansas Exemption Certificates, from our web
3) The redemption of a vehicle from a lien holder
site. This publication defines Kansas sales tax
by a debtor who satisfies the underlying debt is
exemptions, how to use exemption certificates as a buyer
not considered to be a sale and therefore is not
and seller, and contains most, if not all, of the blank
subject to sales tax.
sales exemption certificates.
The situations that follow illustrate the three types of
title transfers that occur as a result of a repossession
DIRECT PURCHASES BY EXEMPT ENTITIES
or lien foreclosure.
One of the most common types of exempt sales made
Mr. Gordon is making payments on his new
by vehicle dealers is the sale to an entity that has been
car to The National Bank. Mr. Gordon has
granted an exemption under Kansas law from paying
title to the vehicle; The National Bank is
sales (or use) tax on all of its direct purchases of tangible
the lien holder on the title.
personal property or taxable services. (All sales tax
exemptions are applicable to all compensating use tax
Situation 1. The National Bank repossesses the car from
situations.) The most common exempt entities are
Mr. Gordon for failure to make the payments. No sales tax is
bulleted below. For a complete list of all sales tax exempt
due when The National Bank obtains a title for the
entities see Pub. KS-1520.
repossessed vehicle in its name.
Situation 2. Mr. Gordon (the original owner) brings his
• The U. S. Government, its agencies and
payments current and redeems the car from The National
instrumentalities
Bank, whereby the title is transferred from the bank back to
Mr. Gordon. This title transfer is not considered to be a sale
• The state of Kansas and Kansas political sub-
and is therefore not subject to sales tax.
divisions – cities, counties, school districts, etc.
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