Form Pub. Ks-1526 - Kansas Business Taxes For Motor Vehicle Transactions Page 5
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44the boat and trailer in his inventory for resale, a trade-
warranty for an additional $1,000 ($11,000 total
in deduction of $5,000 should be allowed with the
purchase). Mr. Marshall may claim a trade-in allowance
purchaser paying sales tax on a tax base of $22,000.
for the total purchase of $11,000 since the value Mr.
Marshall’s trade-in exceeds the value of vehicle received
Farmer Jones trades a 2003 John Deere
from the dealer, and the warranty is considered part of
tractor to Holiday Motors - a Kansas motor
the gross receipts received from the sale of the pickup.
vehicle dealer for a pickup truck. Since
See Warranty Work on page 15.
Holiday Motors is placing the tractor in
inventory for resale, it may give farmer Jones a trade-in
Additionally, sales of warranty/service contracts to
allowance for the value of the tractor even though no
nonresidents of Kansas are not subject to Kansas sales
sales tax was paid on the selling price of the tractor
tax when purchased simultaneously with a motor vehicle,
when originally purchased by farmer Jones.
semitrailer, pole trailer or aircraft that will not be
registered in Kansas and that the nonresident will
Mr. Brown wants to gift a car titled in his
removed it from Kansas within 10 days of the sale.
name to his grandson for use as a trade-
Warranty contracts purchased in Kansas separate from
in on a pickup truck offered by the local
the sale of a motor vehicle, semi-trailer, pole trailer or
dealership. The dealership can not give
aircraft by a nonresident are subject to Kansas sales
a trade-in allowance on this car unless title to the vehicle
tax. See Dealer Sales to Nonresidents herein.
is in the grandson’s name at the time of the trade.
DEALER SALES TO RESIDENTS OF KANSAS
Ms. Black is leasing a 2008 Buick and
wants to trade it for a 2011 model. Since
she does not have an ownership interest
Retail sales of vehicles by Kansas dealers are
in the 2008 Buick, a dealer can not give a
subject to sales tax on the gross receipts (defined on
trade-in allowance on the value of the 2011 Buick.
page 3) received by the dealer. The sales tax rate
charged is the combined state and local (city, county
Mr. Allen sells his 2005 Honda to a
and/or special jurisdiction) rate in effect at the dealer’s
neighbor, Mr. Jacobs and uses the
place of business.
proceeds of the sale ($6,000) as a down
payment on a 2009 model offered by a
A Sterling, Kansas new and used car
local dealership for $24,000. The dealership can not
dealer sells a pickup for $19,500 to a
give a $6,000 trade-in allowance to Mr. Allen as the
Kansas resident. The dealer is required
sale to Mr. Jacobs and subsequent purchase from the
to collect sales tax on $19,500, at the rate
dealership constitute two separate sales transactions.
of sales tax in effect at the dealer’s place of business
(6.3% state tax and 2% local tax).
Mrs. Contento totals her 2006 Chevrolet
and her insurance company pays her
$19,500 X .083 = $1,618.50
$15,000 in settlement thereof. She
desires to assign the $15,000 insurance
Upon collection of the sales tax due, the dealer will
check to Tarbell Motors as down payment on a
give the buyer a completed Form ST-8B, Statement of
replacement model that will sell for $20,000. Tarbell
Kansas State and Local Retail Sales Tax Paid, showing
Motors can not give a trade-in allowance and must
the sales tax base and the amount of sales tax paid to
charge sales tax on the $20,000 sales price.
the dealer.
Warranties
The buyer must submit a copy the ST-8B receipt to
the County Treasurer when the automobile is registered
The general rule is that sale of a warranty, service
in the Kansas county in which the buyer resides. If the
contract or maintenance contract for motor vehicles is
buyer is a resident of another city or county, the buyer
subject to sales tax – K.S.A. 79-3603(r). A warranty or
may owe a local compensating use tax on the sale. This
similar agreement is taxable whether purchased at the
tax is payable to the County Treasurer when the vehicle
time a vehicle is purchased, or purchased separately
is registered. See Local Compensating Use Tax -
at another time.
Intrastate Sales herein.
Effective July 1, 2007 the sale of warranty, service
or maintenance agreements/contracts, are considered
DEALER SALES TO NONRESIDENTS OF KANSAS
to be part of the selling price of a motor vehicle, semi-
trailer, pole trailer or aircraft. Thus, a trade-in allowance
Kansas law (K.S.A. 79-3606(k)) allows Kansas dealers
may be applied to the cost of a warranty.
to sell or lease motor vehicles, semitrailers, pole trailers
and aircraft to nonresidents of the state of Kansas without
Mr. Marshall trades his 2006 pickup,
collecting Kansas sales tax when all three of these
valued at $18,000, to Palmerton Motors
requirements are met. See Revised Notice 04-13.
for a 2000 model with a value of $10,000.
Mr. Marshall purchases an extended
1) The buyer is a bona fide resident of another state.
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