Form Pub. Ks-1526 - Kansas Business Taxes For Motor Vehicle Transactions Page 9
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44only when the labor is performed in Kansas. Thus,
First Actual Use
compensating use tax would not be due on the sale of
labor services performed in another state that are
Under provisions of K.A.R. 92-20-13, Compensating
separately stated on the invoice.
Use Tax may not be due on an automobile purchased
outside of the state of Kansas if: 1) when the motor
vehicle was purchased, it was intended for bona fide
EXCEPTIONS TO COMPENSATING USE TAX
use outside of the state of Kansas, 2) the first actual
use of the automobile was outside of the state of Kansas,
There are two instances when vehicles purchased
and 3) the first actual use of the motor vehicle was
outside of Kansas and subsequently registered in
substantial and constituted the primary use for which
Kansas are not subject to the Kansas Compensating
the motor vehicle was purchased. KDOR’s position is
Use Tax. The first is when a sales/use tax equal to or
that substantial use in another state consists of a
greater than the Kansas rate has already been paid to
minimum of six months of use in the other state.
another state, as outlined in K.A.R. 92-19-30(l)(2). The
In January, an Ohio resident purchases a
second is when the first actual use of the vehicle was
car in Cleveland for her use. In August of
outside the state of Kansas, as defined by K.A.R.
that year, she moves and registers the
92-20-13. Each of these exceptions is explained and
car in Kansas. No Kansas Use Tax is due
illustrated with examples below.
since the first use of the car was substantial (more
than six months).
Taxes Legally Paid to Another State
A United States Air Force officer buys a
When a person purchases a vehicle and legally pays
car in Germany and pays no sales tax. A
a sales or use tax to another state, equal to or greater
year later, the officer is reassigned to
than the Kansas rate due, no Kansas compensating
Wichita, KS. No Kansas Use Tax is due as
use tax is due when the vehicle is subsequently
the first actual substantial use of the automobile was
registered in Kansas.
outside of Kansas.
Mr. Peacock buys a van and registers it
in Kentucky, paying 8% Kentucky sales
LOCAL COMPENSATING USE TAX –
tax (6% state & 2% local). A week later,
INTRASTATE SALES
Mr. Peacock moves to Wichita, KS. Since
the 8% Kentucky rate paid is equal to or greater than
Kansas law requires that intrastate (within Kansas)
the Wichita combined rate of 7.3%, no Kansas
sales of vehicles that are required to be registered for
Compensating Tax is due. K.A.R. 92-19-30(l)(2).
operation on streets and highways (automobiles, trucks
(regardless of gross weight), motorcycles, motorized
K.A.R. 92-19-30(l)(2) provides that when a
bicycles and trailers) are subject to the highest local
purchaser has paid state and local sales tax to another
sales tax rate between:
state at a rate that is less than Kansas state and local
use tax rates where the vehicle is registered, the
1) the rate in effect where the sale took place
purchaser shall pay Kansas state and local use tax to
and
the county treasurer at a rate that is equal to the
difference between the combined state and local tax
2) the rate in effect at the buyer’s registration
rates for the Kansas location and the combined state
address (purchaser’s residence or place of
and local tax rates that were used to determine the tax
business).
paid to the other state.
This local compensating use tax law, K.S.A. 12-199,
Mr. Jones buys a car in Missouri and pays
applies to all in-state vehicle sales; it does not apply to
the Missouri sales tax of 5%. Three
vehicle rentals or leases (see IMPORTANT on the next
months later he moves to Anytown,
page). As with the collection and payment of sales tax,
Kansas (tax rate of 7%). When he
the only difference is how and to whom the tax is paid.
registers the vehicle with his Kansas address, he will
pay the difference between the two rates (2%) to the
When a vehicle is purchased from a dealer, the
County Treasurer. (The first use of the car was less
dealer will collect the full rate of state and local sales
than 6 months; see First Actual Use that follows.)
tax in effect at the dealer’s location. If the sales tax rate
is higher at the dealer’s place of business than at the
A car is bought in Alaska – a state that
purchaser’s residence, there is no additional local
does not impose a sales tax. When the
compensating use tax to be paid to the County Treasurer
car is subsequently registered in Kansas,
by the purchaser when the vehicle is registered.
the full state and local rate of Kansas tax
in effect at the registration address will be due, unless
However, if the sales tax rate is higher at the
the first actual use test has been met.
purchaser’s residence (or place of business if the
9
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