WHICH GOODS AND SERVICES ARE TAXABLE?
Determining whether or not the products or services your company sells are taxable in Kansas is the first step in sales tax compliance.
Traditional Goods or Services
Goods that are subject to sales tax in Kansas include physical property, like furniture, home appliances, and motor vehicles.
Medicine and gasoline are both tax-exempt.
Some services in Kansas are subject to sales tax. For a detailed list of taxable services view this PDF from the Kansas Department of Revenue Website.
Digital Goods or Services
A digital good or service is anything electronically delivered, such as an album downloaded from iTunes or a film purchased from Amazon.
Kansas does not require businesses to collect sales tax on the sale of digital goods or services.
However, Kansas has one exception to this policy. Businesses must collect sales tax on pre-written computer software that is sold online.
HOW TO REGISTER FOR KANSAS SALES TAX
If you determined that you need to charge sales tax on some or all of the goods and services your business sells, your next step is to register for a seller's permit. This allows your business to collect sales tax on behalf of your local and state governments.
In order to register, you will need the following information:
- Reason for application
- Tax type
- Business info including name, address, phone, parent company, subsidiaries
- Location information
- Annual Kansas sales estimation
- Other questions about the nature of your business (if you’re connected to construction, natural gas, etc.)
Save Money with a Resale Certificate
With a resale certificate, also known as a reseller's permit, your business does not have to pay sales tax when purchasing goods for resale.
COLLECTING SALES TAX
After getting your seller's permit and launching your business, you will need to determine how much sales tax you need to charge different customers. To avoid fines and the risk of costly audits, it's important for business owners to collect the correct rate of sales tax.
When calculating sales tax, you'll need to consider the following kinds of sales:
- Store Sales
- Shipping In-State
- Out-of-State Sales
For traditional business owners selling goods or services on-site, calculating sales tax is easy: all sales are taxed at the rate based on the location of the store.
Here's an example of what this scenario looks like:
Mary owns and manages a bookstore in Wichita, Kansas. Since books are taxable in the state of Kansas, Mary charges her customers a flat-rate sales tax of 7.5% on all sales. This includes Kansas’s state sales tax rate of 6.5% and Sedgwick county’s sales tax rate of 1.0%.
The state of Kansas follows what is known as a destination-based sales tax policy. This means that long-distance sales within Kansas are taxed according to the address of the buyer. This policy applies to state, county, and city sales taxes.
Consider the following example:
Steve runs his own business selling electronics on eBay out of his home in Olathe, Kansas. A customer living in Topeka, Kansas finds Steve’s eBay page and purchases a $350 pair of headphones. When calculating the sales tax for this purchase, Steve applies the 6.5% state tax rate for Kansas, plus 1.15% for Shawnee county’s tax rate and 1.5% for Topeka’s city tax rate. At a total sales tax rate of 9.15%, the total cost is $382.03 ($32.03 sales tax).
Kansas businesses only need to pay sales tax on out-of-state sales if they have nexus in other states. Nexus means that the business has a physical presence in another state.
Common types of nexus include:
- A physical location, such as an office, store, or warehouse
- An employee who works remotely or who is a traveling sales representative
- A marketing affiliate
- Drop-shipping from a third party seller.
- A temporary physical location, including festival and fair booths.
FILE YOUR SALES TAX RETURN
Now that you’ve registered for your Kansas seller's permit and know how to charge the right amount of sales tax to all of your customers, you are all set to file your sales tax return. Just be sure to keep up with all filing deadlines to avoid penalties and fines.
Recommended: Hiring a business accountant can help your business file tax returns as well as issue payroll and manage bookkeeping. Schedule a consultation with a business accountant today to save thousands of dollars on your taxes.
How to File
Kansas requires businesses to file sales tax returns and submit sales tax payments online.
How Often Should You File?
How often you need to file depends upon the total amount of sales tax your business collects.
- Annual filing: If your business collects less than $6.66 in sales tax per month then your business should elect to file returns on an annual basis.
- Quarterly filing: If your business collects between $6.66 and $266.66 in sales tax per month then your business should elect to file returns on a quarterly basis.
- Monthly filing: If your business collects between $266.66 and $2666.66 in sales tax per month then your business should file returns on a monthly basis.
- Prepaid-monthly filing: if your business collects more than $2666.66 in sales tax per month then your business will follow the normal monthly filing option. The only difference is that the business has an expectation to file returns on a semi-monthly basis.
Note: Kansas requires you to file a sales tax return even if you have no sales tax to report.
All Kansas sales tax return deadlines fall on the 25th day of the month, unless it is a weekend or federal holiday, in which case the deadline is moved back to the next business day.
Annual filing: January 25, 2020
- Q1 (Jan. 25 - March 25): Due April 25
- Q2 (April 25 - June 25): Due July 25
- Q3 (July 25 - Sept. 25): Due Oct. 25
- Q4 (Oct. 25 - Dec. 25): Due Jan. 25
Monthly filing: The 25th of the following month, or the next business day, e.g. April 25 for the month of March, or May 25 for the month of April.
Prepaid-monthly filing: The First 15 days of the current months’ liability is due on or before the 25th of that month. The second portion is due on the same due date as the monthly filing option: the 25th of the following month which also happens to be on the same day as the prepayment for that month.
- Here are some instructions that might help when deciding what is to be filled out on the sales tax return.
For a complete list of deadlines, check out the Tax Filing Calendar on the Kansas Department of Revenue website.
Penalties for Late Filing
Kansas charges a late payment penalty that is equal to 1.0% per month up to 24% of the tax that is unpaid after the specified due date.
The state assesses the unpaid tax with a compounded interest rate of 5.0% per year or 0.42% per month or partial month for any unpaid tax or penalty.
Kansas Helpful Resources
Kansas Tax Assistance: