Kansas Clarifies Sales and Use Tax Obligations on Remote Sellers and Marketplace Facilitators

On May 3, 2021, the Kansas Governor’s veto on S.B. 50 was overridden by the Kansas House and Senate. The override had the votes with a substantial majority in both chambers. The new law, effective July 1, 2021, establishes sales and use tax obligations on remote sellers and marketplace facilitators with annual sales exceeding $100,000.

Background

After the United States Supreme Court decision in South Dakota v. Wayfair in June 2018, states have actively pursued enactment of laws that imposed sales and use tax obligations on remote sellers. Although the standard varies state by state, the standard adopted by most states is a two-part test: 1) sales that exceed $100,000 in the current or previous year, OR 2) two hundred transactions. This threshold essentially created a safe harbor for small businesses. However, in August 2019, the Kansas Department of Revenue issued Notice 2019-04 which clarified that beginning October 1, 2019, remote sellers would be required to collect and remit sales tax on all Kansas sales.

The Kansas Attorney General issued Notice 2019-8, which called into question the validity of the Department of Revenue Notice 2019-04. Meanwhile, the Governor and the Department of Revenue have continued to assert that the position in Notice 2019-04 was valid. For most remote sellers, this internal conflict in the Kansas government caused confusion regarding whether or not a registration, collection and remittance obligation existed.

Remote Sellers / Marketplace Facilitators

Now the confusion can be set aside with the passage of S.B. 50. Effective July 1, 2021, remote sellers and marketplace facilitators with annual sales exceeding $100,000 are required to collect and remit sales and compensating use tax.

Marketplace facilitators are defined as entities that contract with sellers to facilitate the sale of products or lodgings through a physical or electronic marketplace operated, owned, or otherwise controlled by the entity and either directly or indirectly collect the payment from the purchaser and transmit all or part of the payment to the seller. The definition excludes platforms that exclusively provide advertising services, principally provide payment processing, or are a certain type of commodity futures trading organization[1]*.

Reference:

[1] https://cdn.ymaws.com/www.lkm.org/resource/resmgr/files/league_news/2021/League_News_05122021.pdf

ABOUT THE AUTHORS

Blake Burge
Senior Consultant, Tax

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