Our customers ask us about general guidelines to collecting and paying sales tax in just about every state. Below you’ll find the most common examples for collecting (or not collecting) sales tax for online sellers with actual or potential ties to Kansas. If your particular case is more unique than what I’ve outlined, contact a tax professional.
You’re an online seller living outside of Kansas
In our first example, let’s assume you’re an online seller running your business out of your home in a state other than Kansas. Fortunately for you, you don’t have sales tax nexus with Kansas. Translated: you’re not required to collect sales tax from customers that want taxable items shipped to an address in Kansas.
You live/operate your business in Kansas
Now let’s assume you’re a resident of Kansas and you operate a business out of your basement. Kansas considers that to be nexus, so you need to collect sales tax and remit it to the state. By the way, no matter what type of business you have (sole proprietorship, LLC, corporation, etc) or how much your business actually sells, you need to register your business with the state before you begin collecting sales tax from your customers. Here’s the Business Tax and Registration guide(PDF) Kansas makes available to learn more about the registration process.
How much sales tax you collect from your customers with a shipping address in Kansas depends on where the customer is located – also known as a destination-based sales tax state. In general, the sales tax rate is a sum of the state rate (6.3%) plus applicable local taxes.
Let’s go through a couple of examples. Your business is located in Havensville, KS and you sell a taxable item to be delivered to Junction City, KS. The tax rate that you’d use to collect sales tax is based on the Junction City address. According to the KS-1700 (PDF), the total tax rate charged to the customer should be 9.550% (state rate of 6.15% plus local rate(s) of 2.25%).
Now check out this more complicated example. Assume the seller is still located in Havensville. But this time the buyer is in Kansas City, KS. What’s different about this example is we’d need to know exactly what address in Kansas City to be able to determine the correct sales tax rate. Why? Because Kansas City has 15 different sales tax rates! See the table below from Kansas’ Sales and Use Tax Jurisdiction Code Booklet (PDF).
You live out-of-state but sell through FBA
Let’s crank it up a notch and assume you live outside of Kansas but use a fulfillment service. If your fulfillment service stores your inventory in a warehouse in Kansas (Amazon’s Fulfillment By Amazon (FBA) has a fulfillment center in Coffeyville), then the state of Kansas considers that inventory nexus. That means even if you never set foot in Kansas you need to collect sales tax (technically Kansas calls it “compensating use tax”) from all orders your business ships to Kansas addresses. Here’s an excerpt from page 28 of Kansas’ Sales Tax and Compensating Use Tax Guide (PDF) that shows your inventory equals nexus.
The rate at which you collect sales tax in this scenario is just like our last example – it’s based on the shipping address of your customer. So let’s say you’re living and operating your business in San Francisco with nexus to Kansas because you’re an FBA customer. You make a sale and have to ship an item to Americus, KS. The correct tax rate is based on the shipping address (which as I write this Americus’ tax rate is 7.8%).
Summary: destination matters most
If you live in any state other than Kansas then you’re not required to collect sales tax from customers you ship to in Kansas. If you live in Kansas or have inventory stored in Kansas through a fulfillment service, then you are required to collect sales tax. Collect sales tax based on where the taxable item is being shipped.
Got questions? Feedback? Tell me about your experience selling in Kansas in the discussion section below.
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