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The Kansas Department of Revenue issued guidance in response to a recent question posed regarding how to collect tax on shipping charges related to taxable and non taxable goods. The Department stated that if a single shipment contains both taxable and nontaxable items, the seller must collect Retailer’s Sales Tax on the basis of the percentage of the shipping charge allocated to taxable goods in the shipment. The seller may allocate the shipping charge by (1) dividing the amount charged for the taxable goods by the total amount charged for all of the goods being shipped, or (2) dividing the weight of the taxable goods by the total weight of the shipment. The invoice provided by the seller must prove the allocation of the taxable versus nontaxable shipping charges. (Questions and Answers, Kansas Department of Revenue, December 10, 2004)


In a “Questions and Answers” release, the Kansas Department of Revenue discussed the allocation of tax on shipping charges. They stated that when a shipment contains both taxable and non-taxable goods, sales tax is only due on the shipping charges related to the taxable goods. A retailer can find the tax due using one of two methods. They can calculate the tax on by dividing the amount charged for the taxable goods by the total amount being charged for all the goods shipped or divide the weight of the taxable goods by the total shipment weight. Multiplying this percentage by the total shipping charge will determine the total taxable amount of the shipping charge. The invoice must contain all of the information needed to determine the allocation of the charges that was made by the seller. (Questions and Answers, Kansas Department of Revenue, December 10, 2004)


In an appeal to the Kansas Supreme Court, the court found that purchases of telecommunications equipment were subject to tax. Under Kansas law, telecommunications is defined as a service rather than tangible personal property. Because it is used in providing a service, telecommunications equipment is not considered machinery or equipment used in manufacturing of tangible personal property and does not qualify for the manufacturing exemption. (Appeal of Sprint Communications Co., L.P., from an Order of the Division of Taxation for a Refund of Sales and Use Tax, Kansas Supreme Court, Nos. 90,663 – 90,667, December 17, 2004)


In a private letter ruling, the Kansas Department of Revenue stated that the resale of installation services was exempt from tax if the equipment installed is not affixed to real property and the seller had a valid resale certificate. If the labor is applied to real property, the purchaser of the service is deemed to be the consumer. The Department of Revenue also stated that an out of state manufacturer who is registered for sales tax in Kansas and makes a drop shipment to a consumer in Kansas who ordered the product from an out-of-state retailer should collect and remit the compensating use tax if the retailer is not registered to collect it. (Private Letter Ruling No. P-2004-058, Kansas Department of Revenue, December 14, 2004)


Recent legislation has been signed affecting various retail sales for items ranging from aircraft repair to public water systems. Among these are four changes that apply specifically to retail sales. 1) Effective July 1, 2004, the base for computing the tax on isolated or occasional sales of motor vehicles or trailers will be either the stated selling price or the valuation of the item, whichever cost is greater. Regarding wrecked or damaged vehicles, the selling price will be used as the tax base for the isolated sale. 2) Effective January 1, 2005, retailers' sales tax will apply to "prewritten computer software", where previously the tax applied to "computer software" and the sale of service of providing the software. 3) Effective January 1, 2005, sales of the services and the parts used in aircraft repair, modification, remanufacturing will no longer be exempt from the retailers' sales tax. 4) Effective January 1, 2005, the retailers' sales tax exemption will include hearing aids, tangible personal property sold to a contractor, food items sold by a contractor engaged in preparing meals for the homebound elderly, and other items sold to various exempt organizations. (S.B. 147, Laws 2004)



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