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The Kansas Department of Revenue issued an opinion letter discussing the sales tax treatment of charges for hosted software services billed to Kansas subscribers. The application service provider (ASP) charges subscribers for the use of software hosted on the ASP’s remote servers, located out-of-state. Subscribers access the software via the internet. This type of transaction is commonly referred to as “Software as a Service” (SaaS) or cloud computing. In this instance, no software was downloaded or delivered to the customer, and title to the software did not pass to the subscribers. In Kansas, charges imposed by an ASP for using software on a remote server are not considered charges for a lease and are not subject to sales tax. The department noted that Kansas law applies sales tax only to services expressly described under Kansas law as subject to sales tax. None of the taxable services enumerated in Kansas law can be construed as hosted software services. The department also stated that charges for hosted software services are not subject to Kansas sales tax as sales of prewritten computer software because the software installed on the server (regardless of whether the server is located in Kansas or out-of-state) is not delivered to subscribers or installed on their computers. Such software is not taxable as a sale of prewritten software as long as the software is not billed to subscribers as a separate line item charge. (Opinion Letter No. O-2012-001, Kansas Department of Revenue, February 6, 2012)

(03/26/2012)

Kansas has enacted a tax amnesty program for delinquent payment of certain taxes administered by the Department of Revenue. The tax groups covered are sales, income, withholding, privilege, severance, estate, liquor, cigarette, and tobacco products. Amnesty applies only to unpaid tax liabilities for tax periods ending on or before December 31, 2008. The amnesty period began September 1, 2010 and will run through October 15, 2010. Interest and penalties will be dismissed if the tax liability is paid within this period. Certain liabilities that exist on or after September 1, 2010 are not eligible for amnesty including any audits in progress or already assessed. Participants in the amnesty program will relinquish all administrative and judicial rights of appeal in regard to the tax liability. Any tax payments received in relation to the amnesty program are not eligible for refund or credit. Payments of penalties or interest made before September 1, 2010 are not eligible for amnesty. (S.B. 572, Laws 2010, effective as noted; E-mail, Kansas Department of Revenue, August 12, 2010). (9/10)

(09/13/2010)

As a result of Senate Bill 430, the Kansas Department of Revenue (KDOR) has released a notice announcing that businesses will be required to electronically file returns for retailer’s sales, compensating use, and withholding tax, effective July 1, 2010. To ensure a smooth transition for Kansas businesses the KDOR will continue to provide paper forms as needed through September 30, 2010. After September 30, 2010, KDOR will no longer have printed paper forms available.

There are two options for electronic filing and payment:
1) The WebTax system: http://www.webtax.org; can file single and multiple jurisdiction sales and use tax returns. Requires users to create a login ID and password; a one-time use of a personal identification number (PIN) is required. For retailers’ sales and compensating use tax, it can be used to file single and multiple jurisdiction returns for FORM ST-16, ST-36, CT-9U, and CT-10U. For withholding tax, the system can be used to file Forms KW-3, KW-5, W-2, and 1099.
2) The TeleFile system: can file single jurisdiction sales tax returns. This telephone method requires the use of a PIN each time it used. For retailer’ sales and compensating use tax, the telephone number is (877) 317-5639 and the system can be used to file single jurisdiction returns for Form ST-16 only. For withholding tax, the telephone number is (877) 600-5640 and the system can be used to file Form KW-5 only.

For PIN assignment, taxpayers can call the Electronics Services at 1-800-525-3901 (in Topeka, call 296-6993) or if preferred, taxpayers can email Electronic Services at eservices@kdor.state.ks.us. Payments are made through EFT transfer (ACH Debit or ACH Credit) on or before the due date. Credit card payments are also accepted through third-party vendors. Additional rules and regulations apply. (New Filing Requirements for Your Retailers’ Sales, Compensating Use, and Withholding Tax, Kansas Department of Revenue, May 21, 2010)

(06/10/2010)

Kansas Governor Mark Parkinson has signed House Bill 2360 enacting the increase to the state’s retailers’ sales and compensating use tax rate from 5.3% to 6.3%, effective July 1, 2010. The Kansas Department of Revenue has recently revised a state and local rate change notice to reflect this rate increase. (H.B. 2360, Laws 2010, effective July 1, 2010; Press Release, Kansas Gov. Mark Parkinson, May 27, 2010; Information Guide No. EDU-96, Kansas Department of Revenue, June 2, 2010)

(06/08/2010)

Senate Bill 430, effective upon publication in the Kansas Register, conforms Kansas provisions with the recent changes to the Streamlined Sales and Use Tax (SST) Agreement. Specifically, the legislation replaces provisions governing direct mail sourcing with and without a direct pay permit with provisions governing advertising and promotional direct mail and other direct mail. S.B. 430 defines advertising and promotional direct mail as printed material that meets the definition of direct mail for which the primary purpose is to attract public attention to a product, person, business or organization, or to attempt to sell, popularize, or secure financial support for a product, person, business, or organization. A purchaser of advertising or promotional direct mail can provide the seller with 1) a direct pay permit; 2) an exemption certificate or other statement approved, authorized, or accepted by the secretary claiming direct mail; or 3) information showing the jurisdiction to which the advertising and promotional direct mail is to be delivered to recipients. Other direct mail has also been updated by S.B. 430 to be defined as any direct mail that is not advertising and promotional direct mail, regardless of whether such advertising and promotional direct mail is included in the same mailing. A purchaser of other direct mail may provide the seller with 1) a direct pay permit, or 2) an exemption certificate, or other statement approved, authorized, or accepted by the secretary claiming direct mail.

The legislation has also made amendments to various other provisions, including exemption certificates and rate changes. Specifically, if a seller obtains an exemption certificate, the certificate must claim an exemption that was authorized pursuant to Kansas law on the date of the transaction in the jurisdiction where the transaction is legally sourced, must be applicable to the item being purchased, and must be reasonable for the purchaser’s type of business. For rate change provisions, S.B. 430 includes that whenever there is less than 30 days between the effective date of any retailer’s sales tax or compensating use tax rate change and the date that the rate change takes effect, a seller is relieved from liability for failing to collect tax at the changed rate if 1) the seller collected tax at the immediately proceeding rate; and 2) if the seller’s failure to collect at the new rate does not extend beyond the 30 days after the effective date of the rate change. Additional rules and regulations apply. (S.B. 430, Laws 2010, effective upon publication in the Kansas Register)

(06/01/2010)

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