Kansas Enacts Economic and Marketplace Nexus Legislation Following Veto Override

Effective Date: July 1, 2021

Threshold: $100,000

Measurement Date: Current or immediately preceding calendar year

Includable Transactions: Gross sales; Marketplace sales included towards the threshold for individual sellers. For marketplace facilitators, it is taxable sales instead of gross per Notice 21-14.

When You Need to Register Once You Exceed the Threshold: Next transaction

The Kansas House and Senate overrode the Kansas governor’s veto of a tax omnibus bill, S.B. 50, that contains economic and marketplace nexus provisions. This bill, like other Kansas bills with remote seller provisions that came before it, was coupled with other provisions that the governor did not agree with, so it was initially vetoed.

Effective July 1, 2021, remote sellers will be required to register to collect and remit tax if, in the current or immediately preceding calendar year, they have more than $100,000 of cumulative gross receipts from sales to Kansas customers. Marketplace facilitators are required to collect and remit tax if the exceed the $100,000 de minimis threshold, but only taxable sales are included in determining whether the de minimis threshold has been met; sales of property or services that are exempt from tax are not included per Notice 21-14.

A marketplace facilitator is defined as a person that contracts with marketplace sellers to facilitate sales of the marketplace seller’s products, rooms, lodgings, or accommodations through a physical or electronic marketplace. A marketplace seller either directly or indirectly (through a third party arrangement) collects payments from the purchaser.

Under the bill, a marketplace facilitator specifically includes a person that provides a platform for third parties to offer rentals, for a period less than 29 consecutive days, of rooms, lodgings, accommodations, homes, apartments, and other residential dwellings. A person is not a marketplace facilitator with respect to lodging rentals if they meet the definition of “hotel” under Kansas law.

A marketplace facilitator also does not include platforms that exclusively provide advertising or listing services, payment processing services, and derivatives clearing organizations, designated contract market, foreign board of trade, or swap execution facility.

Marketplace sellers must include sales of property or services subject to tax in Kansas, whether made on their own behalf or on the behalf of marketplace sellers, towards the threshold calculation. The Kansas Department of Revenue may grant a waiver from marketplace facilitator requirements if a marketplace facilitator demonstrates, to the satisfaction of the Department, that substantially all of its marketplace sellers are already collecting and remitting taxes to the department. If the waiver is granted, required taxes will be collected from the marketplace seller.

Prior to April 1, 2022, a marketplace facilitator that sells or facilitates the sale of prepaid wireless service is not liable for the collection or payment of the prepaid wireless 911 fees imposed under K.S.A. 12-5371. On and after April 1, 2022, a marketplace facilitator that is obligated to collect under the new marketplace facilitator law must also collect and remit the prepaid wireless 911 fees.

The Kansas Department of Revenue will solely audit the marketplace facilitator for sales facilitated for marketplace sellers. A marketplace facilitator is relieved of liability for failure to collect and remit the correct amount of tax if the error was due to incorrect or insufficient information supplied by the marketplace seller and the facilitator made a reasonable effort to obtain the correct information. (S.B. 50, Laws 2021, effective July 1, 2021)

Posted on November 1, 2021