Kansas Releases Unprecedented Remote Seller Policy

The Kansas Department of Revenue released a notice on August 1, 2019 stating that any remote seller that sells tangible personal property or services into the state must register and begin collecting and remitting sales and/or use tax by October 1, 2019. The state does not specify a sales or transactions threshold.

The notice states that Kansas imposes its sales and use tax collection requirements to the “fullest extent permitted by law,” pointing to K.S.A. 79-3702(h)(1)(F) as the authority under which it can require all remote sellers to register. The statute provides that any retailer that has contact with Kansas is considered ‘doing business in the state’ and permits the state to require the retailer to collect and remit tax under the provisions of the constitution and U.S. laws.

Retailers may register online through the Streamlined Sales Tax Program since Kansas is a full member or directly through the Kansas Department of Revenue. Failure to register may result in “administrative enforcement action.”

Marketplace facilitators are encouraged to contact the Department of Revenue to potentially enter a voluntary compliance agreement with the Department. However, there is no legal requirement for marketplaces to collect tax rather than the seller. The notice defines a marketplace facilitator as a person who, pursuant to an agreement with a retailer, facilitates sales through a physical or electronic marketplace and engages directly or indirectly in activities such as communicating offers and acceptances between buyers and sellers, operating the infrastructure that brings buyers and sellers together, providing a virtual currency for buyers for use on the platform, or software or R&D activities related to the previously listed activities.

Marketplace facilitators engage in any of the following activities related to marketplace sellers’ products: payment processing services, fulfillment, delivery, or storage services, listing products for sale, setting prices, branding sales as those of the marketplace facilitator, order taking, advertising or promotion, or customer service or returns and exchanges services.

Kansas proposed two different bills in 2019 to enact remote seller legislation that would have implemented a $100,000 threshold for remote sellers. However, both bills were vetoed by the governor because the provisions were coupled with other provisions with which she did not agree. (Notice 19-04: Sales Tax Requirements for Retailers Doing Business in Kansas, Kansas Department of Revenue, August 1, 2019)

UPDATE: The Kansas Attorney General released an opinion on the Department of Revenue’s remote seller policy on September 30, 2019. The opinion states that the Kansas Department of Revenue did not have the authority to impose the remote seller policy through a notice without having a public hearing or review by public officials outside the DOR among other procedural requirements. The AG declared that the policy “has not been lawfully adopted and is invalid.” The Kansas Secretary of Revenue, however, has indicated in a statement that the Department will enforce the policy unless a court rules against the policy.

UPDATE: The Kansas legislature passed economic and marketplace nexus legislation via veto override on May 3, 2021. Effective July 1, 2021, remote sellers and marketplace facilitators 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. See our news item for more details.

Posted on September 30, 2019