Separately stated delivery charges are exempt from Kansas sales tax as of July 1, 2023

Delivery charges that are separately stated on an invoice are not subject to Kansas sales tax starting July 1, 2023. Prior to July 1, delivery charges were considered part of the sales price and were therefore subject to sales tax if the item delivered was taxable.

This policy change affects applicable local sales taxes and special district sales taxes as well as the state sales tax. 

For Kansas sales tax, taxation is still generally the rule

Taxation is still the general rule when it comes to Kansas sales tax. So, to qualify for a sales tax exclusion, delivery charges must be separately stated on the invoice, bill of sale, or similar document and be clearly identified as charges for:

  • Delivery, 
  • Transmission, or 
  • Transportation

Kansas sales tax will apply to delivery charges that aren’t properly identified as well as separately stated.

A word about sales tax exclusions versus sales tax exemptions, as they aren’t the same. What distinguishes them is who bears the burden of proof. With a sales tax exclusion, the taxpayer must prove the transaction isn’t taxable (in this case by separately stating shipping charges). With a sales tax exemption, the burden of proof falls on the tax agency.

The distinction is important, though in common parlance a sales tax exclusion may be referred to as an exemption. This is not an exemption: Shipping charges are excluded from Kansas sales tax.

Delivery charges must be reasonable and provable

The Kansas Department of Revenue reminds that the delivery charges must be both reasonable and provable.

Retailers must retain records related to delivery costs and charges, and make them available to the Kansas Department of Revenue upon request. Per department Notice 23-02, “depending upon the amount of the delivery charges relative to the sales price of the item sold, a detailed, itemized list of all the charges may be required for each delivery.”

In Kansas, “delivery charges” include but aren’t limited to transportation, shipping, postage, handling, crating, and packing. Delivery charges do not include the cost of transportation to the seller (i.e., freight-in), fuel surcharges, or any charge-back for delivering returned goods.

Learn how other states tax delivery charges in our state-by-state guide on how to handle sales tax on shipping.

Are delivery charges for direct mail subject to Kansas sales tax?

Separately stated charges to deliver direct mail became exempt from Kansas sales tax effective July 1, 2007. The policy change taking effect July 1, 2023, doesn’t affect the taxability of direct mail delivery charges.

“Direct mail” is defined as printed material delivered or distributed to a mass audience or to addressees on a mailing list, when the cost of the items isn’t billed directly to the recipients. It can include tangible personal property.

Excluding separately stated delivery charges from Kansas sales tax is due to the enactment of 2022 House Bill 2136. The Kansas Department of Revenue published guidance on how to tax delivery fees on June 22, 2023.

 

Keeping up with sales tax changes can be a full-time job. If you’d rather spend your time elsewhere, automating sales tax compliance could be right for you.

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