When to Apply the Kansas State Rate Change
- Aug 26, 2013 | Gail Cole
Kansas instituted a new state sales tax rate, effective July 1, 2013. At that point, the rate decreased from 6.3% to 6.15%. Instituting a rate change involves extra work for businesses. At minimum, cash registers and point of sale systems must be updated to reflect the new rate.
For some businesses, the change is fairly straightforward: business transactions that take place on June 30 are subject to the 6.3% rate of sales tax, and transactions that take place on July 1 are subject to the 6.15% rate.
Yet lots of business transactions are less straightforward. For example, what happens when an order is taken prior to July 1 but the goods aren't delivered until after July 1? Which rate applies to charges for something that spans the date of rate change, as with fees for lodging?
Recognizing that these and other situations may be confusing for business owners, the Kansas Department of Revenue has reissued an information notice about the state rate change. It provides transition rules to be used to "determine how sales tax applies to taxable sales that begin before July 1, 2013, and are completed on or after July 1, 2013."
Break it down
Sales agreed to before July 1 but delivered on or after July 1: "When goods are sold but delivery is arranged to be made or can reasonably be expected to be made on or after July 1, 2013, the 6.15% state rate applies." This rule applies to both written and verbal sales agreements, "even when full or partial payment is made before July 1, 2013.
Sales of services: Repair, installation and application services are subject to sales tax in Kansas. The rate of sales tax is based on "when the goods being serviced or repaired are returned to the customer or when the completed service work is otherwise available for 'first use' by the customer." For example, if a car is brought to an auto shop on June 27 and returned to the customer on July 2, the 6.15% applies.
Telephone, cable, community antennae, and other subscriber television and telecommunication services; and Metered utility charges for taxable nonresidential water, gas, and electricity service: The new state rate of 6.15% applies to these services, effective July 1. The new rate applies to services that begin prior to July 1 and end after July 1, 2013.
Leases of tangible personal property: Each lease installment is treated as a separate sales. Any installment for a billing period that starts on or after July 1, 2013, is subject to the 6.15% state rate. "The installment for the last billing period that starts before July 1, 2013 and ends after July 1, 2013 and is billed on or after July 1 is taxed at the new rate of 6.15%."
Financing leases are different. "Sales tax on the goods is payable up front at the time of sale on the full sales price rather than on the stream of payments made to pay down the loan balance."
Rentals: When rented goods are possessed before July 1, 2013 but charges are billed on or after July 1, the lower 6.15% rate applies.
Admission Charges: the rate in effect on the date of the sale of the ticket applies, even if the event itself takes place after a rate change.
Membership dues: The rate of sales tax that is in effect on the date of billing applies, even if the billing period includes a period prior to the rate change.
Room occupancy: The new state rate of 6.15% applies to single day sleeping room charges for the evening of June 30 and the morning of July 1. Weekly or monthly rates not treated as day-to-day rentals that begin prior to July 1 and conclude on or after July 1, 2013, are taxed at the new 6.15% rate.
Construction contracts: In progress payments that include taxable sales of labor, the 6.3% rate applies to "labor services rendered before July 1, 2013, in a progress-payment interval billing," and the 6.15% rate applies to services rendered on or after July 1. If a progress payment covers a billing period that begins before July 1 and ends and is billed on or after July 1, 2013, the new rate applies.
If the contractor doesn't bill a property owner until the real property improvements are completed, the rate on the date of completion applies to all charges, "regardless of when payment is made."
Building materials: The rate of the date of delivery applies, "not when the purchase is agreed to or payment is made."
Use tax: "The 6.15% state rate should be applied if the first use of the property in Kansas occurs on or after July 1, 2013." If an item is delivered by an out-of-state retailer to a Kansas business, the rate on the date the Kansas accepts delivery applies.
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