Will Kansas require remote retailers to collect sales tax in October 2019?
- Jul 16, 2019 | Gail Cole
Update 9.30.19: The Kansas Attorney General has determined Department of Revenue Notice 19-04 is "of no legal force or effect"; failure to include safe harbor for small sellers is "inconsistent with Wayfair." See Attorney General Opinion 2019-8 for more details.
Update 8.5.2019: "Remote sellers who are not already registered with the Kansas Department of Revenue must register and begin collecting and remitting Kansas sales and/or use tax by October 1, 2019." See Kansas Department of Revenue Notice 19-04 for additional details.
And then there were two.
Kansas is one of just three states that have a general sales tax and haven’t passed legislation requiring remote sellers to collect and remit sales tax. Come October, Florida and Missouri may be the last two such states standing.
Kansas law (K.S.A. 79-3702(h)(1)(F)) includes in the definition of a “retailer doing business in this state” any retailer whose contact with the state “would allow [Kansas] to require the retailer to collect and remit tax under the provisions of the constitution and laws of the United States.” In other words, any retailer it’s allowed to tax.
For decades, Kansas and other states were limited by the Dormant Commerce Clause and numerous rulings by the Supreme Court of the United States to imposing a sales tax collection obligation on businesses with a physical presence in the state. In other words, they lacked the authority to tax remote sales.
That changed on June 21, 2018, when the Supreme Court overruled the physical presence rule in South Dakota v. Wayfair, Inc. The court determined that a sales tax collection obligation can be based on a remote seller’s “economic and virtual contacts” with a state (economic nexus), as well as physical presence.
In the wake of the Wayfair ruling, more than 40 states have enacted economic nexus laws that enable them to tax remote sales. Kansas came close to doing the same last spring. However, Governor Laura Kelly vetoed the measure approved by the legislature because it was part of a larger package that would have reduced overall tax revenue and put the state out of compliance with the Streamlined Sales and Use Tax Agreement.
With Kansas eager for remote sales tax revenue and the Kansas Legislature adjourned until January 2020, the Kansas Department of Revenue may have found another way to enforce economic nexus in Kansas statute K.S.A. 79-3702(h)(1)(F).
The Sunflower State will reportedly impose a sales tax collection obligation on remote sellers effective October 1, 2019. Additional details will be reported here once available.
For more information about economic nexus laws in all states, check out Avalara’s state-by-state guide to economic nexus laws.