Kansas scalding Wayfair rules hit online sellers this fall.
A single sale into Kansas and pay up for sales tax collections. That’s the new rule Kansas will begin enforcing on all sellers selling to Kansans as of October 1, 2019. Talked to Toto but looks like Kansas is stretching the boundaries of Wayfair. Just one sale and sellers need to register, collect and remit.
With this rule, Kansas moves to the front of the line as the toughest state on Wayfair laws in the nation. Disregarding the U.S. Supreme Court de facto standards, Kansas will impose aggressive state and local tax obligations on online sellers moving product and services into the state at any level. One product or 200+–it won’t matter. If you sell an item into Kansas, you need to be registered.
The rules
The Kansas Department of Revenue Notice 19-04 will begin enforcing all remote sellers to register in the state, no small business exemptions. The Notice states:
Kansas can, and does, require on-line and other remote sellers with no physical presence in Kansas to collect and remit the applicable sales or use tax on sales delivered into Kansas. Accordingly, a remote seller must register with Kansas and obtain a sales and/or use tax account number.
Kansas will begin enforcing these requirements on October 1, 2019. For registration, Kansas is a member of the Streamlined Sales and Use Tax Governing Board, which allows businesses to complete an online application for 24 states. One caveat, though, is that using streamlined registration can be prohibitive for your business as you are limited to certain tax rules that might not fit your unique business facts.
Alternatively, remote sellers can register with Kansas specifically at www.ksrevenue.org. Kansas is a destination-based sourcing state and as such, sales tax is imposed at the rate determined by the jurisdiction where the purchaser takes delivery or possession. Marketplace sellers are encouraged to contact the state and enter into a voluntary compliance agreement.
The Takeaway
While almost all states (and the District of Columbia) eligible to impose Wayfair laws have done so, Kansas is bringing up the rear with a scalding tax policy that opponents say invites legal action. Among the states that have Wayfair laws, sales thresholds (transactions and/or dollar amount) tend to limit the burden on smaller sellers doing business in the state.
The U.S. Supreme Court threshold standard of $100,000 or 200 transactions set in Wayfair isn’t really that low of a threshold. So, maybe having no line of demarcation just means register and collect, get your statute of limitations running and protect yourself from eating other people’s sales taxes. Because the burden falls on sellers primarily (individual buyers hardly ever get audited), it’s the ecommerce business that really carries the audit risk due to volume.
Registering carries a cost and administrative burden. Not registering carries the risk of noncompliance. A tax adviser can help you negotiate the tough decision to register now or wait. Or, if decision time has passed and you’ve become non-compliant in any jurisdiction, help you negotiate penalty relief.
Let’s talk tax
Judy Vorndran can be reached at jvorndran@taxops.com.
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