USA: Kansas expands sales and use tax nexus

On April 16, 2013, Kansas Governor Sam Brownback signed a new bill – S.B. 83, which generally creates a presumption that out-of-state retailers are doing business in the state for sales and use tax purposes based on the activities of other persons, applicable starting July 1, 2013.

The bill also adopts “click-through” nexus, applicable to sales made 90 days after the bill is published in the Kansas Register. Out-of-state retailers should be aware that, following the enactment of S.B. 83, the activities of an unrelated entity or person could potentially create sales and use tax nexus in Kansas.

Nexus based on activities of other persons

Effective July 1, 2013, a retailer is presumed to be doing business in Kansas for sales and use tax purposes (i.e. has a sales and use tax nexus in Kansas) if another person within Kansas sells the same or a substantially similar line of products as the retailer and does so under the same or a substantially similar business name, or maintains a distribution center or similar place of business in Kansas.  For the complete list of activities that create sales and use tax nexus in Kansas, please read the full article here.

Click-through nexus

S.B. 83 provides that a retailer is presumed to be doing business in Kansas for sales and use tax purposes if the retailer enters into an agreement with one or more Kansas residents under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link or an internet website, by telemarketing, by an in-person oral presentation, or otherwise, to the retailer. The cumulative gross receipts from such sales must exceed $10,000 during the preceding 12 months.

This presumption may be rebutted by submitting proof that the residents with whom the retailer has an agreement did not engage in any activity within Kansas that was significantly associated with the retailer’s ability to establish or maintain the retailer’s market in the state during the preceding 12 months.

The click-through nexus provision is applicable for sales made and uses occurring on or after 90 days after the publication of S.B. 83 in the Kansas Register.

The takeaway

While awaiting movement in Congress on the Main Street Fairness Act, more and more states are enacting expanded nexus statutes. S.B. 83 has two aspects of concern for potential Kansas taxpayers. First, it appears that some of the nexus-creating activities do not have to be performed in Kansas. Second, while S.B. 83 contains nexus provisions for an in-state ‘affiliate,’ other provisions presume nexus based on an in-state entity defined only as a ‘person.’ Accordingly, out-of-state retailers should be aware that, following the enactment of S.B. 83, it is possible that the activities of an unrelated entity or person could create Kansas sales and use tax nexus.  For more on this topic, please click here.

About Jennifer Jensen

email: jennifer.jensen@us.pwc.com Mobile: +1 240 678 0226 Office: +1 202 414 1741

Jennifer is a state and local tax director in PwC Washington National Tax Services specializing in sales and use and indirect taxes. Her industry focus is in technology, entertainment, media, and communications. Jennifer helps lead the firm's cloud computing initiative and is the state and local subject matter expert in this area. Jennifer provides both internal firm and external client sales and use tax training in such issues as eCommerce, the taxation of digital products, and, of course, cloud computing. She also summarizes relevant legislation or other tax law changes to disseminate both externally and internally and writes thought leadership pieces for external publication by the firm.