Wayfair related state sales tax developments have continued since the ruling came down last summer, with virtually every state with a sales tax making changes over the past year in how they handle out of state sellers.  But the state of Kansas has decided to go where no one else has dared to tread, issuing Notice 19-04, Sales Tax Requirements for Retailers Doing Business in Kansas.[1]

As you read the document you’ll note one key item is missing—the minimum amount of sales (either in dollar volume or number of transactions) necessary to trigger the need to register and collect Kansas sales tax.  That is because, in the view of the Kansas Department of Revenue, any amount of sales into Kansas is enough to trigger the requirement to collect and pay over the tax.

In an article published by Bloomberg Tax, Kathleen Smith, the director of research and analysis at the Kansas Department of Revenue is quoted as stating that the law in Kansas does not support a minimum sales threshold.  The article states:

“If the legislature wants to, they can go ahead and put it in there, but based on the law we have, we believe we have the ability to collect taxes on all transactions,” Smith said. For example, if a retailer had a single transaction for $10 to a buyer in the state, that retailer would have to get licensed and remit sales taxes on that singular sale, she said.[2]

The article notes that the Kansas legislature had passed a bill this past session that would have set a $100,000 threshold, the same level as South Dakota, but the governor had vetoed that bill.[3]

The Notice requires remote sellers not already registered with the state of Kansas to do so by October 1, 2019 and begin collecting the tax no later than that date.  The state will not enforce the collection requirements for sales made into Kansas prior to October 1, 2019.[4]

Whether Kansas will be able to enforce this standard is not clear.  The Supreme Court specifically noted that South Dakota’s law had features to prevent discrimination against or undue burdens on interstate commerce, the first one noted being “a safe harbor to those who transact only limited business in South Dakota.”[5]

Of course, very few states have in place the exact set of protections that the Court commented positively on in the Wayfair decision.  For instance, a large number of states, and most of the largest ones, are not members of the Streamlined Sales and Use Tax Agreement (SSUTA), but those states are arguing that Wayfair clears the way for them to impose the collection obligation on the states. 

Note that Kansas is a full SSUTA member state.  The state may be reasoning that, based on the actions of non-SSUTA states seeking to impose collection obligations, that something less than the complete South Dakota list of protections will be enough to avoid having the rule barred as imposing too great a burden on interstate commerce.  And, certainly, there has not been any case law interpreting in detail what options other than the South Dakota law would serve as adequate protection.

So, Dorothy, while you and Toto may not be in Kansas anymore, the state still wants you to register to collect sales tax.

[1] https://www.ksrevenue.org/taxnotices/notice19-04.pdf, August 1, 2019, retrieved August 2, 2019

[2] Tripp Baltz, “Kansas Only State Making Small Businesses Pay Remote Sales Tax,” Bloomberg Tax Daily Tax Report website, August 1, 2019, https://news.bloombergtax.com/daily-tax-report/kansas-only-state-making-small-businesses-pay-remote-sales-tax, retrieved August 2, 2019

[3] Ibid

[4] Notice 2019-04, p. 1

[5] South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (US Supreme Court, 2018), https://www.supremecourt.gov/opinions/17pdf/17-494_j4el.pdf, p. 23, retrieved August 2, 2019

[1] https://www.ksrevenue.org/taxnotices/notice19-04.pdf, August 1, 2019, retrieved August 2, 2019

[2] Tripp Baltz, “Kansas Only State Making Small Businesses Pay Remote Sales Tax,” Bloomberg Tax Daily Tax Report website, August 1, 2019, https://news.bloombergtax.com/daily-tax-report/kansas-only-state-making-small-businesses-pay-remote-sales-tax, retrieved August 2, 2019

[3] Ibid

[4] Notice 2019-04, p. 1

[5] South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (US Supreme Court, 2018), https://www.supremecourt.gov/opinions/17pdf/17-494_j4el.pdf, p. 23, retrieved August 2, 2019