SALT Report 1619 – The Kansas Department of Revenue issued a Private Letter Ruling that discusses the taxability of firearms, firearm parts, firearm accessories, and firearm-related services. The letter ruling also rescinds a previous private letter ruling regarding the taxability of interstate sales of firearms.
Every Kansas dealer that sells guns must register with the Department as a retailer and obtain a retailers’ sales tax registration certificate. All Kansas retail firearms dealers must collect and remit sales tax on retail sales of tangible personal property, which includes firearms, firearm parts and accessories, ammunition, and hunting goods.
Firearms dealers must also collect sales tax on any charges they impose on their customers for all taxable services, such as the repair or modification of firearms, regardless of whether the dealer performs the service work. If the dealer contracts with an outside service provider to perform the service work, the dealer should provide that service provider with a Resale Exemption Certificate Form ST-28A.
If a Kansas firearms dealer wants to purchase tangible personal property for resale and exempt from tax it must provide the vendor with an exemption certificate that contains a Kansas registration certificate number or a Resale Exemption Certificate. A Federal Firearms Permit cannot be used to purchase taxable tangible personal property or taxable services exempt from tax.
Additionally, the Department rescinded Private Letter Ruling No. P-2003-054 which states that “retailers’ sales tax applies to the sale of a firearm to a Kansas resident by an out-of-state retailer not registered for Kansas sales tax purposes when the firearm is shipped to a Kansas dealer for delivery to the Kansas purchaser.” The Department disagreed with the legal wording of the 2003 letter ruling and now finds that the taxability should be determined by whether the Kansas dealer is making a taxable retail sale when delivering the firearm to the Kansas resident.
Under Kansas sales tax law, a “sale” only occurs if it is made for “money” or “consideration.” The Department found that any money or consideration the Kansas dealer receives is for the time and labor involved with accepting and redelivering the firearm, recording and documenting the transaction, and performing background checks, which are all nontaxable services.
Therefore, because the Kansas dealer does not receive money or consideration for the firearm it redelivers and never holds title to the firearm, the department now finds that Kansas dealers involved in this type of activity are not required to collect or remit Kansas sales or use tax.
The Department warns that although they rescinded the 2003 ruling no refunds will be issued to Kansas dealers who previously collected the tax. Refunds will only be issued if the Kansas buyer can establish they paid sales or use tax to the state of Kansas after they paid sales tax to the state were the firearm was initially purchased and the payment of tax to the other state was not credited against the use tax paid to Kansas.
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