SALT Report 2584 – The Kansas Department of Revenue announced that they have revoked sales and use tax Notice 13-07 and have replaced it with Notice 13-08. The notice discusses the reduction in the state sales and use tax rate from 6.3% to 6.15% pending the Governor’s signature.
Revisions to Notice 13-08 include additional guidance regarding how the new tax rate will apply to transaction that occur before the rate change but are billed after the rate change. The notice also revised how the new tax rate applies to sales of telephone, cable, community antennae, and other forms of television or telecommunication subscription services, as well as to metered utility services.
During the transition to the new tax rate, the following rules should be used to determine which tax rate applies to transactions that begin before July 1, 2013, but are completed on or after July 1, 2013:
- The 6.15% rate will apply to sales of goods agreed to or entered into before July 1 but that are delivered on or after that date. This rule applies to both written sales contracts and verbal sales agreements even if a full or partial payment is made before July 1, 2013.
- The 6.15% rate applies to property that is serviced or repaired and will be returned and billed to the customer on or after July 1. This means charges for labor services should be taxed when the item being serviced or repaired is returned to the customer, or when the completed service work is available for “first use” by the customer. This rule applies regardless of when the service agreement is entered into, when payment is received, or when the labor services are performed
- Telephone, cable, community antennae, subscriber television and telecommunication services, and metered utilities are subject to the 6.15% rate effective July 1. If the services are invoiced for a billing period that starts before and ends after July 1, the 6.15% rate should be applied to those bills issued after July 1.
- For lease installment payments in which the billing periods start on or after July 1, the 6.15% rate applies. The 6.15% rate also applies to installment payments for a billing period that starts before July 1 and ends after July 1, and is billed on or after July 1. This rule does not apply to financing leases as sales tax is imposed at the time of sale, on the full sales price.
- The 6.15% rate applies to rental goods when the customer takes possession of the goods on or after July 1. If a customer takes possession of rental goods before July 1 and the rental charge for the last billing period starts in June and ends on or after July 1, that billing period will be subject to the 6.15% rate. Additionally, if a rental agreement is extended, renewed, or modified on or after July 1, the 6.15% rate applies from that point forward.
- For admission charges to events held in Kansas, the state rate in effect on the date the ticket is sold and delivered to the purchaser will apply.
- Hotels should charge sales tax on single-day room charges for the evening of June 30 and the morning of July 1 at the 6.15% rate. All taxable occupancy charges thereafter should be taxed at the 6.15% rate. If the room rentals are billed on a weekly or monthly basis they are considered day-to-day rentals if the hotel or the guest has the right to terminate the room rental agreement at any time. Otherwise, charges for weekly or monthly room rentals in which the billing period begins before July 1 and ends on or after July 1 and is billed on or after July 1 will be subject to the 6.15% rate.
- When construction progress payments are made, the 6.3% rate applies to taxable labor services performed before July 1, and the 6.15% rate applies to taxable labor services performed on or after July 1. If the progress payment includes a billing period that begins before July 1 and ends on or after July 1 and is billed on or after July 1, the 6.15% rate applies. For construction projects not involving progress payments, the rate in effect on the date of completion will apply. For building materials, the rate in effect when the materials are delivered to the contractor will apply.
- When a different state’s sales tax is credited against Kansas use tax the 6.15% Kansas rate applies if the first use of the property in Kansas occurs on or after July 1. If an out-of-state retailer does not collect Kansas sales tax, the date the customer takes delivery will determine whether the 6.3% rate or 6.15% rate applies.
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