Does a buyer of a tractor or trailer that will be leased to an ICC-authorized motor carrier have to pay Kansas sales or use tax?

Plain-English summary

This 1990 Departmental Memorandum states the Kansas Department of Revenue's position on how sales and use tax applies when someone buys a tractor and/or trailer that will be leased to a motor carrier holding ICC (Interstate Commerce Commission) authority. The short version: the buyer normally owes tax on the vehicle, but can register it without paying if the vehicle will run in interstate commerce and the buyer either holds — or timely applies for — a retailers' sales tax registration number.

The memo starts from the default rule: "The purchaser of a tractor and/or trailer will pay the appropriate retailer's sales tax at the time of the purchase or pay the consumer's compensating use tax at the time the vehicle is registered."

It then sets out the two exceptions:

• Apply for a registration number after leasing to the carrier. After obtaining a lease from a motor carrier with ICC authority, the purchaser "may make application for a retailers' sales tax registration number." That application "must be made within 30 days of the purchase of the vehicle," and "[t]he vehicle title, lease, and retailers' sales tax application must have all the same individual, partnership or corporate name." Once the purchaser holds a valid registration, "the vehicle may be registered, without remitting the sales or use tax," provided it "is to be used in interstate commerce."
• Already hold a registration at purchase. If the purchaser "holds a valid retailers' sales tax registration at the time of the purchase," the vehicle "may [be] purchased without tax," provided it is to be leased to a carrier with ICC authority.

Finally, the memo describes the fallback: if the purchase does not fall within either situation, "the purchaser must pay the sales or use tax." After paying, and once the listed requirements are met, "the purchaser may file a refund request with the Business Tax Bureau, Kansas Department of Revenue."

What this means for you

Owner-operators and leasing companies buying rigs for interstate carriers

If you buy a tractor or trailer to lease to an ICC-authority carrier for interstate use, plan the paperwork before or right after the purchase. Holding a valid Kansas retailers' sales tax registration at the time you buy — or applying for one within 30 days of purchase — is what lets the county register the vehicle without collecting sales or use tax.

Watch the 30-day window and the matching-name rule

The exception that lets you apply after the fact is time-limited: the application must be filed within 30 days of purchase, and the title, the lease, and the sales tax application all have to be in the same name (individual, partnership, or corporate). A mismatch or a late filing can knock you out of the exception.

If you already paid, you may still get it back

If your purchase didn't fit either exception and you paid the tax, the memo says you can file a refund request with the Business Tax Bureau once the requirements are satisfied — the tax paid up front is not necessarily lost.

Common questions

Q: Do I always owe Kansas sales or use tax when I buy a truck to lease to a carrier?
A: As a default, yes — you pay retailers' sales tax at purchase or compensating use tax at registration. The memo describes two exceptions that let the vehicle be registered without the tax when it is used in interstate commerce.

Q: What do I have to do to register the vehicle without paying the tax?
A: Either already hold a valid Kansas retailers' sales tax registration when you buy it, or — after leasing it to an ICC-authority carrier — apply for a registration number within 30 days of purchase, with the title, lease, and application all in the same name. The vehicle must be used in interstate commerce.

Q: I already paid the tax. Is there any way to recover it?
A: The memo says that if you pay the tax and then meet the requirements, you may file a refund request with the Kansas Department of Revenue's Business Tax Bureau.

Citations and references

• ICC (Interstate Commerce Commission) authority — the memo's exceptions apply to vehicles leased to motor carriers holding ICC authority and used in interstate commerce; it does not cite specific K.S.A. sections, and it directs refund requests to the Department's Business Tax Bureau.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: MEMO-LeasesInvolvingICCAuthority

Original ruling text

Memorandum

Body:

MEMORANDUM

TO: TAX POLICY, BUSINESS TAX BUREAU, DIVISION OF MOTOR VEHICLES PRORATE

FROM: STEVEN A. STOTTS, ACTING DIRECTOR OF TAXATION

RE: LEASES INVOLVING ICC AUTHORITY

DATE: SEPTEMBER 25, 1990

The purpose of this memo is to clarify the department's position regarding leases to carriers with ICC authority.

The purchaser of a tractor and/or trailer will pay the appropriate retailer's sales tax at the time of the purchase or pay the consumer's compensating use tax at the time the vehicle is registered.

Except for the following situations:

1. After obtaining a lease from a motor carrier, with ICC authority, the purchaser may make application for a retailers' sales tax registration number.

2. The application for a sales tax registration number must be made within 30 days of the purchase of the vehicle.

3. The vehicle title, lease, and retailers' sales tax application must have all the same individual, partnership or corporate name.

Once the purchaser holds a valid retailers' sales tax registration, the vehicle may be registered, without remitting the sales or use tax. Provided, the vehicle is to be used in interstate commerce.

2. If the purchaser holds a valid retailers' sales tax registration at the time of the purchase, he vehicle may purchased without tax. Provided, the vehicle is to be used leaded to a carrier with ICC authority.

If the purchase does not fall within one of the two situations described above, the purchaser must pay the sales or use tax. After the tax is paid and the requirements listed above are met, the purchaser may file a refund request with the Business Tax Bureau, Kansas Department of Revenue

Date Composed: 10/06/1997 Date Modified: 10/09/2001

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