Must a Kansas licensed vehicle dealer collect sales tax on a vehicle sold to a Native American who lives on a reservation?

Plain-English summary

This 1997 Departmental Memorandum from the Division of Vehicles' Titles and Registration Bureau answered "numerous inquiries" from Kansas vehicle dealers and county treasurers about collecting sales tax on vehicle sales to Native Americans living on a reservation. The short version: the dealer must collect Kansas sales tax at the time of sale unless the dealership's established place of business is physically on a federally recognized reservation and the buyer is a member of that reservation's tribe.

The memo grounds the rule in the dealer-licensing statute: "Pursuant to K.S.A. 8-2410(25) motor vehicle dealers are prohibited from conducting sales away from their established place of business." From that it draws the operative conclusion: "unless a dealer's established place of business is physically located on a federally recognized reservation and the purchaser of the motor vehicle is a member of that reservation's tribe, sales tax must be collected by the dealer at the time of sale."

It then adds two enforcement points:

• Off-site sales violate the Dealer's Act. "Failure to comply with K.S.A. 8-2410(25) is a violation of the Dealer's Act and will result in a fine and/or a suspension or revocation of the dealer's license to sell motor vehicles."
• The dealer still owes the tax even if the sale was improper. "[E]ven if a sale is conducted in violation of K.S.A. 8-2410(25) and the sales tax is not collected by the dealer, K.S.A. 79-3601 et seq. Does not relieve the dealer from remitting the sales tax to the Director of Taxation."

What this means for you

Kansas licensed vehicle dealers

Do not assume a sale to a Native American buyer is tax-exempt. Under this memo, you must collect sales tax at the time of sale unless both conditions are met: your established place of business is physically located on a federally recognized reservation, and the buyer is a member of that reservation's tribe. Trying to complete the sale on the reservation to fit the exemption would itself be an off-site sale barred by K.S.A. 8-2410(25).

The exemption turns on the dealership's location, not just the buyer

The key is where your established place of business sits. A dealer located off-reservation cannot create the exemption by traveling to the buyer — that off-site sale violates the Dealer's Act and can cost you your license.

You remain on the hook for the tax

If you fail to collect the tax on a sale that should have been taxed, the memo warns that K.S.A. 79-3601 et seq. still requires you to remit the sales tax to the Director of Taxation. The uncollected tax becomes your liability.

Common questions

Q: Does a Kansas dealer have to charge sales tax when selling a vehicle to a Native American?
A: Generally yes. The dealer must collect the tax at the time of sale unless the dealership's established place of business is physically on a federally recognized reservation and the buyer is a member of that reservation's tribe.

Q: Can the dealer just complete the sale on the reservation to avoid the tax?
A: No. K.S.A. 8-2410(25) prohibits dealers from making sales away from their established place of business; doing so is a Dealer's Act violation that can bring fines and license suspension or revocation.

Q: What happens if the dealer doesn't collect the tax?
A: The dealer is still liable. The memo states that even for a sale made in violation of K.S.A. 8-2410(25), K.S.A. 79-3601 et seq. does not relieve the dealer from remitting the sales tax to the Director of Taxation.

Citations and references

• K.S.A. 8-2410(25) — prohibits motor vehicle dealers from conducting sales away from their established place of business; the memo uses this to conclude the sale-to-a-tribe-member exemption applies only when the dealership itself is located on the buyer's federally recognized reservation, and notes that violations are Dealer's Act violations subject to fines and license suspension or revocation.
• K.S.A. 79-3601 et seq. — the Kansas retailers' sales tax act; the memo states it does not relieve a dealer from remitting the sales tax to the Director of Taxation even where the dealer failed to collect it on an improper sale.

Source

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

Original ruling text

Memorandum

Body:

Division of Vehicles
MEMORANDUM

TO: Kansas Vehicle Dealers/County Treasurers

FROM: Marge Bailey
Chief, Titles and Registration Bureau

DATE: April 2, 1997

SUBJECT: Sales Tax Collection

The Department of Revenue has recently received numerous inquiries regarding sales tax collection on vehicle sales transacted by Kansas Licensed Dealers to Native American’s residing on a reservation.

Pursuant to K.S.A. 8-2410(25) motor vehicle dealers are prohibited from conducting sales away from their established place of business. Therefore, unless a dealer’s established place of business is physically located on a federally recognized reservation and the purchaser of the motor vehicle is a member of that reservation’s tribe, sales tax must be collected by the dealer at the time of sale. Failure to comply with K.S.A. 8-2410(25) is a violation of the Dealer’s Act and will result in a fine and/or a suspension or revocation of the dealer’s license to sell motor vehicles. Furthermore, even if a sale is conducted in violation of K.S.A. 8-2410(25) and the sales tax is not collected by the dealer, K.S.A. 79-3601 et seq. Does not relieve the dealer from remitting the sales tax to the Director of Taxation.

Should you have any further questions or concerns, please don’t hesitate to contact this office at (913) 296-3621.

MB/drt

cc: Betty McBride
Rick Schiebe
David Clauser
Mike Hale

Date Composed: 02/24/1998 Date Modified: 10/09/2001

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