Is the Kansas liquor drink tax owed on free alcohol samples served by clubs and drinking establishments?

Plain-English summary

Kansas Notice 13-09 explains a 2013 change letting certain licensees serve free alcohol samples -- and taxing them.

The change. 2013 House Bill 2199 (effective July 1, 2013) authorizes Class A clubs, Class B clubs, drinking establishments (DE), hotels, DE/Caterer and Hotel/Caterer licensees to serve free samples to customers. Section 14 imposes the 10% liquor drink tax on the acquisition cost of any alcoholic liquor served as samples.

How to report it.

• Until the revised return is available, include the acquisition cost of sample liquor in total gross receipts on Line 2.
• Once the revised return is provided, report the 10% tax on samples on new Line 4 ("Tax due on free samples"); continue reporting gross receipts from sales on Line 2 and the 10% tax on those sales on Line 3; then add Lines 3 and 4 for the total tax on Line 5.

Additional information on serving samples appears in the Department's 2013 ABC Industry Notice. The notice highlights only the liquor drink tax portion of HB 2199.

Date note. The notice is footer-dated June 26, 2013.

What this means for you

Clubs, drinking establishments and hotels

• You may serve free alcohol samples, but you owe the 10% liquor drink tax on the acquisition cost of the sampled liquor and must report it (on Line 4 once the revised return is available, or in Line 2 gross receipts until then).

Bookkeepers

• Track the acquisition cost of sample liquor separately so it can move to Line 4 when the revised return arrives.

Common questions

Who can serve free samples? Class A and B clubs, drinking establishments, hotels, and DE/Caterer and Hotel/Caterer licensees.

Is tax owed on free samples? Yes -- the 10% liquor drink tax on the acquisition cost of the sampled liquor.

Where is it reported? On new Line 4 of the revised return (or in Line 2 gross receipts until the new return is available).

When did it take effect? July 1, 2013.

Citations and references

• 2013 House Bill 2199 -- authorizes free samples and (Section 14) imposes the 10% liquor drink tax on the acquisition cost of sampled liquor.
• Kansas 2013 ABC Industry Notice -- referenced for additional detail on serving samples.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 13-09

Original ruling text

KANSAS DEPARTMENT OF REVENUE
DIVISION OF TAXATION

                                            NOTICE 13-09

                             2013 Liquor Drink Tax Legislative Update

The following bill was enacted by the 2013 Legislature:

House Bill 2199

This bill is effective as of the date of publication in the statute book, July 1, 2013.

House Bill 2199 provides the authority for Class A club, Class B club, drinking establishment (DE), hotel,
DE/Caterer, and Hotel/Caterer licensees to serve free samples to their customers. Additional information
on the serving of samples and other changes made in the legislation can be found at
www.ksrevenue.org/pdf/2013ABC IndustryNotice.pdf. Section 14 imposes the 10% liquor drink tax
upon the acquisition costs of any alcoholic liquor served as samples by clubs and drinking establishments.

The liquor drink tax return, both paper and online, are being revised to report the amount of liquor served
as samples. The revised returns may not be available for the July reporting period. Until you receive the
new return, you will need to report the acquisition cost of the liquor used in samples in your total gross
receipts from the sale of alcoholic beverages on Line 2.

Once the new liquor drink tax returns are provided, the 10% liquor drink tax on samples will be reported
on new Line 4, Tax due on free samples. You will only be reporting the tax due on the samples on this
line. You will continue to report gross receipts from the sale of alcoholic beverages on Line 2 of the
return and the 10% tax on those sales on Line 3. You will then add Line 3 and Line 4 to arrive at the total
amount of liquor drink tax due and report the total tax due on Line 5.

This notice highlights only the liquor drink tax portion of the bill. For a detailed, full-text copy of
the bill, please visit the Kansas Legislature's web site at: www.kslegislature.org.

                                    TAXPAYER ASSISTANCE

To obtain additional copies of this or any other notice, call the Kansas Department of Revenue's forms
request line at 785-296-4937, or download the notice from our web site: www.ksrevenue.org. If you
have questions regarding this notice, please contact our Miscellaneous Tax Segment:

                                        Miscellaneous Tax
                                   Kansas Department of Revenue
                                       915 SW Harrison St.
                                     Topeka, KS 66612-1588
                                    Telephone: (785) 368-8222
                                       Fax: (785) 291-3968

Notice 13-09
June 26, 2013