How do Kansas e-cigarette consumable material distributors register, report, and pay the tax?

Plain-English summary

Kansas Notice 16-06 sets out the registration and reporting requirements for the consumable material tax on electronic cigarettes.

The tax. House Bill 2109 (2015) amended K.S.A. 79-3399 to impose the tax on distributors at $0.20 per milliliter of consumable material; Senate Bill 149 (2016) set the effective date at January 1, 2017 (see the companion Notice 16-05).

Registration. Each distributor of consumable material must apply for a certificate of registration using form EC-1 -- there is no registration fee.

Definitions. "Consumable material" is any liquid nicotine or other nicotine solution -- the final product sold to consumers that is depleted as an e-cigarette is used. A "distributor" broadly includes those who bring consumable material into Kansas for sale, manufacture it in Kansas, or ship it into Kansas to sellers here; a "retail dealer" sells it to the consumer.

Reporting and payment. A monthly consumable material tax report (form EC-2) with schedules EC-3, EC-4, and EC-5 must be filed and the tax paid by the 20th of the month following the report month. The first report, for January 2017, was due February 20, 2017.

Two layers of tax. At the distributor level, the tax is $0.20 per milliliter; a retail dealer who manufactures consumable material, or buys it from a distributor that has not paid the tax, is deemed a distributor. Separately, the retail sale of consumable material to the consumer is subject to Kansas retailers' sales tax and applicable local sales taxes.

What this means for you

E-cigarette / consumable material distributors

• Register on form EC-1 (no fee), then file a monthly EC-2 report with schedules EC-3/EC-4/EC-5 and pay the $0.20-per-milliliter tax by the 20th of the following month (first report due February 20, 2017).

Retail dealers (vape shops)

• If you manufacture consumable material or buy it from a distributor that hasn't paid the tax, you are deemed a distributor and owe the tax.
• Your retail sales of consumable material to consumers are also subject to Kansas state and local sales tax.

Common questions

How does a distributor register? With form EC-1; there is no registration fee.

When are reports and payment due? Monthly, by the 20th of the month after the report month (first report for January 2017 was due February 20, 2017).

What is the tax rate? $0.20 per milliliter at the distributor level.

Is the retail sale also taxed? Yes -- retail sales of consumable material to consumers are subject to Kansas retailers' sales tax and local sales taxes.

Citations and references

• House Bill 2109 (2015) and K.S.A. 79-3399 -- impose the $0.20-per-milliliter consumable material tax on distributors.
• Senate Bill 149 (2016) -- effective date January 1, 2017 (see companion Notice 16-05).
• Registration on form EC-1 (no fee); monthly form EC-2 with schedules EC-3/EC-4/EC-5 due the 20th; retail sales also subject to Kansas and local sales tax.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 16-06

Original ruling text

Miscellaneous Tax Phone: 785-368-8222
Division of Taxation FAX: 785-291-3968
915 SW Harrison St www.ksrevenue.org
Topeka KS 66612-1588
Samuel M Williams, Secretary of Revenue Department of Revenue Sam Brownback, Governor
Steve Stotts, Director of Taxation

                                           NOTICE 16-06

                               CONSUMABLE MATERIAL TAX

The 2015 Legislature passed House Bill 2109 which amended K.S.A. 79-3399 by imposing a tax "upon
the privilege of selling or dealing in electronic cigarettes in this state by any person engaged in business
as a distributor thereof, at the rate of $.20 per milliliter of consumable material for electronic cigarettes
and a proportionate tax at the like rate on all fractional parts thereof." The effective date of this
consumable material tax was to be July 1, 2016.

The 2016 Legislature passed Senate Bill 149 which amended the effective date of the consumable
material tax to January 1, 2017.

REGISTRATION REQUIREMENTS:

Each distributor of consumable material must apply for a certificate of registration from the Kansas
Department of Revenue. To register, complete form EC-1, Application for Consumable Material Tax
Registration (enclosed with this notice.) The EC-1 can be found on our web site: www.ksrevenue.org.
Submit the registration application to Division of Taxation, Miscellaneous Tax, 915 SW Harrison St.,
Topeka, KS 66612-1588. If you prefer, you may fax the completed application to 785-296-4993 or email
to: [email protected]. NOTE: There is no fee charged to register.

CONSUMABLE MATERIAL DEFINITIONS:

"Consumable Material" is defined as any liquid nicotine or other solution containing nicotine. For
purposes of this definition, consumable material is the final product sold to consumers that is depleted as
an electronic cigarette is used.

"Consumer" is defined as person purchasing or receiving consumable material for final use.

"Distributor" is defined as (1) any person engaged in the business of selling consumable material in
Kansas who brings, or causes to be brought, into Kansas consumable material for sale, unless that person
is a retail dealer who has purchased the consumable material on a tax-paid basis from a distributor; (2)
any person who makes, manufactures, or fabricates consumable material for sale in Kansas; (3) any
person engaged in the business of selling consumable material outside of Kansas who ships or transports
consumable material to any person in the business of selling electronic cigarettes or consumable material
in Kansas; or (4) any person who has one or more retail dealer establishments that (a) bring or cause to be
brought into Kansas consumable material for sale by any of those retail dealer establishments, or (b)
make, manufacture, or fabricate consumable material in Kansas for sale in Kansas; however, each person
who has a retail dealer establishment from which the consumable material is sold to the consumer shall be
deemed a retail dealer.

"Retail Dealer" is defined as a person engaged in the business of selling consumable material to the
consumer in Kansas.

Miscellaneous Tax Phone: 785-368-8222
Division of Taxation FAX: 785-291-3968
915 SW Harrison St www.ksrevenue.org
Topeka KS 66612-1588
Samuel M Williams, Secretary of Revenue Department of Revenue Sam Brownback, Governor
Steve Stotts, Director of Taxation

REPORTING REQUIREMENTS:

A monthly consumable material tax report (form EC-2) and accompanying schedules (forms EC-3, EC-4
and EC-5) must be filed and the consumable material tax paid by the 20th of the month following the
report month by any person deemed to be a distributor, by definition, of consumable material.

Schedule A (form EC-3) – List all consumable material purchased within Kansas, including consumable
material purchased on which the tax has already been paid.

Schedule B (form EC-4) – List all consumable material manufactured within Kansas and sold, including
consumable material sold to out-of-state customers.

  •   NOTE: For consumable material manufactured and sold to the consumer (end-user), only
      complete the number milliliters sold on Schedule B.

Schedule C (form EC-5) – List all consumable material (1) purchased, on which the consumable material
tax has already been paid, and (2) sold to out-of-state customers. A separate Schedule C must be
completed for each option.

Please complete additional pages of each schedule, if necessary. The totals from the three schedules are
to be entered on the appropriate lines of form EC-2, Consumable Material Tax Report. Copies of the
report and schedules are enclosed with this notice. These forms can be found on our web site.

Electronic filing of the reports will be available in the future.

The consumable material tax is effective January 1, 2017. The first consumable material tax report for
the January 2017 period will be due February 20, 2017.

TAXATION ON CONSUMABLE MATERIAL:

The consumable material tax is imposed on the consumable material contained in a pre-packaged
electronic cigarette or the consumable material sold separately.

At the distributor level, the tax on consumable material is $0.20 per milliliter. A retail dealer who
manufactures consumable material or who purchases consumable material from a distributor who has not
paid the consumable material tax is deemed to be a distributor.

The retail sale of consumable material to the consumer (end user), whether wholly or in conjunction with
the sale of an electronic device containing consumable material, is subject to the Kansas retailer's sales
tax and any associated local sales taxes.

Frequently asked questions (FAQs) are enclosed and will be available on our web site
(www.ksrevenue.org).

If you have questions, please contact the Division of Taxation, Miscellaneous Tax, at 785-368-8222,
option 5, then option 4, from 8:00 a.m. to 4:45 p.m., Monday through Friday; or, email to:
[email protected].