When is a motor vehicle sold to a nonresident exempt from Kansas sales tax, and what did the revised Form ST-8B change?

Plain-English summary

Kansas Notice 21-26 addresses the sales tax exemption for certain vehicles and aircraft sold to nonresidents who will remove them from Kansas. The statute did not change -- instead, the Department revised Form ST-8B (Dealer/Purchaser Declaration of Exemption for Certain Vehicles and Aircraft Sold to Nonresidents for Removal from Kansas) to highlight and clarify the qualification requirements, because some Kansas buyers and dealers were unaware of them.

The exemption. K.S.A. 79-3606(k) exempts from sales tax the sale of "any motor vehicle, semitrailer or pole trailer, as such terms are defined by K.S.A. 8-126, . . . or aircraft sold and delivered in this state to a bona fide resident of another state, which . . . is not to be registered or based in this state and which . . . will not remain in this state more than 10 days."

Who counts as the buyer. In Kansas sales tax law, "taxation is the rule and exemption the exception." The residency of the purchaser controls:

• Nonresident buys alone: No residency question arises -- all the documents (financing, purchase invoice, title) show a sale to a bona fide resident of another state, and the sale can be exempt.
• Kansas resident is only a co-signor: If a Kansas resident appears only on the promissory note as a true co-signor (not on the purchase invoice or the title, and not a co-owner), there is no requirement for the co-signor to appear on the sale contract, and the exemption is not defeated.
• Kansas resident is a purchaser: When both a nonresident and a Kansas resident are shown on the purchase invoice and/or the vehicle title, the Department presumes the exemption has not been met and sales tax is due. The Kansas resident then has ownership rights but the transaction is taxable.

Form ST-8B and dealer duties. The nonresident must properly complete Form ST-8B to qualify. The dealer must ascertain the identity of the person presenting the certificate and, after exercising due diligence (a good-faith effort to confirm the facts), accept it in good faith. Failing to do either can lead to a tax assessment against the nonresident and/or the dealership.

Assessments and appeals. If a dealer sells to both a nonresident and a Kansas resident and does not collect the tax, the Department issues an assessment to the purchaser(s), who may appeal. At the informal conference the purchaser can explain why the transaction should qualify and provide supporting documents, and the Department will request residency information for all parties.

What this means for you

Nonresident buyers

• If you genuinely reside in another state, will not register or base the vehicle in Kansas, and will remove it within 10 days, your purchase can qualify -- but you must properly complete Form ST-8B.
• Delivery must be to you as a bona fide nonresident; a mere intent to remove or register elsewhere does not exempt a Kansas resident.

Kansas dealers

• Verify the buyer's identity and exercise due diligence before accepting a Form ST-8B in good faith.
• If you accept a defective certificate or fail to collect tax on a taxable sale, the Department can assess the tax against you and/or the buyer.

Kansas residents co-signing a purchase

• Being only a co-signor on the promissory note (not on the invoice or title) does not make the sale taxable, but you take on the debt for a vehicle you will not own.
• If you go on the purchase invoice and/or the title, you gain ownership rights but the sale becomes subject to Kansas sales tax.

Common questions

What does the exemption cover? Motor vehicles, semitrailers, and pole trailers (as defined by K.S.A. 8-126), and aircraft, sold and delivered in Kansas to a bona fide resident of another state.

What conditions must be met? The vehicle must not be registered or based in Kansas and must not remain in the state more than 10 days.

Did the law change? No -- the statute is unchanged. The Department only revised Form ST-8B to clarify and highlight the requirements.

What if a Kansas resident is on the title or invoice? The Department presumes the exemption is not met and sales tax is due on the transaction.

Can I appeal an assessment? Yes -- the notice of assessment advises of the right to appeal, and you can present documents and argument at an informal conference.

Citations and references

• K.S.A. 79-3606(k) -- exempts vehicles, semitrailers, pole trailers, and aircraft sold and delivered in Kansas to a bona fide nonresident, not to be registered or based here and not remaining more than 10 days.
• K.S.A. 8-126 -- defines "motor vehicle," "semitrailer," and "pole trailer."
• Form ST-8B -- Dealer/Purchaser Declaration of Exemption for Certain Vehicles and Aircraft Sold to Nonresidents for Removal from Kansas, revised to clarify the requirements.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 21-26

Original ruling text

Policy and Research
109 SW 9th Street Phone: 785-368-8222
PO Box 3506 Fax: 785-296-1279
Topeka KS 66601-3506 www.ksrevenue.org
Mark A. Burghart, Secretary Laura Kelly, Governor

                                         NOTICE 21-26

                Sales Tax Exemption for Certain Motor Vehicles
                 Sold to Nonresidents for Removal from Kansas
                            Revision of Form ST-8B

                                     (OCTOBER 25, 2021)

   The Kansas Department of Revenue has revised form ST-8B, Dealer/Purchaser Declaration

of Exemption for Certain Vehicles and Aircraft Sold to Nonresidents for Removal from Kansas.
The statute is unchanged, but the Department has revised the form ST-8B to highlight and clarify
the requirements that must be met to qualify for the exemption.

   The Department became aware that some Kansas buyers or Kansas dealers are not aware of

the qualification requirements that exist for a nonresident of Kansas to be exempt from sales tax
on the purchase of a motor vehicle. K.S.A. 79-3606(k) provides an exemption from sales tax for
the sale of:

   "any motor vehicle, semitrailer or pole trailer, as such terms are defined by K.S.A. 8-
   126, and amendments thereto, or aircraft sold and delivered in this state to a bona fide
   resident of another state, which motor vehicle, semitrailer, pole trailer or aircraft is not
   to be registered or based in this state and which vehicle, semitrailer, pole trailer or
   aircraft will not remain in this state more than 10 days;"

   The revised format of form ST-8B emphasizes those requirements that must be met to qualify

as a bona fide resident of another state. When a vehicle is purchased by a Kansas resident the
intent to remove the vehicle from Kansas and/or to register the vehicle in another state does not
relieve the purchaser from paying Kansas retailers' sales tax.

   When only one party is involved in the transaction and that person is a bona fide resident of

a state other than Kansas, (i.e., a nonresident of Kansas) no question of residency exists. All the
documents involved in the transaction (financing, purchase agreement / purchase invoice, and
vehicle title) indicate a sale to a bona fide resident of another state.

   Questions of residency also do not arise in a situation where a Kansas resident is involved

only in the vehicle sale financing for a vehicle purchased by a nonresident of Kansas. In these
cases the Kansas resident does not appear on the purchase agreement / purchase invoice, or on the
vehicle title; it is plain that a nonresident of Kansas purchased the vehicle. While a co-signor will
definitely appear on the promissory note, if the co-signor is truly a co-signor on the promissory

note and not a co-owner of the property, there is no requirement for the co-signor to appear on the
contract showing the sale to the new owner.

  Questions of residency arise when both a nonresident of Kansas and a Kansas resident are

shown on the purchase agreement / purchase invoice and/or the vehicle title. Under Kansas sales
tax law, taxation is the rule and exemption the exception. In these cases, the Department presumes
the requirements for exemption established under K.S.A. 79-3606(k) have not been met, and that
sales tax is therefore due. If the dealership making the sale does not collect and remit the sales
tax, the Department will issue a sales tax assessment to the purchaser(s).

  One of the tools used to determine a nonresident of Kansas' qualification for exemption is

form ST-8B. The Department revised the form to highlight exemption requirements and to ensure
that the buyer signing is aware of the exemption requirements.

  Whether a nonresident of Kansas is making a purchase on their own, or the nonresident of

Kansas is making a purchase with a Kansas resident co-signor, it is important for the nonresident
of Kansas to properly complete the form ST-8B. First, the nonresident of Kansas must properly
complete the form to qualify for exemption from sales tax. Second, the dealership must ascertain
the identity of the person or entity presenting this certificate and, after exercising due diligence to
determine its accuracy (i.e., making a good faith effort to confirm the facts and details of the
situation), must accept the certificate in good faith. Failure to do either may cause a tax assessment
against the nonresident of Kansas and/or the dealership.

  If a dealership sells a vehicle to both a nonresident of Kansas and a Kansas resident (i.e.,

both the nonresident of Kansas and the Kansas resident are on the purchase agreement / purchase
invoice and/or on the vehicle title), and does not collect and remit the sales tax, the Department
will issue an assessment to the purchaser(s), and the notice of assessment will advise the
purchaser(s) of their right to appeal. During the appeal (the informal conference) the purchaser(s)
will have the opportunity to explain why they believe the transaction should qualify for exemption,
and to provide any authority, documents, proofs, or other information they want the Department
to consider. At the same time the Department will request information regarding the residency of
all parties involved in the transaction, and all other requirements for exemption.

 In summary, when both a nonresident of Kansas and a Kansas resident are involved in the

purchase of a vehicle from a Kansas dealership, it is important for them to determine the role of
each party. If the Kansas resident will truly be acting only as a co-signor, the transaction will not
be subject to sales tax, but the Kansas resident will assume a financial obligation for the purchase
of a vehicle they will not own. On the other hand, if the Kansas resident is on the purchase
agreement / purchase invoice and/or the vehicle title, they then will have full rights to the vehicle
(and at least some protection for any financial obligation) but the transaction will be subject to
Kansas sales tax.

  When the Department determines a transaction does not qualify for exemption and issues an

assessment against a purchaser, that purchaser may appeal the assessment. Anyone in this situation
is encouraged to exercise their right of appeal and proceed through the administrative process.

During the administrative process they will be given an opportunity to explain why they believe
the transaction should qualify for exemption.

                                TAXPAYER ASSISTANCE

 Additional copies of this notice, forms or publications are available from our web site,

www.ksrevenue.org. If you have questions about this Notice, please contact:

                             Taxpayer Assistance Center
                            Kansas Department of Revenue
                            Scott Office Building, 1st Floor
                                   120 SE 10th Ave
                                    P. O. Box 3506
                               Topeka, KS 66601-3506
                                 Phone: 785-368-8222
                                  Fax: 785-291-3614