May a seller accept a Missouri exemption certificate for carpet shipped to a Kansas retailer before the carpet is transported to Missouri for installation?

Plain-English summary

A seller planned to ship carpet to a Kansas retailer, which would later move and install the carpet in Missouri. The retailer supplied a Missouri exemption certificate.

The Department said the seller should not accept another state's certificate for a sale made and shipped to a Kansas resident. But the transaction appeared exempt from Kansas use tax under a different theory.

K.S.A. 79-3702(e) exempted property shipped into Kansas for temporary storage before transportation and use outside Kansas. The retailer therefore needed to provide the seller with Kansas Form ST-28, the Designated or Generic Exemption Certificate, citing the temporary-storage statute.

The Missouri certificate could be attached to help document the intended out-of-state use, but it did not replace the Kansas form. Kansas temporary-storage treatment applied even if the Missouri installation was taxable, because Missouri rather than Kansas would receive any use tax due on the out-of-state use.

What this means for you

Sellers shipping to Kansas customers

Use a Kansas exemption certificate for the Kansas transaction rather than accepting another state's form by itself.

Kansas retailers staging out-of-state jobs

Document that the property is only temporarily stored in Kansas and will be transported outside the state for use there.

Multistate contractors

Kansas temporary-storage exemption does not establish exemption in the destination state; analyze that state's tax separately.

Common questions

Q: Could the seller accept the Missouri certificate alone?
A: No. The Department required the correct Kansas certificate.

Q: Was the carpet exempt from Kansas use tax?
A: Yes on the stated temporary-storage and out-of-state-use facts.

Q: Did the Missouri job have to be exempt?
A: No. Kansas temporary-storage treatment applied even if Missouri tax was due.

Citations and references

• K.S.A. 79-3702(e) — temporary storage before out-of-state use
• Form ST-28 in Publication KS-1520 — Kansas Designated or Generic Exemption Certificate

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: O-2001-016

Original ruling text

Opinion Letter

Body:

Office of Policy & Research

April 23, 2001

XXXX
XXXX
XXXX

RE: You fax of April 16, 2001

Dear XXXX:

Thank you for your recent fax. You question whether or not you can accept a Missouri exemption certificate for carpet that you are shipping to a Kansas retailer. Please be advised that you should not accept an exemption certificate from another state for sales made and shipped to a Kansas resident.

While you should not accept the Missouri exemption certificate, the sale in question does appear to be exempt from Kansas taxes. Kansas has a temporary storage exemption for property that is shipped to Kansas for the purpose of subsequently transporting the property outside the state for use outside the state. The Missouri exemption certificate that you faxed suggests that this is the Kansas exemption that the retailer is actually claiming. Accordingly, this is apparently a case where the Kansas retailer has asserted the wrong theory of exemption for a sale that is exempt from Kansas use tax.

To correct this error in your records, you must ask the Kansas retailer to complete the correct Kansas exemption form and return it to you. In this case, the correct form to use is a Designate or Generic exemption certificate. The Missouri exemption certificate indicates the retailer’s intention to install the carpeting in the state of Missouri on an exempt Missouri job. Thus, the exemption being claimed is the temporary storage exemption found in K.S.A. 79-3702(e). You and your customer should note that such sales and shipments to Kansas would be exempt even if the job were taxable in Missouri. In such a case, Missouri --- not Kansas --- is entitled to the use tax that is due.

The Designated or Generic Exemption Certificate (Form ST-28) can be found on our web site, www.ink.org/public/kdor/ . To locate it, simply enter the site, access “2000 Forms,” and then access “Sales and Compensating Use Tax.” Next, scroll down to Kansas Sales Tax Exemption Certificates and open “KS-1520.” Once this is open, Form ST-28 can be located. It is listed alphabetically as the “Designated or Generic Exemption Certificate.” Your Kansas customer should open this form, copy it, complete it, and send it to you. The statutes that your customer should cite when completing the form are set out above in this letter. You should attach the Missouri certificates to the Kansas claim since the Missouri certificates help to document what the claim is for.

I hope that I have answered all of your questions. If not, please e-mail me or call me at (785) 296-3081.

Sincerely,

Thomas E. Hatten
Attorney/Policy & Research

Date Composed: 05/02/2001 Date Modified: 10/10/2001

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