If the federal Internet Tax Freedom Act moratorium expires, will Kansas start taxing internet access charges?

Plain-English summary

The federal Internet Tax Freedom Act (ITFA) bars states from taxing charges for internet access. A taxpayer asked what Kansas would do if Congress let the ITFA moratorium expire (then scheduled for October 1, 2015). The Department's answer: nothing.

Kansas sales tax applies to charges for "telecommunication service" under K.S.A. 79-3603(b), but K.S.A. 79-3602(aaa) defines that term and subsection (aaa)(6) expressly excludes "internet access service." Because Kansas law itself carves internet access out of the tax base — independent of the federal moratorium — charges for internet access sourced to a Kansas location are not taxed and would not become taxable just because ITFA lapses. That remains true unless the Kansas legislature amends or repeals K.S.A. 79-3602(aaa)(6).

The Department added that this guidance stays in effect for at least 60 days after it posts notice that Congress has repealed ITFA and the legislature has acted to tax internet access.

What this means for you

Internet service providers and telecom billers

Continue treating charges for internet access sitused to Kansas customers as exempt from Kansas sales tax. The exemption rests on Kansas's own statute, not on the federal ITFA, so a change in federal law does not by itself create a Kansas collection duty.

Kansas businesses and consumers

Your internet access charges are not subject to Kansas sales tax. Bundled charges that also include taxable telecommunications services can be treated differently — this letter addresses internet access service specifically.

Tax professionals

The reasoning is a clean statutory-exclusion argument: an item expressly excluded from the definition of a taxed service is untaxed absent a separate imposition statute naming it. Watch K.S.A. 79-3602(aaa)(6) for any future amendment.

Common questions

Q: Does Kansas tax internet access charges?
A: No. K.S.A. 79-3602(aaa)(6) excludes "internet access service" from the definition of taxable "telecommunication service."

Q: What happens if the federal ITFA moratorium expires?
A: Nothing changes in Kansas. The exemption comes from Kansas's own statute, not from ITFA.

Q: Are bundled internet-and-phone charges exempt too?
A: This letter addresses internet access service. Taxable telecommunications services bundled with internet access can raise separate sourcing and bundling questions.

Q: Does this opinion bind the Department?
A: An Opinion Letter is general guidance without the force of law; another taxpayer with different facts should not assume the same result.

Citations and references

• K.S.A. 79-3603(b) — imposes Kansas sales tax on telecommunication services
• K.S.A. 79-3602(aaa) — definition of "telecommunication service"
• K.S.A. 79-3602(aaa)(6) — excludes "internet access service" from that definition

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: O-2015-001

Original ruling text

Opinion Letter

Body:

September 16, 2015

XXXX
XXXX
XXXX

RE: Your e-mail received September 9, 2015

Dear XXXX:

Thank you for your recent e-mail inquiry. The Internet Tax Freedom Act (ITFA) imposes a Federal moratorium on state taxation of customer charges for internet access services. The moratorium was first enacted by Congress in 1998 with a fixed expiration date. Congress extended that date a number of times. Currently, the moratorium is set to expire on October 1, 2015. You ask what the department will do if Congress fails to take action to extend the moratorium before October 1, 2015. The answer is nothing.

K.S.A. 79-3603(b) imposes Kansas sales tax on charges for telecommunication services. K.S.A. 79-3602(aaa) defines "telecommunication service," and subsection (aaa)(6) specifically excludes "internet access service" from its meaning. See K.S.A. 79-3602(aaa) ("Telecommunications service does not include: . . (6) internet access service."). The express exclusion of "internet access service" from the definition and imposition on "telecommunication service" establishes the Kansas legislature did not intend to tax such services, absent another imposition statute that imposes tax on "internet access service" by name. There is no such statute.

Charges for internet access services sourced to a Kansas location are not and will not be subject to Kansas sales tax as long as K.S.A. 79-3602(aaa)(6) remains in place. Because of this, a repeal of ITFA will not affect the ongoing exemption of internet access services under Kansas sales tax law. Charges for internet access services sitused to Kansas residents will continue to be exempt on and after October 1, 2015, even if the ITFA moratorium expires due to Congressional inaction.

This guidance shall remain in effect for at least 60 days after the department publishes notice on its website that indicates that Congress has repealed ITFA and the Kansas legislature has taken steps to impose Kansas sales tax on internet access service. Such legislative action would require amending or repealing K.S.A. 79-3602(aaa)(6).

Sincerely,

Thomas E. Hatten
Attorney/Policy & Research

Date Composed: 09/17/2015 Date Modified: 09/17/2015

Table 1

| Letter Number: | O-2015-001 |

Table 2

| Tax Type: | Kansas Retailers' Sales Tax |
| Brief Description: | Internet Tax Freedom Act (ITFA) |
| Keywords: | |
| Effective Date: | 09/16/2015 |
| Approval Date: | 09/16/2105 |