Are outsourced customer-care (call center) voice and data communication services subject to Kansas sales tax?

Plain-English summary

A company that provides outsourced "customer care solutions" asked the Department whether its services are taxable in Kansas. The Department ruled they are not.

What the company does. Per the request, the company handles a wide range of "telephone and computer based" customer programs for large clients — new-product information, enrolling customers in client programs, "24-hour technical and help desk support," resolving complaints, and conducting satisfaction surveys. Trained representatives respond to inbound calls (and Internet messages), with the caller's information automatically routed and displayed so the representative can assist. The company serves clients in telecommunications, transportation, technology, government services, healthcare, financial services, and utilities.

The rule. The Department restated the basic structure of the Kansas sales tax: "Kansas law imposes sales tax on the sale of tangible personal property and certain enumerated services." In other words, a service is taxable only if the Legislature has specifically listed (enumerated) it.

The holding. Applying that rule, "[i]t is the opinion of the Department that no imposition exists in the law to impose Kansas sales tax on the services as described in this letter." The customer-care services are not among the enumerated taxable services, so they are not taxed.

The provider still pays tax on its own purchases. The Department added that the company "would be required to pay Kansas sales and compensating taxes on all purchases of tangible personal property and taxable services used or consumed by their business." Providing a nontaxable service does not exempt the provider's own inputs.

What this means for you

Call centers and outsourced customer-service providers

The service of answering calls and providing customer support, help-desk, and survey work for clients is not an enumerated taxable service in Kansas, so you generally do not charge Kansas sales tax on those service billings.

The reason is "enumeration"

Kansas taxes sales of goods and only the specific services the Legislature lists. Because customer-care/call-center work is not on that list, it falls outside the tax — the same reasoning the Department uses for other non-enumerated services.

You still owe tax on what you buy

Being a nontaxable service provider does not exempt your purchases. You must pay Kansas sales or compensating (use) tax on the tangible personal property and taxable services you buy and consume to operate.

Common questions

Q: Does Kansas tax outsourced customer-care or call-center services?
A: No. The Department found no imposition in the law that reaches the described customer-care services, because Kansas taxes only sales of tangible personal property and certain enumerated services.

Q: Why aren't these services taxed?
A: Kansas taxes a service only if it is specifically enumerated in the statute. Customer-care/call-center services are not enumerated, so they are not subject to sales tax.

Q: Does the company owe any Kansas tax?
A: Yes — it must pay Kansas sales and compensating tax on the tangible personal property and taxable services it buys and consumes to run the business.

Citations and references

• The Department cited no specific statutory section. It applied the general Kansas rule that sales tax reaches sales of tangible personal property and only "certain enumerated services," and concluded that the described customer-care services are not enumerated and therefore not taxable — while the provider must still pay Kansas sales and compensating tax on the property and taxable services it purchases.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1999-13

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

February 5, 1999

XXXXXXXXXXXXXX
XXXXXXXXXXXXXX
XXXXXXXXXXXXXX

Regarding: XXXXXXXXXXXXXX

Dear XXXXXXXXXX:

The purpose of this letter is to respond to your letter dated January 19, 1999.

Your client, XXXXXXXXXXX. ("Company") is a leading provider of customer care solutions for large multinational companies. These customer care solutions encompass a wide range of telephone and computer based customer acquisition, retention and satisfaction programs designed maximize long-term value of the relationships between the Company's clients and customers. Such programs involve all stages of customer relationship and consist of a variety of customer service product support activities. This includes new product information, enrolling customers in clients programs, providing 24-hour technical and help desk support, resolving customer complaints and conducting satisfaction surveys. The Company works closely with its clients to rapidly design and implement a comprehensive solutions to their specific business needs.

Services are provided by a trained customer care representative who respond to customer inquiries on behalf of the Company's clients. The Company representatives provide a wide range of on going voice and data communications services and loyalty programs. In a typical inbound customer interaction, a customer calls a toll free number or sends an Internet message to request product, service or technical information or assistance. The Company's system identifies each inbound call by its telephone number and routes the call to an appropriate representative who is trained for that particular client program. Upon receipt of the call, the representative's computer screen automatically displace the client specific product, service or technical information to enable the representative to assist the customer. The Company also extended its capabilities to incorporate multimedia technology for customer interactions, including e-mail and interactive video.

The Company typically enables long-term strategic relationships formalized by multiyear contracts with selected clients in the telecommunications, transportation, technology, government services, healthcare, financial services and utilities industries. The Company targets these industries because of their complex product and service offerings and large customer bases, which require frequent and increasingly sophisticated customer interactions. You requested advice as to the taxability of the services provided by the Company.

Kansas law imposes sales tax on the sale of tangible personal property and certain enumerated services.

It is the opinion of the Department that no imposition exists in the law to impose Kansas sales tax on the services as described in this letter.

The Company would be required to pay Kansas sales and compensating taxes on all purchases of tangible personal property and taxable services used or consumed by their business.

This private letter ruling is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to make an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects this private letter ruling.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 02/16/1999 Date Modified: 10/11/2001

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