Must an out-of-state internet seller register and collect Kansas sales or compensating (use) tax on goods shipped to Kansas customers?

Plain-English summary

A North Carolina company sells goods to consumers over the Internet and ships them into Kansas. It has no physical location and no sales representatives in Kansas. It asked whether it must register, collect, and remit Kansas sales or compensating (use) tax.

The Department answered in terms of nexus — the connection with Kansas that lets the state require tax collection. The company has nexus if any of these is true: (1) it has an office or other place of business in Kansas; (2) it has people who solicit sales in Kansas; or (3) it delivers items into Kansas on its own vehicles. The company does not have nexus if it and its agents never enter Kansas to do business, have no property rights in the state, and send all their goods to Kansas residents by mail, UPS, or some other common carrier.

(Note: this 1999 ruling reflects the physical-presence nexus standard of its time. The U.S. Supreme Court's 2018 decision in South Dakota v. Wayfair later allowed states to require collection based on economic activity even without physical presence, and Kansas has since adopted remote-seller collection rules. Check current Kansas guidance before relying on this ruling's nexus test today.)

What this means for you

If you are an out-of-state seller shipping into Kansas, this ruling describes the physical-presence factors the Department applied in 1999.

• Physical presence created nexus. An office, in-state salespeople, or delivery on your own trucks each gave Kansas the power to require collection.
• Common-carrier shipping alone did not. Mailing or shipping by UPS or another common carrier, with no in-state presence or property, meant no nexus under this ruling.
• No nexus doesn't erase the buyer's tax. Even where the seller need not collect, the Kansas customer generally owes compensating (use) tax on the purchase.
• The law has changed since 1999. Post-Wayfair, economic nexus can require collection without physical presence; confirm your obligations under current Kansas rules.

Common questions

When does an out-of-state internet seller have Kansas nexus (per this ruling)?
When it has a Kansas office/place of business, has people soliciting sales in Kansas, or delivers goods into Kansas on its own vehicles.

Does shipping by UPS or mail create nexus?
Under this 1999 ruling, no — if the seller and its agents never enter Kansas, hold no property there, and ship only by common carrier.

If the seller doesn't collect, does anyone owe tax?
Yes. The Kansas purchaser generally owes compensating (use) tax on goods bought from a seller that doesn't collect Kansas tax.

Can I rely on this ruling's nexus test today?
Be careful. It reflects pre-Wayfair physical-presence law; economic-nexus rules now apply, so check current Kansas guidance. And a private letter ruling binds the Department only for the requesting taxpayer and stated facts.

Citations and references

• The ruling states the Department's nexus test (office/place of business, in-state solicitation, or delivery on the seller's own vehicles create nexus; common-carrier shipping with no in-state presence does not) without citing a specific numbered statute.

Source

• Original ruling (DOCX): https://www.ksrevenue.gov/pildocs/rulings/P-1999-64.docx
• Kansas Policy Information Library: https://www.ksrevenue.gov/prpil.html

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

March 12, 1999

XXXXXXXXXXX
XXXXXXXXXXXXXXX
XXXXXXXXXXXXXXX

Dear XXXXXXXXXXXXXXXXX:

I have been asked to respond to your letter received by this office on March 8, 1999. In it, you ask if your company is required to register, collect and remit Kansas sales or compensating taxes on sales of tangible personal property delivered to consumers in the state of Kansas.

In your letter you stated that your company is based in North Carolina and sells XXXXXXX and XXXXXX to consumers via the Internet. You do not have a physical location in Kansas. You do not have sales representatives in Kansas.

It is the opinion of the Kansas Department of Revenue that your company has nexus for Kansas sales/use tax purposes if: 1) it has an office or other place of business, 2) has people that solicit sales in Kansas, or 3) delivers sales items into Kansas on their own vehicles.

Your company would not have nexus if they and their agents never enter Kansas to do business, have no property rights in the state and send all their goods to Kansas residents by mail, UPS, or by some other common carrier.

This is a private letter ruling pursuant to K.A.R. 92-19-59. It is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to an accurate determination by the department, this ruling is null and void. This ruling will be revoked by operation of law without further department action if there is a change in the controlling statutes, administrative regulations, revenue rulings or case law that materially effects this determination.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 03/26/1999 Date Modified: 10/10/2001

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