Are data processing services subject to Kansas sales tax?

Plain-English summary

A provider of data processing services asked whether those services are subject to Kansas retailers' sales tax. The Department ruled they are not.

Kansas taxes only listed services. The Department explained that "[t]he state of Kansas taxes only enumerated services." Sales tax applies broadly to sales of tangible personal property, but a service is taxable only if a statute specifically lists it.

Data processing is not on the list. Because data processing is not an enumerated taxable service, "[t]he data processing services that you are providing are not currently subject to sales tax in the state of Kansas."

The provider still pays tax on its inputs. The Department added the standard caveat: "you must pay sales tax on all articles of tangible personal property and all taxable services to provide the nontaxable services." A nontaxable service provider is the final consumer of what it buys to run its business.

Bottom line: data processing services are not taxable in Kansas, but the provider owes sales tax on the equipment, supplies, and taxable services it purchases to deliver them.

What this means for you

Data processing and similar service providers

If you provide data processing services in Kansas, you generally do not charge Kansas sales tax on those services, because they are not among the state's specifically enumerated taxable services.

You still owe tax on your inputs

Not charging tax on your service does not exempt your purchases. You must pay Kansas sales tax on the tangible personal property and taxable services you buy to deliver the nontaxable service.

"Enumerated only" is the rule for services

For any service, the question is whether a Kansas statute specifically lists it as taxable. If it is not enumerated, it is generally not taxed - though the answer can change if the Legislature amends the list.

Common questions

Q: Are data processing services taxable in Kansas?
A: No. The Department ruled data processing services are not currently subject to Kansas sales tax because Kansas taxes only enumerated services.

Q: Does the provider owe any Kansas tax?
A: Yes - it must pay Kansas sales tax on all tangible personal property and taxable services it buys to provide the nontaxable services.

Q: Could this change?
A: The ruling says data processing is "not currently" taxed; because Kansas taxes services only when enumerated, the treatment would change only if the Legislature added data processing to the taxable list.

Citations and references

• The Department cited no specific statutory section. Its conclusion rests on the rule that Kansas "taxes only enumerated services," so data processing services - not being enumerated - are not currently subject to Kansas sales tax, while the provider must pay sales tax on the tangible personal property and taxable services it buys to provide them.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2001-048

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

May 22, 2001

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RE: Data Processing Services

Dear Mr. TTTTT:

We wish to acknowledge receipt of your letter dated May 18, 2001, regarding the application of Kansas Retailers’ Sales tax.

The state of Kansas taxes only enumerated services. The data processing services that you are providing are not currently subject to sales tax in the state of Kansas. However, you must pay sales tax on all articles of tangible personal property and all taxable services to provide the nontaxable services.

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 in the future by the operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or published revenue ruling, that materially effects this private letter ruling. If I may be of further assistance, please contact me at your earliest convenience at (785) 296-7776.

Sincerely yours,

Thomas P. Browne, Jr.
Tax Specialist

TPB

Date Composed: 05/30/2001 Date Modified: 10/11/2001

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