Must a newspaper collect Kansas sales tax on subscriptions, and does it still owe use tax on the free copies it gives away?

Plain-English summary

A free monthly newspaper distributed at over 500 locations on both the Missouri and Kansas sides of the state line — mailed from a post office, and soon to be printed in Kansas — recently began selling subscriptions through subscription cards. It asked the Department four questions about how Kansas tax applies. The core answer: subscriptions are taxable, and the publisher still owes use tax on the copies it gives away.

Subscriptions are taxable. Asked whether it must pay sales tax when it collects a subscription, the Department answered simply: "Yes." A paid newspaper subscription is a taxable sale in Kansas.

Only Kansas transactions are the Department's call. Because the paper circulates in both states, it asked whether it should collect tax on both Missouri and Kansas subscriptions. The Department answered that it "can only advise you on the taxability of Kansas transactions," and directed the publisher to the Missouri Department of Revenue for the Missouri side.

Collect tax on subscriptions mailed to Kansas addresses. On how much to collect, the Department said that on subscriptions delivered by mail to any Kansas address, the publisher should collect the applicable rate. (The specific rate figure is redacted in the published ruling.)

Use tax on the free copies continues. The publisher asked whether collecting sales tax changes the excise (compensating/use) tax it already pays. The Department answered "Yes" in the sense of adding a duty, not removing one: the publisher "would continue to pay the compensating tax in the amount of 4.9% of the cost of the publications that you do not sell," while "on publications that you sell in Kansas, you would collect and remit sales tax" (rate redacted). In short, the paper pays use tax on the free giveaway copies and collects sales tax on the copies it sells.

Register first. The Department noted the company "is not registered for sales tax" and said it had requested the registration forms be sent. A publisher selling taxable subscriptions must register to collect and remit the tax.

Bottom line: going from free distribution to paid subscriptions creates a sales-tax collection duty on Kansas subscriptions, on top of the 4.9% compensating (use) tax the publisher already owes on the cost of the copies it distributes free.

What this means for you

Publishers moving from free to paid

Selling subscriptions is a taxable retail sale in Kansas. Once you charge for the paper, you must register, collect, and remit Kansas sales tax on subscriptions delivered to Kansas addresses — the free-distribution model does not carry over to the paid copies.

You still owe use tax on the free copies

Distributing copies free of charge does not escape tax. The publisher here owed compensating (use) tax of 4.9% on the cost of the publications it does not sell. Budget for use tax on your giveaway print run separately from the sales tax you collect on subscriptions.

Multi-state circulation: ask each state

The Department will only speak to Kansas transactions. If you circulate across a state line, get the other state's answer from that state's revenue department — here, Missouri subscriptions were a Missouri Department of Revenue question.

Common questions

Q: Are newspaper subscriptions taxable in Kansas?
A: Yes. The Department ruled that the publisher must pay/collect Kansas sales tax on subscriptions, and specifically on subscriptions delivered by mail to a Kansas address.

Q: Does the publisher still owe use tax after it starts collecting sales tax?
A: Yes. It continues to owe compensating (use) tax of 4.9% on the cost of the free copies it does not sell, while collecting sales tax on the copies it sells in Kansas.

Q: What about subscriptions in Missouri?
A: The Department only advises on Kansas transactions and directed the publisher to the Missouri Department of Revenue for the Missouri side.

Q: Does the publisher need to do anything administratively?
A: Yes. It must register for sales tax; the Department noted the company was not registered and said it had requested the forms be sent.

Citations and references

• Kansas compensating (use) tax — 4.9% — the rate the Department said the publisher continues to pay on the cost of the publications it distributes free of charge (does not sell). (The ruling states the sales-tax rate on Kansas subscriptions but that figure is redacted in the published copy, and it cites no specific statute section.)

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2001-118

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

October 26, 2001

XXXXXXXXXXXXX
XXXXXXXXXXXXXX
XXXXXXXXXXXXXXXX

Dear Mr. XXXXXXX:

The purpose of this letter is to respond to your letter dated September 20, 2001.

In your letter you stated:

The name of my company is the XXXXXXXXXXXXXX. We are a monthly newspaper that is free and distributed to over 500 different locations in the XXXXXXXXX on both the Missouri and Kansas sides of the state line. Our company is XXXXXXXX Corporation.

Our paper is currently printed in Missouri but in the near future will be printed in Kansas. The paper is mailed from the XXXXXXX Post Office.

Recently we started offering subscriptions to our readers through subscription cards. There are four questions that I would like to get a ruling on:

When we collect a subscription are we required to pay sales tax?

Answer: Yes.

If we're required to contact sales tax do we collect it on both Missouri and Kansas, subscriptions?

Answer: I can only advise you on the taxability of Kansas transactions. You should address your Missouri subscription question to the Missouri Department of Revenue.

If we collect sales tax how much must we collect?

Answer: On subscription delivered via the mail to any Kansas address, you should collect the XXXXXXXXXXXXXXXXXXXXX

Does the collection of sales tax change the amount of Excise Tax that we currently pay?

Answer: Yes, you would continue to pay the compensating tax in the amount of 4.9% of the cost of the publications that you do not sell. On publications that you sell in Kansas, you would collect and remit sales tax in the amount of XXXXXXX%.

It appears that your company is not registered for sales tax. I have requested that the appropriate forms be sent to you.

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: 10/30/2001 Date Modified: 10/30/2001

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