Kansas Sales and Use Tax Protest, Refund Claim, and Wayfair / Economic Nexus Defense

KANSAS SALES AND USE TAX — PROTEST, REFUND CLAIM, AND WAYFAIR DEFENSE

TABLE OF CONTENTS

1. Header and Addressee
2. Caption and Identification
3. Timeliness and Statutory Authority
4. Statement of Facts
5. Issues Presented
6. Legal Argument
7. Refund Claim — K.S.A. 79-3650 / 79-3693
8. Wayfair / Economic Nexus Defense
9. Relief Requested
10. Hearing Request and Representation
11. Verification and Signature
12. BOTA Notice of Appeal (Post-Final Determination)
13. Certificate of Service
14. Kansas Practice Notes
15. Sources and References

1. HEADER AND ADDRESSEE

[DATE]

VIA CERTIFIED MAIL — RETURN RECEIPT REQUESTED
AND ELECTRONIC FILING

Office of Administrative Appeals
Kansas Department of Revenue
PO Box 3506
Topeka, KS 66625-3506
Email: [email protected]

Re: Written Protest of Sales/Use Tax Assessment, Request for Informal Conference, and Claim for Refund
Taxpayer: [TAXPAYER NAME]
Kansas Sales-Tax Account No.: [ID NUMBER]
Notice / Assessment No.: [NUMBER]
Notice Date: [__/__/____]
Periods at Issue: [FROM __/__/____ THROUGH __/__/____]
Amount in Dispute: $[AMOUNT] (tax: $[___] + penalty: $[___] + interest: $[___])

2. CAPTION AND IDENTIFICATION

3. TIMELINESS AND STATUTORY AUTHORITY

3.1. This Written Protest is filed pursuant to K.S.A. 79-3610, which incorporates the procedural framework of K.S.A. 79-3226 for sales-tax matters, and authorizes a taxpayer to file, within sixty (60) days of the mailing of a Notice of Final Assessment, a written request for an informal conference with the Secretary of Revenue or the Secretary's designee.

3.2. The Notice was mailed by KDOR on [__/__/____]. The 60th day thereafter is [__/__/____]. This protest is timely.

3.3. To the extent this submission also seeks affirmative refund of sales or use tax previously paid, it is filed pursuant to K.S.A. 79-3650 (direct refunds) and K.S.A. 79-3693 (retailer and consumer refund applications), within the three-year refund period prescribed by K.S.A. 79-3609(b).

3.4. Taxpayer reserves all rights conferred by K.S.A. 79-3268 (Taxpayer Bill of Rights), including the rights to representation, to appeal, and to recover attorney's fees if the assessment is shown to lack a reasonable basis in law or fact.

3.5. Taxpayer further reserves the right, upon issuance of the Secretary's written final determination, to appeal to the Kansas Board of Tax Appeals ("BOTA") within thirty (30) days under K.S.A. 79-1609, and thereafter to seek judicial review under K.S.A. 74-2426 and the Kansas Judicial Review Act, K.S.A. 77-601 et seq.

4. STATEMENT OF FACTS

4.1. Taxpayer is [a Kansas retailer / a remote seller located in [STATE] / a marketplace facilitator] engaged in the business of [describe business].

4.2. For the periods at issue, Taxpayer [reported and remitted Kansas retailers' sales tax in the amount of $[___] / did not collect Kansas tax because [reason]].

4.3. On [__/__/____], KDOR issued a Notice of Final Assessment asserting additional tax of $[___] based on [BRIEFLY DESCRIBE — e.g., disallowance of resale exemptions for [vendor list]; reclassification of services as taxable; assertion of economic nexus under K.S.A. 79-3702; sourcing dispute under destination-based sourcing rules].

4.4. [FACTS SUPPORTING THE PROTEST — e.g., Taxpayer accepted resale certificates in good faith from [purchasers]; taxable receipts were correctly reported; gross Kansas receipts were below the $100,000 economic-nexus threshold for the year(s) [____]; the transactions at issue are excluded by [statute]].

4.5. Taxpayer maintains complete books and records as required by K.S.A. 79-3609(c) for the three-year retention period, and has produced or will produce all such records on request.

5. ISSUES PRESENTED

5.1. Whether KDOR erred in disallowing exemption certificates accepted in good faith under K.S.A. 79-3651.

5.2. Whether the transactions at issue are taxable retail sales under K.S.A. 79-3603, or are excluded as [wholesale / occasional / true-object services / non-taxable digital products].

5.3. Whether Taxpayer (a remote seller) had constitutional and statutory nexus with Kansas under K.S.A. 79-3702 and South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018), during the periods at issue.

5.4. Whether the assessment is barred in whole or in part by the three-year statute of limitations under K.S.A. 79-3609(b).

5.5. Whether penalties should be abated for reasonable cause under K.S.A. 79-3615.

5.6. Whether Taxpayer is entitled to a refund under K.S.A. 79-3650 / 79-3693 of $[AMOUNT] previously remitted in error.

6. LEGAL ARGUMENT

6.1. Exemption Certificates — Good-Faith Acceptance

Pursuant to K.S.A. 79-3651, a retailer that accepts a properly completed exemption certificate in good faith is relieved of the obligation to collect Kansas retailers' sales tax on the sale, and any liability for the tax shifts to the purchaser. In re Tax Appeal of [Cite] (BOTA / Court of Appeals).

Taxpayer accepted exemption certificates from [list], copies of which are produced at Exhibit A. Each certificate is properly completed and was accepted in good faith. KDOR's disallowance is therefore contrary to law.

6.2. Taxability of the Transactions at Issue

Kansas imposes retailers' sales tax on "the gross receipts received from the sale of tangible personal property at retail" (K.S.A. 79-3603) and on certain enumerated services. The transactions at issue [involve nontaxable services / are wholesale sales for resale / are excluded as digital goods not within the enumerated tax base / are sales to exempt entities under K.S.A. 79-3606]. The "true object" of the transaction is [describe], which is not subject to Kansas sales tax under [authority].

6.3. Statute of Limitations

K.S.A. 79-3609(b) bars assessment of sales or use tax more than three (3) years after the return for the period was filed. Returns for the periods [___] were filed on [__/__/____], rendering any assessment for those periods untimely absent a written waiver. No waiver has been executed for those periods. The assessment is therefore time-barred as to [$AMOUNT] of the proposed deficiency.

6.4. Penalty Abatement

Penalties asserted under K.S.A. 79-3615 should be abated for reasonable cause. Taxpayer [describe reasonable cause — e.g., reliance on KDOR Private Letter Ruling [No.]; complex first-impression issue; ordinary business care; reliance on competent tax advisor].

7. REFUND CLAIM — K.S.A. 79-3650 / 79-3693

7.1. Statutory basis. This Section 7 is filed as a claim for refund of Kansas sales and/or use tax previously paid in error, pursuant to:

• K.S.A. 79-3650 — Direct refunds for amounts equal to or exceeding $50, where the consumer paid the tax directly to KDOR or where the retailer refused, was unavailable, or failed to act timely on a refund request.
• K.S.A. 79-3693 — Retailer and consumer refund applications and supporting documentation requirements.
• K.S.A. 79-3609(b) — Three-year refund deadline measured from the due date of the return for the reporting period.

7.2. Refund period. Periods covered by this claim: [FROM __/__/____ THROUGH __/__/____]. The earliest period is within three (3) years of the return due date.

7.3. Amount claimed. Total refund sought: $[AMOUNT] (sales tax: $[___]; use tax: $[___]; interest under K.S.A. 79-3609 and K.S.A. 79-2968: to be computed by KDOR).

7.4. Basis for refund. [Describe — e.g., overpayment due to (a) tax collected in error on exempt sales to [purchaser]; (b) tax remitted on transactions later determined non-taxable; (c) duplicate remittance; (d) over-collected sales tax to be refunded to customers per K.S.A. 79-3650(b)].

7.5. Documentation enclosed.

• Schedule of overpayments by period (Exhibit B);
• Customer invoices and exemption documentation (Exhibit C);
• Original returns and amended returns (Form ST-21 / ST-21PEC) (Exhibit D);
• Notarized statements (where required by K.S.A. 79-3650(a)(4)) (Exhibit E);
• Customer-credit documentation, if over-collected and to be refunded to customers (Exhibit F).

7.6. Interest on refund. Pursuant to K.S.A. 79-3609, interest is allowed on overpayments at the rate prescribed by K.S.A. 79-2968 from the filing date of the return claiming the refund, except no interest is allowed if the refund is paid within 120 days.

7.7. Suit on refund claim. Taxpayer acknowledges that, under K.S.A. 79-3609, no suit to recover on a refund claim may be commenced until six (6) months after the claim is filed.

8. WAYFAIR / ECONOMIC NEXUS DEFENSE

8.1. Statutory framework. K.S.A. 79-3702(h) defines a "retailer doing business in this state" to include enumerated categories of physical-presence retailers and, by virtue of the 2021 amendments (SB 50, effective July 1, 2021), remote sellers and marketplace facilitators whose cumulative gross receipts from sales sourced to Kansas exceed $100,000 during the current or immediately preceding calendar year.

8.2. Constitutional limit. Under South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018), economic nexus is constitutional only where the state's standard does not impose an undue burden on interstate commerce, is not retroactive, contains a small-seller safe harbor, and is part of a streamlined system. Any KDOR position imposing tax-collection obligations on a remote seller whose Kansas receipts fall below the $100,000 statutory threshold is unconstitutional under the Commerce Clause as construed in Wayfair and Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977).

8.3. Application to Taxpayer. Taxpayer's Kansas-sourced gross receipts for the periods at issue were:

Taxpayer's receipts [did not exceed / did not exceed in a manner that triggers prospective nexus] the $100,000 threshold during the periods covered by the assessment, and Taxpayer is therefore not a "retailer doing business in this state" under K.S.A. 79-3702 for those periods.

8.4. Marketplace facilitator collection. To the extent Taxpayer's Kansas sales were facilitated by a marketplace facilitator (e.g., [NAME]) that is itself required to collect under K.S.A. 79-3702(h), those sales are excluded from Taxpayer's nexus computation and from any direct collection obligation.

8.5. P.L. 86-272 (income-tax overlay). For income-tax purposes only, 15 U.S.C. §§ 381–384 may further preclude Kansas income-tax nexus for remote sellers engaged in mere solicitation of orders for tangible personal property approved and shipped from outside Kansas — though P.L. 86-272 does not protect against sales-tax collection obligations.

9. RELIEF REQUESTED

WHEREFORE, Taxpayer respectfully requests that the Secretary of Revenue:

• A. Schedule and conduct an informal conference under K.S.A. 79-3610 / 79-3226;
• B. Issue a written final determination withdrawing the Notice of Assessment in full, or alternatively reducing it to $[AMOUNT];
• C. Allow Taxpayer's refund claim under K.S.A. 79-3650 / 79-3693 in the amount of $[AMOUNT], plus statutory interest under K.S.A. 79-3609 / 79-2968;
• D. Abate all penalties for reasonable cause under K.S.A. 79-3615;
• E. Find that Taxpayer lacked statutory and constitutional nexus with Kansas during the periods at issue under K.S.A. 79-3702 and Wayfair; and
• F. Grant such other and further relief as is just and proper.

10. HEARING REQUEST AND REPRESENTATION

10.1. Hearing format. ☐ in person at KDOR Topeka; ☐ by telephone; ☐ by video; ☐ on the written record.

10.2. Representation. Taxpayer is represented by [NAME, FIRM, BAR/CPA NO.] under attached Form DO-10.

10.3. Record. ☐ Taxpayer requests a record of the conference at Taxpayer's expense.

11. VERIFICATION AND SIGNATURE

I declare under penalty of perjury under the laws of the State of Kansas that the foregoing protest and refund claim are true, correct, and complete to the best of my knowledge, information, and belief.

Date: [__/__/____]

[________________________________]

[TAXPAYER / OFFICER NAME]

Title: [TITLE]

For the Representative:

[________________________________]

[ATTORNEY / CPA NAME]

KS Bar No. / CPA No.: [NUMBER]

[FIRM]

[ADDRESS] | Tel: [NUMBER] | Email: [EMAIL]

12. BOTA NOTICE OF APPEAL (POST-FINAL DETERMINATION)

BEFORE THE BOARD OF TAX APPEALS — STATE OF KANSAS

Docket No.: [TO BE ASSIGNED]

NOTICE OF APPEAL

Pursuant to K.S.A. 79-1609 and K.A.R. 94-5-8, Appellant [TAXPAYER NAME] hereby appeals the Kansas Department of Revenue's Final Determination dated [__/__/____] (Exhibit A) and states:

1. Tax type: Kansas Retailers' Sales Tax / Compensating Use Tax.

2. Tax periods: [FROM] through [TO].

3. Amount in controversy: $[AMOUNT].

4. Division: ☐ Regular Division / ☐ Small Claims and Expedited Hearings (K.S.A. 74-2433f).

5. Grounds for appeal: Appellant incorporates by reference the Statement of Facts, Issues Presented, Legal Argument, Refund Claim, and Wayfair / Economic Nexus Defense from the underlying protest, and states that the Final Determination is contrary to law in the respects identified in the attached Memorandum.

6. Hearing location: [Topeka / regional].

7. Filing fee: $[___] tendered.

Date: [__/__/____]

[________________________________]

[ATTORNEY / TAXPAYER NAME]

KS Bar No.: [NUMBER]

13. CERTIFICATE OF SERVICE

I certify that on [__/__/____], I served a true and correct copy of the foregoing [PROTEST / NOTICE OF APPEAL / REFUND CLAIM] on:

• Office of Administrative Appeals, KDOR, PO Box 3506, Topeka, KS 66625-3506 — [email protected]
• Kansas Board of Tax Appeals, Eisenhower State Office Building, 700 SW Harrison St., Suite 1022, Topeka, KS 66603 — [email protected]

by certified U.S. mail, return receipt requested, and by email where indicated.

[________________________________]

[NAME]

14. KANSAS PRACTICE NOTES

• Procedural overlay. K.S.A. 79-3610 imports the income-tax informal-conference procedure of K.S.A. 79-3226 into the sales/use tax context: 60-day window to request the conference, 270-day window for the Secretary to issue a final determination (extendable by written agreement), and 30 days thereafter to appeal to BOTA under K.S.A. 79-1609.
• Three-year SOL. K.S.A. 79-3609(b) gives KDOR three (3) years from the date of return filing to assess sales/use tax, and gives the taxpayer three (3) years from the return's due date to claim a refund. Both clocks are extendable by written agreement that, if executed, must waive interest in excess of 48 months on any additional tax.
• Record retention. K.S.A. 79-3609(c) requires retailers to maintain books and records for three (3) years from the last day of the calendar year or fiscal year, whichever is later. Retain exemption certificates indefinitely if the underlying customer relationship continues.
• Direct refunds. K.S.A. 79-3650 lets a consumer claim a refund directly from KDOR (≥$50) only if (1) the consumer paid the tax directly to KDOR; (2) the retailer refused or was unavailable; (3) the retailer did not act timely on a refund request; or (4) the retailer provides a notarized statement disclaiming any refund or credit on the same tax.
• Refund suit waiting period. K.S.A. 79-3609 prohibits a suit for refund until six (6) months after the refund claim is filed with KDOR.
• Wayfair / economic nexus. Effective July 1, 2021, K.S.A. 79-3702(h) imposes a $100,000 cumulative gross-receipts threshold on remote sellers and marketplace facilitators. There is no separate "200 transactions" prong in current Kansas law. Audit periods that pre-date July 1, 2021 may be governed by KDOR Notice 19-04 — verify before relying on the $100,000 rule.
• Marketplace facilitators. Marketplace facilitators meeting the $100,000 threshold are the parties responsible for collecting and remitting Kansas tax on facilitated sales. K.S.A. 79-3702.
• Exemption certificates. Good-faith acceptance under K.S.A. 79-3651 shifts the tax burden to the purchaser. Use Form ST-28A (general resale) or the multi-state SST certificate where applicable.
• Sourcing. Kansas applies destination-based sourcing for most retail sales. Verify sourcing for delivered goods, services, and digital products against K.S.A. 79-3670 and KDOR Pub. KS-1510.
• Streamlined Sales Tax (SST). Kansas is a full SST member state. Voluntary registrants under SST may have additional procedural protections including limited prospective-only liability for certain registration-period transactions.
• Penalty regime. K.S.A. 79-3615 provides penalties up to 50% of tax for willful failure plus monthly delinquency penalties; reasonable-cause abatement applies.

15. SOURCES AND REFERENCES

• K.S.A. 79-3609 (sales-tax assessment SOL; record retention; refund deadlines; interest) — https://ksrevisor.gov/statutes/chapters/ch79/079_036_0009.html
• K.S.A. 79-3650 (direct refunds; over-collected tax) — https://law.justia.com/codes/kansas/chapter-79/article-36/section-79-3650/
• K.S.A. 79-3651 (good-faith acceptance of exemption certificates) — https://ksrevisor.gov/statutes/chapters/ch79/079_036_0051.html
• K.S.A. 79-3693 (retailer and consumer refund applications) — https://ksrevisor.gov/statutes/chapters/ch79/079_036_0093.html
• K.S.A. 79-3702 ("retailer doing business in this state"; remote-seller nexus) — https://ksrevisor.gov/statutes/chapters/ch79/079_037_0002.html
• K.S.A. 79-3610 (procedure; informal conference for sales-tax matters) — https://ksrevisor.gov/statutes/chapters/ch79/079_036_0010.html
• K.S.A. 79-3226 (informal conference; final determination) — https://ksrevisor.gov/statutes/chapters/ch79/079_032_0026.html
• K.S.A. 79-1609 (BOTA appeal deadline) — https://ksrevisor.gov/statutes/ksa_ch79.html
• K.S.A. 74-2426 (BOTA orders; reconsideration; judicial review) — https://ksrevisor.gov/statutes/ksa_ch74.html
• KDOR Sales/Use Tax Appeals — https://www.ksrevenue.gov/appeals.html
• KDOR Pub. KS-1510 (Kansas Sales and Compensating Use Tax) — https://www.ksrevenue.gov/pdf/pub1510.pdf
• KDOR Form ST-21 (Refund Application) — https://www.ksrevenue.gov/forms-btsales.html
• South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018)
• Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977)
• BOTA Rules of Practice & Procedure — https://bota.kansas.gov/appeals/rules-of-practice-procedure/

Disclaimer: This template is provided for informational purposes only and does not constitute legal or tax advice. Kansas sales and use tax controversies are time-sensitive; the 60-day informal-conference deadline (K.S.A. 79-3610 / 79-3226), 30-day BOTA deadline (K.S.A. 79-1609), and 3-year refund deadline (K.S.A. 79-3609(b)) are jurisdictional. Have this template reviewed by a Kansas-licensed attorney or CPA before use.