Kansas Governor Laura Kelly, vetoed legislation (S.B. 50) that would have created a $100,000 annual gross sales threshold for marketplace facilitators and remote sellers
Tax & AccountingMay 05, 2021

Kansas Remains Only State to Require Remote to Collect and Remit Sales Tax From First Sale Sellers

Special Alert: The Kansas legislature overrode the Governor’s veto of a tax bill that would have required marketplace facilitators to collect sales tax and established a “safe harbor for remote/online sellers." The result on the legislator’s action is that starting July 1, the state will require marketplace facilitators including Amazon, Walmart and others to collect sales and use tax on third-party sales, subject to a $100,000 nexus threshold that will also apply to remote sellers, which currently have to collect and remit tax on every sale. This puts Kansas in line with other states and D.C., who all provide a minimum number of sales and/or annual sales amount before sellers are responsible to collect and remit sales tax. This is done to protect small online sellers.

Kansas Governor Laura Kelly, vetoed legislation (S.B. 50) that would have created a $100,000 annual gross sales threshold for marketplace facilitators and remote sellers before they would be subject to sales and use tax compliance obligations.  The new rule would have been effective on July 1.

What this means for remote sellers and marketplace facilitators is that all sales into Kansas continue to be subject to the collection and remittance of sales and use taxes. Kansas is the only state that applies economic nexus rather than physical nexus for sales and use tax purposes that does not offer any “safe harbor” thresholds (e.g., a minimum amount of gross sales and/or number of sales), which must be exceeded before sales tax compliance requirements begin to apply.

The practical effect of the rules in Kansas is that small businesses located out-of-state who sell to customers located in Kansas are subject to stringent sales and use tax compliance obligations from the first dollar of sales (and the first sale). No other state treats remote sellers in this way.

The legislation, which had bi-partisan support, passed the House 81-43 and the Senate 30-10, with one House member not voting. Lawmakers return into session on May 3rd. Although the Senate is likely to override the veto, it will be much more difficult to do so in the Kansas House, where 81 legislators approved the bill but override requires 84.

Mark Friedlich
Author at Tax & Accounting
Mark Friedlich, a CPA & tax lawyer, is the principal international & corporate indirect taxation analyst for Wolters Kluwer Tax & Accounting. He is a member of the U.S. Senate Finance Committee’s Chief Tax Counsel’s Advisory Board, advisor to 14 state taxing authorities, and a member of the American Bar Association’s Tax Section and AICPA’s Tax Section leadership teams. Prior to joining Wolters Kluwer he was a Managing Tax Partner at PricewaterhouseCoopers.