Kansas ~ Sales and Use Tax: Guidance Issued on Telecommunications Transactions

The Kansas Department of Revenue has issued an information guide on the retailers’ sales tax treatment and sourcing of sales of telecommunications services. The guide includes lists of taxable and nontaxable charges billed by telecommunications providers. Generally, retailers’ sales tax is imposed on the gross receipts of a telecommunications service provider from retail sales of intrastate, interstate, or international telecommunications services and any ancillary services sourced to Kansas. However, even if Kansas statutory provisions indicate that a certain service is not a telecommunications service, this is not indication that the service is not subject to retailers’ sales tax. Instead, the service could be subject to sales tax under a different statutory provision. Further, line-item charges for telecommunications services, fees, and taxes are subject to sales or use tax if they are part of the purchase price being paid for the telecommunications services. Taxable charges on a customer invoice are included in the tax base for purposes of levying applicable state and local sales taxes.

Unless a customer is entitled to an exemption, a telecommunications provider must collect and remit sales tax if it charges for taxable services or goods. A provider that purchases telecommunications services for resale can issue a resale exemption certificate for these services. However, the provider cannot issue a resale exemption certificate to a contractor or service provider for work performed to install transmission lines or equipment or to improve real property.

Generally, receipts from taxable telecommunications services sourced to a location in Kansas are subject to Kansas state and local sales taxes. Nearly all landline and mobile telecommunications services are sourced to a customer’s place of primary use, exceptions being (1) prepaid calling and prepaid mobile telephone calling services, (2) landline telecommunications services billed on a call-by-call basis, and (3) private communications services. With the exception of prepaid calling service and air-to-ground radiotelephone service, mobile telecommunications services are sourced to a customer’s place of primary use, regardless of what state the customer is in when placing a the call or using another mobile telecommunications service. Sales of postpaid calling services are sourced to the origination point of the call first identified by the seller’s telecommunications system or from information that the seller receives from its service provider. The information guide also discusses the sourcing of long distance landline telephone services that are billed on a price-per-call basis, and the retailers’ sales tax treatment of government mandated fees, surcharges, and taxes.

Digital subscriber line (DSL) and optical cable services are subject to tax when the lines carry both taxable telecommunications and nontaxable Internet access services. However, if an Internet access provider bundles charges for DSL or optical cable service with Internet access service charges, the charges for the DSL or optical cable service are exempt to the extent that these services carry the Internet access service. With respect to nexus, an out-of-state telecommunications provider selling taxable telecommunications services sourced to locations in Kansas is required to register as a Kansas retailer and collect retailers’ sales tax on taxable service charges sourced to Kansas, regardless of whether the out-of-state provider has a physical presence in Kansas.

AUTHOR

Wolters Kluwer Tax and Accounting

Wolters Kluwer Tax and Accounting is a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency. Wolters Kluwer Tax and Accounting is part of Wolters Kluwer N.V. (AEX: WKL), a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide. Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

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