Current through Register Vol. 43, No. 12, March 20, 2024
(a)
(1) "Certificate," as used in this
regulation, shall mean a direct payment certificate issued by the department to
a permit holder that explains direct pay authority to retailers and can be
provided to retailers in lieu of a direct pay permit.
(2) "Department" shall mean the Kansas
department of revenue.
(3) "Kansas
sales and use tax laws" shall mean the following:
(A) Chapters 36 and 37 of article 79 of the
Kansas statutes annotated, and amendments thereto;
(B)
K.S.A.
12-187
et seq., and
amendments thereto; and
(C)
articles 19, 20, and 21 of these regulations.
(4) "Permit" shall mean a direct payment
permit issued by the secretary that, under
K.S.A.
79-3619 and amendments thereto, allows the
holder of the permit to accrue and pay state and local sales and use taxes
directly to the department of revenue.
(5) "Secretary" shall mean the secretary of
revenue or the designee of the secretary.
(b) Application for permit. Each application
for a permit shall be submitted in writing to the secretary. The application
shall contain the applicant's name, address, and sales and use tax account
numbers, the location of the place or places of business for which direct
payment of tax will be made, the business's standard industrial classification
number or its equivalent, and any other information prescribed by the
secretary.
(c) Qualification
process and requirements.
(1) Each applicant
for a permit shall demonstrate the applicant's ability to comply with the
Kansas sales and use tax laws. The applicant shall provide a description of the
applicant's accounting system and shall demonstrate that the system calculates
the correct amount of state and local tax.
(2) The applicant shall provide documentation
of at least one of the following:
(A) The
applicant makes annual purchases of at least $1 million of tangible personal
property for business use and not for resale.
(B) The applicant purchases substantial
amounts of property for business use under circumstances that normally make it
difficult or impractical at the time of purchase to determine whether the
property will be subject to or exempt from sales or use tax.
(3) The applicant shall provide a
statement that explains the business purpose for the permit and demonstrates
how the grant of direct payment authority will meet one or more of the
following criteria:
(A) Insure tax
compliance;
(B) reduce the
administrative work needed to determine taxability, or to collect, verify,
calculate, or remit tax;
(C)
improve compliance with Kansas tax laws;
(D) provide accurate compliance if the
determination of taxability of the item is difficult or impractical at the time
of purchase;
(E) more accurately
calculate tax using new or electronic business processes, including electronic
data interchange, evaluated receipts settlement, and procurement cards; or
(F) more accurately determine and
calculate tax, based on a showing that the applicant has significantly
automated or centralized its purchasing or accounting processes and that the
applicant's business activities require it to comply with the laws and
regulations of multiple state and local jurisdictions.
(4) Within 90 days of the date the secretary
receives the application, the applicant shall be notified by the secretary of
whether the permit is granted or denied or whether a conference shall be
scheduled because additional documentation is required to complete the review.
(d) Recordkeeping
requirements. Each permit holder shall maintain records necessary to determine
the correct tax liability. These records shall be made available upon request
by the secretary pursuant to
K.S.A.
79-3610 and
K.S.A.
79-3611, and amendments thereto. Books and
records shall be retained in accordance with
K.S.A.
79-3609, and amendments thereto, and K.A.R.
92-19-4b.
(e) Tax reporting. Each
permit holder shall accrue and pay tax directly to the department for all
taxable transactions on which direct payment authority applies or is claimed by
the permit holder. The tax shall be reported on forms prescribed by the
department. The tax owed shall be due and payable on the next tax return due
following the date on which a determination of taxability is made, or in the
exercise of reasonable care should be made, for a given transaction, unless
otherwise provided by written agreement between the taxpayer and the
department.
(f) Certain
transactions not permitted. A permit holder shall not use the permit in
connection with the following purchases:
(1)
Taxable meals or beverages;
(2)
taxable lodging or services related to lodging;
(3) admission to places of amusement,
entertainment or athletic events, and charges for use of amusement devices;
(4) memberships, dues, fees, or
other similar charges paid to private and public clubs or other organizations;
(5) taxable fees to participate in
sports, games, and other recreational activities;
(6) motor vehicles, aircraft, boats, and
other tangible personal property required to be licensed or titled with any
taxing authority;
(7) telephone or
telegraph services, subscriber television or radio services, telephone
answering services, mobile phone services, beeper services, and other similar
services;
(8) real property
construction services taxable under
K.S.A.
79-3603, and amendments thereto; and
(9) any other purchases prescribed
by the secretary or agreed to by the permit holder and the secretary.
(g) Permit holder
duties. The permit holder shall provide a copy of the permit or certificate to
each vendor from whom the holder purchases tangible personal property or
services, other than to those identified in subsection (f). Once presented, a
permit holder shall not be required to pay the tax to the vendor as prescribed
by the Kansas sales and use tax laws, and the vendor who retains the permit or
certificate as part of the vendor's records shall not be required to collect
sales tax. The permit holder shall accrue and pay the tax directly to the
department on all taxable transactions not taxed at the time of the sale. A
vendor who has been presented a permit or certificate may rely on the permit or
certificate until it is withdrawn by the permit holder or notice is otherwise
given that the authority has been withdrawn. If the secretary and permit holder
agree in writing, the permit holder may maintain accounting records in
sufficient detail to show in summary, and in respect to each transaction, the
amount of sales and use taxes paid to vendors who have been not been asked to
honor a permit or certificate for each reporting period.
(h) Vendor responsibilities. Receipt and
maintenance of a copy of a direct payment permit or certificate shall relieve
the vendor of the responsibility to collect tax on sales made to a permit
holder on qualifying transactions. Each vendor who makes sales upon which the
tax is not collected because of this regulation shall maintain records that
identify each sale, the amount of the sale, and the purchaser. The vendor's
receipts from these sales shall not be subject to the tax levied under the
Kansas sales and use tax laws.
(i)
Local taxes. Each permit holder who makes taxable purchases of tangible
personal property or services shall report and pay the applicable state and
local tax on the purchases. A permit holder shall not use a permit as a device
to defer payment of tax on purchases, or to avoid accruing and paying local
sales tax to the appropriate local taxing jurisdiction pursuant to the local
sales tax statutes.
(j) Revocation
of permit.
(1) A direct payment permit shall
not be transferable, and its use shall not be assigned to third parties,
including contractors. A permit may be revoked by the secretary at any time if
the secretary determines that the holder has not complied with the provisions
of the law or that revocation is in the best interest of the department. The
department's interests shall include increased audit expenses caused by
permits, including larger staff, additional travel expenses, and adoption of
new systems for tax reporting and auditing. The written notice of revocation
shall be effective at the end of the direct payment permit holder's next
reporting period.
(2) If a
business is reorganized but ongoing business operations are unchanged, the new
entity shall be allowed 120 days to apply for a new permit. During the 120-day
period, the previous permit shall remain in effect.
(3) Each person whose permit is voluntarily
forfeited or is revoked by the department shall return the permit to the
department and shall immediately notify all vendors from whom purchases of
taxable items are made, advising them that the permit and any certificates are
no longer valid and should not be honored. Failure to give this notification
shall be a violation of
K.S.A.
79-3651(e) and amendments
thereto.
