We’re Not In Kansas Anymore!

Last Updated on October 4, 2019

The Kansas Attorney General’s office has opined that the Department of Revenue’s policy in Notice 19-04, requiring all remote sellers to collect and remit sales tax by October 1, 2019, has no force or legal effect.  Current Kansas statutory law grants the department authority to impose obligations to collect and remit only to the extent the U.S. Constitution permits application of the Compensating Tax Act to out-of-state retailers. By announcing that it intends to require all out-of-state retailers to collect Kansas tax, the department has exceeded the authority granted by the Legislature. The Legislature has only authorized the Department to administer the Compensating Use Tax Act by adopting rules and regulations. However, the Department failed to comply with any of the necessary procedural requirements, including a public hearing, review by the director of budget, approval by the secretary of administration and attorney general, and filing with the secretary of state.

Though the Attorney General’s office did not decide the ultimate question of the extent to which, post-Wayfair, the Commerce Clause allows Kansas to impose a duty to collect on out-of-state retailers, it did make the following observations:

• imposing a duty to collect and remit on out-of-state retailers whose contacts exceed the safe harbor thresholds in Wayfair seems permissible under the Commerce Clause;
• to determine whether imposing a duty to collect on out-of-state retailers with contacts that fall outside the Wayfair safe harbor thresholds, requires an analysis of undue burden and substantial nexus; and
• Kansas may not enforce a duty to collect on out-of-state retailers with only de minimus contacts with the state, though what constitutes de minimus remains an open issue.