State & Local Tax Blog

Understanding the New Kansas Economic Nexus and Marketplace Facilitator Law

On July 1, 2021, Kansas’s new economic nexus and marketplace facilitator laws will go into effect. In this post, we break down what these laws mean and what impact they could have on your business.

Since the creation of economic nexus in 2018, states have been trying to answer two crucial questions:

  • Are remote, online sales taxable in the state where the transaction occurred?
  • Are marketplace facilitators or marketplace sellers responsible for collecting and remitting sales tax on marketplace transactions?”

It’s taken a few years, but the vast majority of states have agreed that marketplace facilitators, like Amazon and Walmart, should be responsible for the burden of collecting and remitting sales tax.

In May, Kansas joined this growing consensus by passing its own economic nexus and marketplace facilitator laws. If you’re an ecommerce seller, it’s important understand these new laws and what they mean for the future of marketplace legislation.

Kansas Economic Nexus

Remote sellers with no physical presence in Kansas will have to register with the Kansas Department of Revenue and collect and remit sales tax if they have a sufficient economic presence in the state. Kansas defined this economic threshold as:

  • More than $100,000 of cumulative gross receipts from sales to customers in the state for the period of January 1, 2021, through June 30, 2021; or
  • More than $100,000 of cumulative gross receipts from sales to customers in the state during the current or immediately preceding calendar year.

It’s important to note that sales through a marketplace facilitator will not count towards this number.

Kansas’s Marketplace Facilitator Law

Kansas also enacted a marketplace facilitator law that requires marketplaces with more than $100k in sales to collect and remit sales tax for third parties that sell through their platform.

This means that all of your sales through major marketplaces like Amazon and Walmart are their problem, not yours.

Kansas Ends Click-Through Nexus

Click-through nexus enables states to tax a business that receives a significant amount of referrals from other businesses in the state. Even if they don’t have a substantial physical or economic presence there. This means the sales you make through referral programs and affiliate links are taxable.

While introducing economic nexus, Kansas repealed their click-through nexus provision. Like several other states, they think it will be more efficient to focus on remote sellers through economic nexus rather than referrals.

How to Get Compliant

To get compliant with Kansas’s new economic nexus, you’ll need to know exactly what your liability is. To do that, calculate your total remote sales in Kansas during the calendar year.

Then, try to reduce that number by taking advantage of sales tax refunds, exemptions, non-taxable transactions and the new marketplace facilitator law.

This will give you your total taxable revenue. If this number exceeds Kansas’s economic threshold of $100k, there’s a good chance you have economic nexus.

From there, you’ll need to register to collect sales tax, pay any owed taxes and configure your ecommerce platform to start collecting taxes.

Need help getting registered to collect sales tax in Kansas? We’re here to help. Fill out our short What’s Next questionnaire to get in touch with our consultants for a free 45-minute consultation.

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