From Topeka the taxman cometh. Any retailer who sells anything online to Kansans must begin remitting sales taxes by October, says Kansas’s Department of Revenue. Kansas’s new requirements, writes Jared Walczak, are a “radical departure from the post-Wayfair consensus,” on how states may tax remote retailers:
Most states have […] looked to South Dakota as a model, perhaps tweaking here and there, but largely hewing to the design of the South Dakota law since it appears to have the Court’s blessing. The provisions specifically praised in Wayfair have been replicated in state after state to give their laws a strong presumption of constitutionality. And it’s worth noting here that South Dakota’s law coming before the Court was no accident; proponents of remote sales tax collection authority from around the country had input into how that law was structured and designed it as the model legislation for a test case before the Court.
One of the most important of these provisions is a safe harbor for businesses with few sales into a given state. South Dakota, with a population less than one-third that of Kansas, chose a threshold of $100,000 in sales or 200 discrete transactions. Any remote seller below the threshold is not obligated to collect and remit. The purpose of this safe harbor is to avoid unduly burdening interstate commerce. To cite an extreme example, imagine someone with a home side business who sells the occasional craft item on commission. They sell maybe 20 products a year, just as a hobby, and now someone from Kansas wants to pay them $50 to make something for them.
If they take that commission, should they—for a single $50 sale—be required to obtain a sales tax permit from the state of Kansas (you have to register three to four weeks before your first sale), fill out the sales tax forms, and collect and remit both state and local sales tax (meaning you have to figure out the applicable local rate as well) of a few dollars?
Kansas says yes.
A court might well be skeptical, as this is a rather significant burden on interstate commerce. A company making even a single sale into Kansas needs to be fully compliant with Kansas’s sales tax laws. This is what the safe harbor was meant to prevent, and Kansas is now the first state to go without one.
The state is doing so, moreover, without any post-Wayfair legal authorization.
[Jared Walczak, “Kansas Invites Legal Challenge with Aggressive Remote Sales Tax Regime,” Tax Foundation, August 2]
