Not content to flub major tax reform, policymakers in Kansas are now turning their attention to internet sales. Jared Walczak writes for the Tax Foundation about the disappointing results.
Kansas just unveiled the most aggressive remote sales tax collections regime in the country, and it did so without adopting any new, post-Wayfair legislation. The new requirements, set out in a Department of Revenue notice, obligate all remote sellers with any transactions in Kansas to begin collecting and remitting sales taxes by October, no matter how small the company or how few Kansas sales they have. The new guidance challenges the emerging consensus on remote sales tax collections and raises legal issues most states have been eager to avoid.
By statute, Kansas has long considered itself empowered to impose sales tax obligations on anyone selling into Kansas, regardless of whether they were physically present in the state. Until recently, however, the state was unable to enforce the law against most remote sellers due to the physical presence standard established by the U.S. Supreme Court in Quill Corp. v. North Dakota (1992). When the Court overturned Quill’s physical presence standard in South Dakota v. Wayfair, Inc. (2018), it ushered in an era of sales taxation, with states rushing to amend their statutes or adjust their regulatory guidance to require remote sellers to collect and remit sales tax.
Most, however, took the Supreme Court’s cautions to heart. The Wayfair decision repudiated physical presence as a nexus standard, replacing it with economic nexus. What this means, in layman’s terms, is that a company can have sufficient economic connections with a state for that state to be able to tax it even if it lacks any physical presence (people or property) in the state. What the Court didn’t do, however, was establish exactly what was sufficient to establish economic nexus.
