Retailers' Compensating Use

Compensating use tax is a tax paid to out-of-state retailers on goods and merchandise purchased from other states and used, stored, or consumed in Kansas on which no sales tax was paid. It is also due if the other state’s rate is less than the Kansas rate of 6.5 percent paid at the time of purchase. The tax protects Kansas businesses from unfair competition from out-of-state retailers who sell goods either tax-free or at a lower tax rate. It also assures fairness to Kansans who purchase similar items in Kansas and pay Kansas sales tax. This use tax compensates for the lack of sales tax paid at the time of purchase. Use tax is due whether the property is shipped into Kansas or picked up in another state and brought back to Kansas. It applies only to tangible personal property, labor services are not subject to use tax. Like sales tax, compensating use tax is based on the total cost of the goods purchases, including postage, shipping, handling, or transportation charges.

The compensating use tax rate is the same 6.5 percent as the state sales tax rate. Local use tax, if levied by a city and/or county, is imposed on all transactions which are currently subject to the state use tax.

The retailers’ compensating use tax is collected by retailers in other states selling tangible personal property to Kansas consumers. Out-of-state retailers are required to register and collect the retailers’ compensating use tax from their Kansas customers if they have established a physical presence in Kansas.

Forms and Publications

Since July 1, 2010, businesses have been required to submit retailers’ sales compensating use and withholding tax returns electronically.

The development and use of paperless formats promotes efficiency, reduces processing costs and therefore, aids in reducing the overall cost of government. Customers can call 785-368-8222 for more information.

Notice of Electronic Filing Mandate

• Retailers’ Compensating Use Tax Return and Voucher (CT-9U)
• Sales and Compensating Use Tax Exemption Certificates
• Sales and Use Tax Refund Application (ST-21)
• Sales And Use Tax Refund Application For Use By Project Exemption Certificate (PEC) Entities (ST-21PEC)
• Vehicle Leases Retailers’ Compensating Use Tax Return and Voucher(CT-114)

Publications
Publications assist in understanding the provisions of Kansas tax laws and regulations and are designed for informational purposes only. The contents should not be used as authority to support a technical position.

• Business Taxes for Hotels, Motels & Restaurants (KS-1540)
• Local Sales Tax Rate Changes
• Local Sales Tax Rates by Jurisdiction (KS-1700)
• Sales and Compensating Use Tax (KS-1510)
• Sales and Use Tax for Contractors, Subcontractors and Repairmen (KS-1525)
• Sales and Use Tax for Kansas Political Subdivisions (KS-1527)
• Sales and Use Tax for Motor Vehicle Transactions (KS-1526)
• Sales and Use Tax for the Agricultural Industry (KS-1550)
• Sales and Use Tax Refund (KS-1220)
• Sales Tax Exemption Information and Certificates (KS-1520)
• Tax Guide for Schools and Educational Institutions (KS-1560)