This month brings us to the center of the country, the Great Plains state of Kansas. Kansas is a Midwestern state that epitomizes the U.S. Heartland with its Great Plains setting of rolling wheat fields. For thousands of years, what is now Kansas was home to numerous and diverse Native American tribes. Tribes in the eastern part of the state generally lived in villages along the river valleys. Tribes in the western part of the state were semi-nomadic and hunted large herds of bison.
The western two thirds of the state, lying in the great central plain of the United States, has a generally flat or undulating surface, while the eastern third has many hills and forests. The land gradually rises from east to west. It is a common misconception that Kansas is the flattest state in the nation. In fact, Kansas has a maximum topographic relief of 3,360 ft, making it the 23rd flattest U.S. state.
Kansas’s climate can be characterized in terms of three types: humid continental, semi-arid steppe, and humid subtropical. The eastern two thirds of the state (especially the northeastern portion) has a humid continental climate, with cool to cold winters and hot, often humid summers. Most precipitation falls during both the summer and the spring.
Business Climate
Nearly 90% of Kansas’ land is devoted to agriculture. The state’s agricultural outputs are cattle, sheep, wheat, sorghum, soybeans, cotton, hogs, corn, and salt. By far, the most agricultural crop in the state is wheat. Eastern Kansas is part of the grain belt, an area of the major grain production in the central United States.
The state’s industrial outputs are transportation equipment, commercial and private aircraft, food processing, publishing, chemical products, machinery, apparel, petroleum, and mining. Kansas is ranked eighth in the nation for petroleum production. It is also ranked eighth in natural gas production.
The state’s economy is also heavily influenced by the aerospace industry. Several large aircraft corporations have manufacturing facilities in Wichita and Kansas City, including Spirit Aerosystems, Bombardier Aerospace (LearJet), and Textron Aviation (a merger of the former Cessna, Hawker, and Beechcraft brands). Boeing ended a decades-long history of manufacturing in Kansas in 2013.
Major companies headquartered in Kansas include the Spirit Corporation (with world headquarters in Overland Park), YRC Worldwide (Overland Park), Garmin (Olathe), Payless Shoes (national headquarters and major distribution facilities in Topeka), and Koch Industries (with national headquarters in Wichita), and Coleman (headquarters in Wichita).
Kansas is also home to three major military installations. Fort Leavenworth (Army), Fort Riley (Army), and McConnell Air Force Base (Air Force). The Kansas National Guard has units at Forbes Field in Topeka and operates the Great Plains Joint Training center (formerly the Smokey Hill Bomb Range) which is one of the largest and busiest bombing ranges in the country. During World War II, Kansas was home to numerous Army Air Corps training fields for training new pilots and aircrew. Many of those airfields live on today as municipal airports. One of our partners, Monika Miles, spent some time in Kansas as a small child while her dad was stationed at Ft. Leavenworth. She was too young to remember much, but there was something about tornadoes that kind of stayed with her!
Tax Climate
The top individual income tax rate is 5.7% and the top corporate income tax rate is 7%.
Apportionment: Kansas taxpayers apportion income using a 3 factor formula with sales, property, and payroll equally weighted. For purposes of sourcing revenues from services performed, Kansas still employs the cost of performance method. So, if the greater cost of performance is in Kansas, the revenue is sourced to the state.
Kansas uses the market-based method for the sourcing of intangibles. For transactions occurring on or after April 1, 2014, retail sales of taxable services are sourced to where the purchaser makes first use of such services.
Sales Tax Structure
The state sales tax rate is 6.5%. However, like many states, Kansas’ counties and cities also add onto the sales tax rate. As such, the rate can be as high as 10.6%.
Sellers who lack physical presence in Kansas and have sales into the state that exceed $100,000 in the previous or current calendar year must register and remit sales tax to the state. Cumulative gross receipts from sales by the retailer to customers in Kansas are included in the threshold. Kansas was a long-time hold-out on economic nexus and this legislation just recently went into effect on July 1, 2021.
Marketplace providers that make or facilitate more than $100,000 in sales of taxable property or services in Kansas during the current or immediately preceding year must register, collect, and remit sales tax on each facilitated taxable sale. This is true regardless of whether the seller would have been required to register and collect sales tax. This legislation went into effect on July 1, 2021.
Kansas generally does not tax electronic downloads of digital products. Prewritten software which is electronically downloaded is taxable and it is also taxable if sold in a tangible medium, electronically, or via load and leave. Custom software is exempt from sales and use tax regardless of the method of delivery (tangible medium, load-and-leave or electronic delivery). Charges for customers to obtain remote access to use software and equipment via the internet or other electronic means when the customer does not have control over, or have possessory rights to the software or equipment, including charges billed by an application service provider (ASP), is not considered a taxable lease. How products are produced, sold and delivered is critical to determining the tax status.
Many states have annual sales tax holidays, during which certain items the state wants to promote the purchase of (like school supplies emergency preparedness supplies, or energy efficient appliances) can be purchased sales tax free. Kansas, however, does not currently have any scheduled sales tax holidays.
Our team at Miles Consulting Group is always available to discuss the specifics of your situation, whether in Kansas or other U.S. States, and help you navigate the complex tax structures arising from multistate operations. Call us to help you achieve the best tax efficiencies.
Random Facts
- The geographic center of the 48 contiguous states in in Smith County, near Lebanon.
- The first woman mayor in the U.S. was Susan Madora Salter. She was elected to office in Argonia in 1887.
- Dwight D. Eisenhower from Abilene was the 34th president of the U.S.
- Amelia Earhart, first woman granted a pilot’s license by the National Aeronautics Association and first woman to fly solo across the Atlantic Ocean, was from Atchison.
- Barton County is the only county in Kansas that is named for a woman, the famous volunteer civil war nurse Clara Barton.
- The world famous fast food chain of Pizza Hut restaurants opened its first store in Wichita on June 15, 1958.
