Kansas Court Rules that CU Due Refund on Sales Tax

The Kansas Court of Appeals overturned a Kansas Court of Tax Appeals' decision and said that Cessna Employees Credit Union should be granted a refund on the state's retail sales tax.

At issue is whether the retail sales tax can be applied to the reimbursement of travel, hotel and meals expenses passed on to the credit union as part of its final invoice from a third party vendor.

Cessna Employees CU contracted with Jack Henry and Associates (JHA) for a computer upgrade. JHA invoiced the credit union for the services, hardware and software and separately invoiced the credit union for the Travel Purchases (JHA employees' transportation, meals, and lodging).

Cessna Employees CU was seeking a refund from the Kansas retail sales tax in the amount of $3,333.05 it paid to JHA on the costs of the Travel Purchases. The credit union claimed that JHA's travel expenses were not taxable as part of JHA's gross receipts.

The Kansas Court of Tax Appeals found that that the reimbursement of the seller's travel expenses was part of the total amount of consideration in the transaction for which the taxable goods and services were sold by JHA and thus subject to the retail sales tax.

However, the state appellate court disagreed. The state appellate court found that the reimbursement for travel expenses does not constitute a retail sale and thus not subject to the retail sales tax.

The court wrote: "the reimbursement and associated tax amounts are not ... subject to retail sales tax in Kansas because they were not sold at retail, they were not a part of the sale of goods and services, and they were not a part of the selling price of the goods and services."

Read the decision.