Is SaaS Taxable in Kansas? - Commenda

2025 SaaS Sales Tax Rates for Kansas

In 2025, Kansas enforces a statewide sales tax rate of 6.5%. However, local jurisdictions within the state can levy additional sales taxes, with rates ranging from 0% to 4.1%, depending on the location.

While the base state rate is uniform, businesses must account for the local taxes that apply in specific cities or counties, which can vary significantly. For example, cities like Wichita and Overland Park impose their own additional local tax rates, impacting the overall sales tax obligation.

Given this, businesses operating in Kansas should stay vigilant about both state and local regulations to ensure they meet all tax compliance requirements.

Is SaaS Taxable in Kansas?

Determining the answer to “Is SaaS is taxable in Kansas” is key for businesses offering such services. According to Kansas law, SaaS (Software as a Service) is generally not taxable. 

The Kansas Department of Revenue has clarified that charges for hosted software services, where the software is accessed remotely and not downloaded or delivered to the customer, are not subject to sales tax. 

This distinction is based on the fact that SaaS does not involve the transfer of tangible property or prewritten software to the subscriber

Businesses must stay informed about changes in sales tax on SaaS in Kansas and its regulations to ensure compliance. Additionally, they should be aware of any local tax rules or exceptions that may apply to SaaS products.

How Does Kansas Define SaaS and Digital Products?

It’s important to first distinguish how the state classifies product categories to answer how is SaaS taxable in Kansas. Here are the key definitions:

• SaaS (Software as a Service): SaaS is considered a service rather than a tangible product. Since it is accessed remotely and does not involve transferring ownership, it is subject to sales tax in Kansas.
• Digital Products: These include e-books, digital music, and downloadable software are generally taxable in Kansas as they fall under the category of tangible personal property.

These distinctions clarify how various types of software products are taxed under Kansas tax rules for SaaS businesses.

Sales Tax on Software in Kansas

In Kansas, understanding the taxability of various software types is essential for SaaS businesses to ensure proper compliance. Different types of software products are treated differently under Kansas sales tax law. 

Here’s how various types of software are taxed:

Treading through the complexities of Kansas SaaS software taxability and local regulations can be challenging, but Commenda makes it easy. 

We help ensure your business stays compliant with all state and local tax laws while optimizing your software operations. With our automated solutions, tax management becomes hassle-free, allowing you to focus on growing your business.Click here to discover how we can simplify your compliance process in Kansas.

How to Determine if Your Product is Taxable in Kansas?

Determining the answer to “Is SaaS taxable in Kansas?” specifically in the context of your product involves several key factors. Here are some of them that influence taxability:

• Delivery Method: Software delivery impacts its tax status in Kansas. Software accessed remotely through SaaS is not taxable because it does not involve the transfer of prewritten software or tangible property.
• Licensing Model: Subscription-based SaaS services are not taxable in Kansas, as they fall under the category of hosted software services rather than prewritten software. However, traditional prewritten software delivered electronically or physically remains taxable
• Customization: Custom software developed specifically for a client is generally exempt from sales tax in Kansas if delivered electronically or on tangible media. This exemption applies because custom software is not classified as prewritten software under Kansas law
• Bundled Services: If SaaS is bundled with other taxable products or services, only the taxable components may be subject to sales tax. Proper itemization of taxable and non-taxable components ensures compliance with Kansas regulations.
• Nexus Rules: Businesses with physical or economic nexus in Kansas must comply with sales tax regulations. Economic nexus applies if a business exceeds $100,000 in annual gross receipts.

Are Digital Goods Taxable in Kansas?

In Kansas, the taxation of digital goods varies based on the nature of the product and its delivery method. 

So are digital goods taxable in Kansas? The answer depends on the type of product.

Here are some digital goods which are taxable in Kansas:​

• Prewritten Software: Sales of prewritten software, whether delivered electronically or on tangible media, are subject to sales tax.​
• Downloaded Video Games: Downloaded video games are considered prewritten software and are taxable in Kansas.
• Implications for SaaS Businesses: SaaS offerings, typically accessed remotely are generally subject to sales tax in Kansas.

Sales Tax Exemptions in Kansas

Kansas provides several sales tax exemptions that can help businesses reduce their tax liabilities. Here are some of the common exemptions available in the state:​

• Resale Exemption: Sales made for resale are exempt from sales tax. To claim this exemption, businesses must provide a valid resale certificate.
• Nonprofit Organizations: Sales to qualified nonprofit organizations are exempt from sales tax. However, these organizations must apply for an exempt entity certificate and provide it to the seller at the time of purchase. ​
• Custom Software: Charges for custom software developed specifically for a client are generally exempt from sales tax. However, businesses must demonstrate the level of customization with supporting documentation. ​

These exemptions help businesses minimize tax liabilities, but maintaining proper documentation is essential for substantiating exemption claims.

Also Read: Sales Tax Exemptions: Certificate, Eligibility, and Compliance in 2024

Consequences of Non-Compliance with SaaS Tax Rules in Kansas

Non-compliance with Kansas’s SaaS tax regulations can result in significant penalties and risks for businesses. Here are some potential penalties for non-compliance:​

• Tax Audits: Failure to comply with Kansas SaaS service tax rules may trigger a tax audit, where your business’s financial records are examined to assess tax liabilities.​
• Penalties for Underpayment: Businesses found to have underpaid taxes may face financial penalties in addition to the taxes owed. Kansas imposes a penalty, up to a maximum of 24%.
• Interest on Late Payments: Interest will be charged on any overdue taxes, increasing the overall tax burden. The interest rate is currently 6% per year.
• Reassessment of Taxes: Non-compliance can lead to a reassessment of taxes, potentially resulting in higher liabilities than originally calculated.​

To avoid these consequences, businesses should ensure timely and accurate compliance with Kansas’s SaaS tax regulations.

Filing and Remitting Kansas Sales Tax

In Kansas, businesses are required to file and remit sales tax according to their assigned filing frequency, which is determined by their monthly tax liability.

Here are the requirements businesses need to follow for compliance:

• Monthly Filers: Businesses with a monthly tax liability of $5000.1 or more must file returns monthly. These returns are due by the 25th of the month following the reporting period.
• Quarterly Filers: Businesses with a monthly tax liability between $1000.1 and $5000 are required to file quarterly. These returns are due by the 25th of the month following the end of the quarter.
• Annual Filers: Businesses with a monthly tax liability of less than $100 must file annually. These returns are due by January 25th of the following year.

All sales tax returns must be filed electronically through the Kansas Department of Revenue’s website. Paper returns are no longer accepted unless the business has received a waiver due to documented technical issues.

Common Sales Tax Challenges for SaaS Companies in Kansas

SaaS companies in Kansas encounter several challenges in adhering to sales tax regulations.

Here are some common issues:

• Nexus Confusion: SaaS businesses may have difficulty determining when they establish nexus in Kansas, which is required for sales tax collection. Nexus can be created through either physical presence or economic activity within the state.
• Bundled Services: When SaaS offerings are bundled with taxable products or services, determining the correct tax treatment can be challenging. If the bundle includes taxable items, the entire package may be subject to sales tax, requiring careful analysis and documentation.
• Exemption Management: Managing exemptions, such as those for nonprofit organizations or resale, can be complicated. Businesses must keep accurate records to avoid errors in tax filings and ensure they comply with the state’s exemption rules.
• Multi-State Compliance: SaaS businesses operating across multiple states face the challenge of navigating different sales tax regulations in each jurisdiction. This complexity can make tax calculations and filings more difficult, requiring ongoing attention to stay compliant.

Simplify Kansas SaaS Sales Tax Compliance with Commenda

Going through Kansas’ SaaS sales tax rules and understanding whether “Is SaaS taxable in Kansas?” can be challenging, but Commenda makes the process easier with its comprehensive compliance tools.

Our software automatically calculates sales tax based on real-time customer data, ensuring accuracy and minimizing errors.

With real-time updates and automated filings, you can effortlessly manage your tax obligations and save valuable time. Commenda seamlessly integrates with your existing systems, minimizing technical hurdles.

Our platform handles tax return filings and payment remittances, helping you reduce administrative costs. It ensures compliance with both state and local tax regulations, assisting you in managing Kansas’ varied tax rates.

Moreover, Commenda tracks nexus status and manages exemptions, offering a clear view of your tax responsibilities.

Ready to simplify your SaaS sales taxation in Kansas? Book a demo with us today.

FAQs About Kansas SaaS Sales Tax

Q. Is SaaS taxable in Kansas if my business doesn’t have a physical office there?

Yes, in Kansas, you may still need to collect sales tax on SaaS services if your business has established a nexus in the state, even without a physical presence. Nexus can be triggered by factors such as economic activity, sales volume, or having customers in Kansas.

Q. How does Kansas classify SaaS products for sales tax purposes?

Kansas typically treats SaaS as a service, which is not subject to state-level tax. However, local jurisdictions may apply their own tax rules depending on how the service is delivered and the nature of the transaction.

Q. Do I need to collect sales tax in Kansas if I only sell subscription-based SaaS?

Generally, subscription-based SaaS services are not taxable in Kansas, unless they involve the sale of tangible personal property or downloadable software.

Q. Are setup fees or bundled SaaS services taxable in Kansas?

If a SaaS service is bundled with taxable items such as physical goods or downloadable software, the entire package may be subject to local sales tax, depending on the jurisdiction and the specific nature of the bundle.

Q. What are the penalties for not charging sales tax on SaaS in Kansas?

Non-compliance with Kansas’ sales tax rules can result in tax audits, additional financial penalties for underpayment, and interest on any overdue taxes. This can cause both financial strain and operational disruptions.

Q. Does Kansas provide exemptions for SaaS sold to nonprofit or government entities?

Yes, sales to qualifying nonprofit organizations or government entities are typically exempt from sales tax in Kansas. However, businesses must retain the necessary documentation, like proof of nonprofit status or government affiliation, to validate exemption claims.

Q. How often do SaaS businesses need to file sales tax returns in Kansas?

The filing frequency for SaaS businesses in Kansas depends on their sales volume and the specific rules of the local jurisdiction. Businesses may file monthly, quarterly, or annually.

Q. What’s the easiest way to automate SaaS sales tax compliance in Kansas?

Using a solution like Commenda makes it easier by automating the process of tax calculation, filing returns, and staying up to date with changes in the regulatory landscape, ensuring full compliance with Kansas’ sales tax laws.