Layaway Fees Not Taxable in Kansas

Monday, October 10, 2011

The Kansas Department of Revenue addressed the taxability of non-refundable layaway fees and layaway cancellation fees in a recently released private letter ruling. When a customer puts an item on layaway, the seller may require the customer to pay a non-refundable layaway fee as well as a down payment on the item. If the customer later cancels the layaway, the customer will be refunded their down payment along with any additional payments made, but the store may keep the non-refundable layaway fee and charge an additional layaway cancellation fee. Sales tax is charged on the selling price of the item placed on layaway only after the purchaser has paid for the item in full. If the layaway is cancelled, the non-refundable layaway fee and layaway cancellation fee are not subject to tax because a taxable retail sale was not made.

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