WICHITA, Kan. – A state appeals court issued a ruling Friday reversing a lower state court and finding that Cessna Employees CU is exempt from state retailers’ sales taxes on travel, hotel and meals a third-party vendor passed on to it as part of its final invoice during a job.
The lower court had denied the credit union’s claim saying the $3,333 in state sales taxes passed on by Jack Henry & Associates and included in the final bill was part of the overall charge for services and did not represent a tax on the credit union. For example, a Jack Henry employee's hotel expense of $527.43 already included sales taxes of $35.92, but that total expense was then again subjected to Kansas retailers' sales tax before being billed to Cessna Employees CU for reimbursement.
But, in its ruling, the state appellate court said “the transaction was constructed to be a sale of goods and services and a reimbursement of necessary travel expenses,” meaning the credit union ended up as responsible for the state tax.
“Based upon the lack of unequivocal imposition authority for retail sales tax to be collectable on travel expenses and associated sales tax already paid by the vendor and separately invoiced to a purchaser of taxable goods and services for mere reimbursement, any sales tax paid is subject to refund,” ruled the court.
Concluding there was no "sale" of the reimbursed travel expenses, the appeals court reversed the lower court ruling with directions to grant Cessna Employee CU’s refund claim.
