Tax insight

Kansas adopts single sales factor, market-based sourcing, and potential rate decreases

Insight
5 minute read
May 29, 2025

What happened?

Legislation enacted in Kansas includes mandatory single sales factor apportionment and market-based sourcing for sales of other than tangible personal property, applicable to both corporations and pass-through entities such as partnerships. The legislation also provides for potential tax rate reductions depending on levels of state revenue.

[H.B. 2231, enacted 4/11/2025; S.B. 269, veto overridden, 4/10/2025]

Why is it relevant?

Kansas not only is changing from three-factor apportionment to a single sales factor and adopting market-based sourcing but also is providing a “deferred tax deduction” to account for an increase in a taxpayer’s net deferred tax liability or a decrease in a taxpayer’s net deferred tax asset resulting from the switch to single sales factor apportionment.

Actions to consider

Affected taxpayers should consider changes to their sourcing methodologies and whether a deferred tax deduction may be applicable due to the switch to single sales factor apportionment. Further, taxpayers should monitor revenue announcements that could trigger tax rate changes.