Kansas sits in the middle of the pack on business taxes. Corporations pay a 4% normal tax plus a 3% surtax on income above $50,000, for a top rate of 7%. Individuals pay 5.2% or 5.58% under the two-bracket system adopted in 2024. Sales taxes are relatively high once local rates are added, although Kansas eliminated its state tax on groceries in 2025. On the plus side, most business equipment and inventory are exempt from property tax.
This guide explains Kansas business taxes for 2026, with worked examples, comparisons with Missouri, Nebraska, Oklahoma and Colorado, and planning tips.
Kansas business taxes at a glance
Here's how the system works for a typical small business in 2026. An LLC, partnership, S corporation or sole proprietorship pays no entity-level income tax; owners pay 5.2% on the first $23,000 of taxable income and 5.58% on the rest. A C corporation pays 4% on all profit plus a 3% surtax on profit above $50,000. Customers pay 6.5% state sales tax plus local rates, though groceries are now free of state tax. Equipment and inventory are mostly exempt from property tax, which lowers costs for manufacturers, distributors and retailers. There's no franchise tax and no gross receipts tax, so a business that loses money pays little or nothing in state taxes beyond sales tax and payroll taxes.
Corporate income tax
| Component | Rate | Applies to |
|---|---|---|
| Normal tax | 4% | All taxable income |
| Surtax | 3% | Taxable income above $50,000 |
| Top combined rate | 7% |
- Apportionment: Kansas uses an equally weighted three-factor formula (property, payroll and sales) for most corporations, with an election for single sales factor for certain qualifying companies.
- Combined reporting: Required for unitary groups.
- Credits: High Performance Incentive Program (HPIP) investment credits, the Promoting Employment Across Kansas (PEAK) program and research credits.
- Returns: Form K-120 is due on the 15th day of the fourth month after year-end.
Financial institutions pay a separate privilege tax instead of the corporate income tax.
Personal income tax and pass-through owners
| Taxable income (single) | Rate |
|---|---|
| $0 to $23,000 | 5.2% |
| Over $23,000 | 5.58% |
Joint filers use a $46,000 threshold. The 2024 reform replaced three brackets that ran from 3.1% to 5.7%, raised the standard deduction and personal exemptions, and exempted Social Security benefits.
- LLC owners, partners and sole proprietors pay these rates on business profit.
- S corporation shareholders pay on their pro rata share.
- SALT parity election: Partnerships and S corporations can pay tax at the entity level, deductible federally, with a credit for owners.
Kansas famously exempted pass-through business income from personal income tax between 2013 and 2017, an experiment that was repealed after budget shortfalls. Today pass-through income is taxed like any other income.
Sales and use tax
The state rate is 6.5%. Cities and counties add local taxes of up to about 4%, so the average combined rate is about 8.71%.
- Groceries: The state rate on food fell to 0% on January 1, 2025. Local taxes may still apply.
- Services: Kansas taxes some services, including repair and installation labor on tangible property, but not most professional services.
- Remote sellers with more than $100,000 of Kansas sales must collect.
- Manufacturing and ingredient exemptions apply to equipment and materials consumed in production.
Payroll and property taxes
- Unemployment insurance: Employers pay on a wage base set by statute and indexed. New employers generally start at 2.7%.
- Withholding: Employers withhold Kansas income tax using state tables.
- Property tax: Commercial real property is assessed at 25% of market value. Machinery and equipment acquired after June 30, 2006 is exempt, as is merchants' and manufacturers' inventory. That makes Kansas attractive for capital-intensive businesses.
Forming a business in Kansas: fees and ongoing costs
| Item | LLC | Corporation |
|---|---|---|
| Formation filing fee | $85 online ($90 paper) | $90 |
| Information report (every two years, due April 15) | $90 online ($110 paper) | $90 online ($110 paper) |
| Franchise tax | None (repealed) | None (repealed) |
| Registered agent | Required | Required |
Kansas repealed its franchise tax in 2011, so the only ongoing state filing for most entities is the biennial information report.
Worked example: $500,000 of profit
| Step | Amount |
|---|---|
| Taxable income | $500,000 |
| Kansas normal tax at 4% | $20,000 |
| Kansas surtax at 3% on $450,000 | $13,500 |
| Total Kansas corporate tax | $33,500 |
| Federal tax at 21% on $466,500 | $97,965 |
| Total income tax | $131,465 (26.3%) |
For a single LLC owner with $150,000 of Kansas taxable income, state tax is about $8,283. At $75,000 it is about $4,098.
How Kansas compares with its neighbors
Kansas now has the highest corporate and personal income tax rates among its neighbors. The difference matters most in the Kansas City metro, where businesses can choose between Kansas and Missouri locations a few miles apart. Kansas City, Missouri, however, charges a 1% earnings tax that Kansas City, Kansas does not, which narrows the gap for owners and employees.
Choosing an entity in Kansas
- LLC or partnership: Owners pay up to 5.58%.
- S corporation: Same personal rates plus federal payroll tax savings.
- C corporation: Pays 4% to 7% plus 21% federally. With the top personal rate at 5.58%, pass-through treatment is usually cheaper at the state level for profitable businesses.
Tax planning tips for Kansas businesses
Model the Kansas City border. If you have flexibility on location, compare the full package on both sides of State Line Road: Kansas's higher income tax versus Missouri's lower state tax plus Kansas City's 1% earnings tax, and differences in property and sales taxes. Incentive programs on both sides compete aggressively for relocations.
Use HPIP for capital projects. The High Performance Incentive Program offers a 10% investment tax credit on qualifying capital investment above a threshold, plus a sales tax exemption, for companies paying above-average wages. You must register before the investment.
Track your equipment acquisition dates. Equipment acquired before July 2006 remains taxable. Replacing very old equipment can remove it from the tax rolls.
Recent changes for 2025 and 2026
- Two-bracket income tax (5.2% and 5.58%) continues from 2024.
- State grocery sales tax eliminated in 2025.
- Social Security benefits fully exempt from state income tax.
- Proposals for further cuts and a flat tax continue to be debated.
Is Kansas a good state for business?
Advantages
- Machinery, equipment and inventory exempt from property tax
- No franchise tax
- Central location for logistics and agriculture
- Competitive incentives such as HPIP and PEAK
Drawbacks
- Highest income tax rates among its neighbors
- High combined sales tax rates
- Three-factor apportionment by default
- Smaller metro areas outside Kansas City and Wichita
Compliance checklist
- File Articles of Organization or Incorporation with the Secretary of State.
- Register with the Kansas Department of Revenue for sales tax and withholding.
- Register with the Kansas Department of Labor for unemployment insurance if you hire.
- File the information report with the Secretary of State on schedule.
- Render business personal property to the county appraiser by March 15 if any is taxable.
- File Form K-120, K-120S or K-65 each year.
Compare Kansas with its neighbors below or estimate your taxes in the United States calculator. See Partnership taxes for more on pass-through rules.