A provision in SB300 will force smaller craft distilleries and liquor manufacturers into a less favorable tax calculation method unless they meet specific Kansas investment benchmarks.
Most Kansas alcoholic liquor manufacturers haven't heard of the tax apportionment change buried in SB300—but it could meaningfully affect their Kansas income tax liability starting in 2027.
Here's what's happening: SB300 creates two different tax treatment tracks for alcoholic liquor manufacturers based on how much they invest in Kansas property and payroll. The distinction matters because it determines which formula the state uses to calculate how much of a manufacturer's total income is taxable in Kansas.
Qualifying Kansas investors are manufacturers that meet both of these thresholds:
These companies can use the single-sales-factor apportionment method—meaning Kansas taxes only the portion of income that comes from Kansas sales. This is generally the more favorable approach for manufacturers with significant out-of-state revenue.
General manufacturers are those that fall short of either threshold. They're locked into the three-factor apportionment formula, which divides taxable income based on three measures: property, payroll, and sales. This typically results in a higher Kansas taxable income and thus higher Kansas income tax liability.
For smaller craft distilleries, regional liquor producers, and other manufacturers that don't meet both investment thresholds, this is a real cost. The three-factor method can significantly increase the percentage of total income that Kansas considers taxable, especially for companies with substantial out-of-state operations or sales.
The difference isn't theoretical. A manufacturer with $10 million in total income, most of it from out-of-state sales, could see a material shift in Kansas tax burden depending on which apportionment method applies.
The provision applies to tax years commencing on or after January 1, 2027. That means the first affected tax return will be for the 2027 tax year, filed in 2028. Manufacturers should begin reviewing their Kansas property and payroll now to understand which category they'll fall into.
The specific language is found in Section 1, subsection (f)(1)(B) of SB300, on page 6.
If you manufacture alcoholic liquor in Kansas, calculate whether you currently meet the $5 million property and $2 million payroll thresholds. If you're close, the next few years may present an opportunity to evaluate whether additional Kansas investment makes tax sense for your business. If you're well below both thresholds, understanding your projected 2027 tax liability under the three-factor method should be part of your forward planning.
For a detailed breakdown specific to your business structure, consult with a Kansas tax professional or your industry association.
Source: SB300, Section 1, subsection (f)(1)(B), effective for tax years commencing on or after January 1, 2027.