By MARTIN HAWVER
OK, there weren’t parades or bells ringing on Oct. 1, the one-year anniversary of Kansas Secretary of Revenue Mark Burghart’s decision that out-of-state sellers of goods into Kansas need to register with the state and pay sales taxes on items that we order online or over the phone and have delivered to us here in Kansas.
Nope, didn’t hear a single bell or whistle, but that sales tax registration and payment have made the state tens of millions of dollars on previously tax-free sales. Some of that money went into the state treasury, some went into the bank accounts of cities and counties with local sales taxes.
Oh, and even if you don’t track how much sales tax revenue (they call it “compensating use tax” for some obscure reason) that Burghart brought into the state, it has the effect of boosting Kansas small businesses which collect sales tax on everything you carry out of the store.
Those previously un-sales-taxed purchases from out of state essentially cut the price you paid when you bought a shirt or shoes or…whatever…from an out-of-state merchant, who shipped it to you without a sales tax.
Buy that shirt in Kansas, and you pay sales taxes ranging from just the 6.5 percent state tax to as much as 10.6 percent state/local total sales tax in Shawnee Mission. That’s a pretty big price boost and it’s what sent many Kansans to the Internet instead of downtown to make their purchases…
That out-of-state sales tax collection essentially evened-up prices, removing a price advantage for out-of-state merchants while the local stores saw their sales shrink. It’s a good thing for the locals, evening-up the prices so that they can be competitive not just for the price of goods sold, but at the bottom of the ticket when the sales taxes are added in.
Oh, yes, there was that little scrap last year, when at the request of some conservative legislators Attorney General Derek Schmidt said in an official opinion that he believed that Burkhart didn’t have specific authority to make those out of state sellers register with Kansas and collect and remit back to the state those sales taxes. That 18-page opinion didn’t go anywhere. Burkhart didn’t think up anything new, he just started actively enforcing the state law on sales tax.
The Legislature didn’t revoke the authority of Burkhart to actually enforce the law that had been on the books for decades and, last session, there weren’t many lawmakers who during the first months of the COVID-19 pandemic were interested in reducing state revenues.
Now, we don’t know the full year’s effect of that “compensating use tax” on the state budget, but there’s talk in the $50 million or higher range for the state, and some smaller amount for those local sales taxes. We’re waiting for Revenue folks to total it up on Nov. 1, when the first 12 months of payments are calculated.
Practically, this year some of those Internet or over-the-phone purchases by Kansans were sparked by the pandemic, when some local “nonessential” stores were closed by the governor. And when that went away, there are still Kansans who don’t want to shop in crowded stores for fear of picking up the virus. But out-of-state purchases by Kansans have increased and that’s a good reason that the compensating use tax is bringing money into the state.
What’s the future of that Burkhart order? Well, we’re coming into a year when state revenues for a whole lot of reasons are likely to be lower than planned for, and there are going to be bills for the state to pay.
We’ll see just what Burkhart’s order did to get those bills paid, won’t we?
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Syndicated by Hawver News Company LLC of Topeka; Martin Hawver is publisher of Hawver's Capitol Report—to learn more about this nonpartisan statewide political news service, visit the website at www.hawvernews.com.