Gov. Laura Kelly on Tuesday morning proposed a sales tax on out-of-state retailers shipping goods and digital products to Kansas.
The tax would generate about $97 million in revenue, according to the governor. Those funds would be used to cut taxes for 94 percent of Kansas residents and provide support for small businesses, according to the governor. It would help small businesses in Kansas because the current tax code not requiring out-of-state internet marketers to pay sales tax is an unfair advantage to out-of-state retailers, according to the governor.
The proposal would also allow the state to have a balanced budget, she said. The governor discussed the plan at a news conference Tuesday morning.
“COVID-19 has brought unprecedented challenges for hard-working Kansans, their families, and their businesses,” Gov. Kelly said. “We know they need relief – and they need it as soon as possible. Our proposal is an amendment to Senate Bill 22, that will provide tax relief to the vast majority of Kansas families and assist in our state’s economic recovery from the COVID-19 pandemic.”
Currently, all sellers whether they are on Amazon, Etsy or on their own, have been instructed to register and collect tax on property shipped to Kansas. But under current state tax code, out-of-state retailers are able to dodge the use tax on sales to Kansas customers, according to the governor.
The proposed plan would require the marketplace facilitator to collect and remit tax on behalf of the remote sellers on their platform, according to the governor. The state would collect from fewer entities and increase compliance, according to the plan.
Currently, Kansas is one of only three states that have not enacted a marketplace facilitator provision, according to the governor.
The plan also would impose taxes on digital products, such as video streaming services. These might include movies and music.
“When out-of-state retailers can duck taxes, there is no way for the local clothing store up the street or the local book store to try and compete with out of state prices,” Gov. Kelly said. “By requiring marketplace facilitators to collect use tax on out-of-state products, we level the playing field for Kansas main street businesses.”
Together, these marketplace facilitator and digital goods provisions would generate approximately $97 million in additional revenue for the state. That revenue would then be used to increase Kansas’s standard tax deduction by 20% in tax year 2021 and 35% in tax year 2022, according to the plan.
If the revenue neutral proposal were implemented, 94% of Kansans would see a tax cut, Gov. Kelly said.
The plan was proposed as an alternative to Senate Bill 22, which is being heard by the Kansas Senate Tuesday.
“At a time when we’re facing huge unemployment rates and an unsteady economy, we do not need tax cuts for the rich which have no impact on unemployment,” Senate Democratic Leader Dinah Sykes said. “At a time when we’re facing economic uncertainty, we do not need to repeat failed tax experiments which studies have shown – and which we have seen firsthand here in Kansas – have no impact on economic growth. Senate Democrats are proposing solutions that will grow our economy, keep Kansas businesses competitive, and keep more money in the pockets of Kansas families.”
“During a time of economic uncertainty and in the midst of a pandemic, Republicans are pushing to spend over $600 million in tax cuts for giant multi-national corporations,” House Democratic Leader Tom Sawyer said. “The vast majority of Kansans would receive no tax relief. We will always continue to fight for tax cuts that help working Kansans lessen their financial burden.”
To see the governor’s news conference, visit https://www.facebook.com/GovLauraKelly/videos/816949302366185.
