August 22, 2014

Kansas Secretary of Revenue: System for sales tax exemptions too political

The state’s system for giving sales tax exemptions to charities is too political, says the secretary of revenue

Kansas Secretary of Revenue Nick Jordan told Wichita Republicans Friday that the state’s system for giving sales tax exemptions to charities is too political – and politics will probably keep it from getting changed.

“We don’t just say you’re a (nonprofit charity), you get a sales tax exemption,” Jordan told the Wichita Pachyderm Club. “You have to be put on that list by a legislator.

“It’s really not a good way to do it. It’s really not. It’s very, very political.”

Jordan said a good example is Rotary clubs in Johnson County.

“Two or three of them have sales tax exemptions, the others don’t – only because people (legislators) up there get it for them,” Jordan said. According to Rotary International’s club finder, there are 17 clubs in Johnson County.

Jordan said it’s an ongoing headache for the Department of Revenue to have to explain such anomalies to charities that call seeking the same exemptions that go to similar, or in some cases identical, groups.

The department gets calls on a regular basis from charities saying they should be exempt from the Kansas sales tax because they are exempt from paying federal taxes, Jordan said.

“We go, ‘That isn’t how it works in Kansas. You need to go talk to your legislator and see if they can put you on the list,’” he said.

State Sen. Michael O’Donnell, R-Wichita, was the only member of the Legislature at the meeting.

O’Donnell is in his first term. He said he hasn’t been approached by anyone seeking a sales tax exemption and didn’t know that it took legislator intervention.

“That was newsworthy to me,” he said. “It’s not anything that I’ve ever heard before.”

He said he would prefer an application system with clear guidelines governing who would and wouldn’t qualify for exemptions.

“That would make it an open process that would be freed from the perception of cronyism or a good-old-boy network,” he said.

The last time lawmakers took a serious shot at reforming exemptions was in 2010. But the proposal was soon tagged as the “Girl Scout Cookie Tax.”

The Legislature, facing strenuous opposition from charities and churches that receive the exemptions, quickly killed it.

Jordan said the best way to reform the system would be to turn it over to an independent panel, much like the military isolates base-closure decisions from congressional politics.

“We need almost like a BRAC (Base Realignment and Closure) Commission, who is not legislators, who’s not political, who can sit down and examine the sales tax policy,” Jordan said. “Give a bill to the Legislature and it’s an up or down, yes or no vote, no amendments allowed, so that you don’t get back into this fight again.”

But Jordan, a former state senator, said it would be unlikely that lawmakers would do that.

“To change that has always been very, very difficult politically because, (legislators would say), ‘You can’t gore my charity,’ or, ‘Are you going to put the sales tax on services?’ which is another exemption that is a heck of a political fight.”

Reach Dion Lefler at 316-268-6527 or dlefler@wichitaeagle.com.

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