A bill in the Kansas Senate could put pressure on large out-of-state retailers to report how much sales tax is owed on internet purchases.
It’s inspired, in part, by neighboring Colorado’s “Amazon tax” to crack down on missed sales revenue from the spread of online shopping.
Senate Bill 111 would require retailers that don’t collect Kansas retail tax to provide records of untaxed Kansas sales to the Department of Revenue.
It would require retailers to notify Kansas residents on each purchase that they are subject to Kansas taxes, which need to be included on a state tax form. People who buy more than $500 worth of products or serves a year from one out-of-state retailer would also get an annual notice.
The notice requirements would apply only to companies that have more than $100,000 in sales in Kansas a year.
The 2010 Colorado law, which was ultimately upheld in court late last year, is nicknamed after the online retail giant Amazon.
The Kansas Department of Revenue at a Wednesday hearing did not want to specify what retailers would be affected but said it would “possibly” include well-known, large firms.
‘Things have changed’
Cindy Green, deputy director of the League of Kansas Municipalities, which proposed the bill’s language, said cities were losing millions of sales tax dollars to internet purchases.
“Many states are frustrated, because the federal government has not taken action on this issue,” she said.
“People believe it’s a tax increase. It is not. It is just a new way to collect taxes that are due the state because things have changed.”
Green said the bill wouldn’t collect “every dollar that’s due out there.”
“Taxpayers are going to know ‘What number do I owe?’ ” Green said.
Nathan Eberline of the Kansas Association of Counties said the bill was a good start to collecting owed revenue.
“It puts, particularly in our rural communities, the (brick-and-mortar) retailers on a more equal footing,” he said.
Americans for Prosperity state director Jeff Glendening pointed in written testimony to a 1992 Supreme Court case that limited states’ power on enforcing sales taxes on “remote sellers.”
“This legislation would waste taxpayer money and create a bad precedent for overly complex tax policy in Kansas,” he wrote.
‘States are moving on this’
Sen. Jim Denning, R-Overland Park, said the bill’s purpose wasn’t to “fill a budget deficit,” noting the relatively modest fiscal impact expected for the state’s revenue.
The revenue department estimates the bill would increase state revenue by $100,000 in the 2019 fiscal year and $2 million in the year after.
“Nobody knows what this thing is going to do,” Denning said. “They came in with a very minimal amount.
“The idea of the bill is to show the federal legislators that the states are moving on this,” he added.
Sen. Tom Holland, D-Baldwin City, said he was concerned “this is going to catch a whole lot of people by surprise.”
“I think we better really understand what we’re getting ourselves into,” he said.