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Thousands report, pay out-of-state sales tax

BY JEANNINE KORANDA

Eagle Topeka bureau

TOPEKA - Some Kansans, it would appear, are more honest than others when reporting what they owe to the state.

Roughly 35,000 of the approximately 1 million who filed tax returns last year declared they had purchased items -- often online -- without paying sales tax.

Then, they paid up -- to the tune of $1.1 million total, or an average of $32 per person.

That's a victory of sorts for the state. It had expected to collect just $250,000 in its effort to recapture sales tax lost when people buy from an out-of-state online store or catalog.

"These people are self-reporting about $21 million in sales that are made outside the state," said Steve Stotts, director of taxation for the state Department of Revenue.

But the amount falls far short of what the state could potentially collect. A 2004 study by the University of Tennessee's Center for Business and Economic Research projected that Kansas could lose about $215 million this year to e-commerce.

The number of people declaring items is increasing. But there is no way to tell if that is because more people are shopping on the Internet or if more people are filling out the form on their taxes, said state Department of Revenue spokeswoman Freda Warfield.

You pay the sales tax as "use tax due" under line 18 on the K-40 form. You can keep receipts for out-of-state online and catalog purchases and itemize -- or estimate what you owe based on adjusted gross income.

But the state has no good way to check whether you report what you buy without paying sales tax.

You owe sales tax only on out-of-state online and catalog purchases. Businesses with buildings in Kansas, such as Amazon.com, already collect sales tax.

Kansas and 21 other states also are looking at how to simplify the tax code to make it easier for retailers to charge a sales tax for several different areas.

From October 2005 through March, the states participating in the Streamlined Sales Tax Project collected about $182 million in sales taxes from approximately 1,100 retailers, said Scott Peterson, executive director of the project. Kansas collected $8 million through the project last year.

This year, those states will lose $6.6 billion to $10 billion in sales tax revenue because they can't collect it, he said.

As budgets across the country get tighter, states may focus more on the lost revenue, said professor Bill Fox, director for the Tennessee center.

"It's going to be real money in a year like this," he said.

The issue isn't just money, but equity, Stotts said.

If someone doesn't pay sales tax on an item, that means it costs 7 to 8 percent less than it would at the store down the street, he said.

"It helps our Main Street local businesses; it kind of helps level the playing field."

Reach Jeannine Koranda at 785-296-3006 or jkoranda@wichitaeagle.com.