Bill seeks to let Wichita exempt groceries from local sales tax. It faces challenges

If Wichita voters approve a 1% city sales tax in March, groceries won’t be exempt.

Some supporters of the ballot initiative have pitched excluding transactions on food items from the $850 million plan as a way of reducing its burden on lower-income Wichitans.

But doing so would require both a change in state law and a revision to the bylaws of an interstate compact that governs Kansas sales tax policy.

“I just think it’s good public policy to not tax food at all,” said state Rep. Nick Hoheisel, a Wichita Republican who introduced a bill in Topeka this week that would empower Kansas cities and counties to exempt groceries from local sales tax levies.

The Legislature enacted a law in 2022 gradually phasing out the state sales tax on groceries. Giving local governments the power to do the same, as Hoheisel has proposed, would be a more complicated process.

“Right now, if we would pass that bill and make it law, it would put us in violation of the (Streamlined Sales and Use Tax Agreement), which kind of causes some revenue issues,” said Rep. Adam Smith, a Weskan Republican who chairs the House Committee on Taxation.

Under the terms of that 24-state agreement, local taxing jurisdictions must have a uniform sales tax rate on all products to simplify collections.

Smith, who sits on the Streamlined executive board, said he’s open to proposing a change in the bylaws that would allow local jurisdictions to eliminate the tax on groceries. But there’s no guarantee it would be adopted.

“It would be a very robust discussion because this is not the first time we’ve had this conversation,” Smith said.

Even if the bylaws were updated, Hoheisel’s bill would have to be approved by both chambers of the Legislature and signed into law before Wichita could opt out of collecting sales tax on groceries.

The legislative session is expected to run through early April. Leaders in the House and Senate have emphasized that their top priority on taxation this year is hammering out a constitutional amendment proposal aimed at limiting spikes in property valuations.

Smith said if all the pieces came together after Wichita voters approved a citywide sales tax in March, nothing would prevent city officials from deciding not to collect sales tax on grocery purchases moving forward.

In an earlier council meeting where members discussed introducing the legislation, the city’s Finance Director Mark Manning said he didn’t have “granular-level data” that would show how much revenue the city would lose out on if the grocery exemption passed at the state level.

“I can’t tell you with any level of precision what it would be,” Manning said. “I don’t think it would be hugely material, but it would be several millions of dollars.”

No delaying March sales tax vote

Sedgwick County’s 1% sales tax — most of which goes to Wichita — still applies to groceries. If Wichita voters approve the new levy, the sales tax on groceries in the city will become 2% on July 1.

The proposed city sales tax, put forward by a coalition of Wichita businessmen, would fund a variety of local government priorities, including a new performing arts center, expanded convention center space, unspecified capital improvements for the police and fire departments, and operation of the city’s centralized homeless services. Backers said it also would allow the city to lower the property tax levy.

Hoheisel said he was disappointed that the City Council rebuffed Mayor Lily Wu’s effort to reschedule the tax vote for August. The council’s 5-2 vote Wednesday against delaying the referendum came after officials learned that roughly 10% of registered voters would be unable to cast ballots at their usual polling stations on March 3.

“I personally think there are a lot of good projects in this sales tax vote that are worthy of discussion and passing and funding,” Hoheisel said. “But I do have concerns about what the general public feels right now and how that will impact the results in March.”

Rep. Tom Sawyer, a Wichita Democrat who serves as the ranking member on the tax committee, said the City Council would have been wise to delay.

“Just talking to constituents, the support’s not out there right now,” Sawyer said.

“If they really want to get it passed, they should postpone it anyways. Build more trust. Get more concrete details on how the money’s going to be used.”