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Minutes for HB2230 - Committee on Taxation
Short Title
Imposing sales tax on digital property and subscription services.
Minutes Content for Thu, Feb 18, 2021
Adam Siebers, Assistant Revisor provided an overview on HB2230 stating the bill would impose a sales tax on sales of digital property and subscription services. (Attachment 1)
Kathleen Smith, Kansas Department of Revenue stated HB2230 would increase State Revenues by $50.9 million in FY2022. Of that total the State General Fund would be estimated to increase $42.7 million and the State Highway Fund is estimated to increased $8.2 million in FY2022. In FY2023 the estimate for the State Revenues would go up to $58.3 million and for FY2024 the estimate will increase to $61.3 million. The Department indicates the bill would require $200,232 from the State General Fund in FY2022 to implement HB2230 and to modify the sales tax system. Ms. Smith noted to formulate the estimates, the Department of Revenue reviewed industry data on music, video games, and other online media subscription services, and reviewed data from other states that tax the sales of digital products.
Proponents:
Michael Hale, Deputy General Counsel, Kansas Department of Revenue testified as a proponent for HB2230 stating the bill is a recommendation from the Governor's Council on Tax Reform that would include the sale of digital goods in the state sales and use tax base. The Kansas sales tax base has been eroding since the 1990s and HB2230 will reform and bring the Kansas sales tax code into the 21st century. The bill levels the playing field for in-state stores that are in competition with on-line sellers. Mr. Hale noted 67% of the states which is thirty states plus the District of Colombia have restored their tax bases by including digital goods and HB2230 would do the same for Kansas to catch up with the majority of states. The Tax Foundation and Kansas Chamber encourages the broadening of an eroding sales tax base by including digital goods. (Attachment 2)
Mr. Hale stood for questions from Committee members.
Trey Cocking, League of Kansas Municipalities testified as a proponent for HB2230 noting imposing a tax on digital goods should not be viewed as a new tax, but a tax on purchases that were previously taxed and purchased from local stores. The inability to collect sales tax on digital goods has led to a reduction in sales tax dollars and increased reliance on property tax. Brick and mortar sellers are at 7-10% price disadvantage, depending on their location in Kansas compared to online sellers. (Attachment 3)
Emily Fetsch, Director of Fiscal Policy, Kansas Action for Children submitted testimony as a proponent for HB2230 (Attachment 4)
Opponents:
Kent Eckles, Kansas Chamber testified as an opponent for HB2230 which expands Kansas sales tax to digital goods and digital subscription services. He noted Kansas already has the 8th highest state/local sales tax burden in the nation and HB2230 only broadens the sales tax base without any offsetting rate reduction. (Attachment 5)
Dave Trabert, Kansas Policy Institute submitted testimony as an opponent for HB2230. (Attachment 6)
Chairperson Smith closed the hearing on HB2230.
