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Minutes for HB2584 - Committee on Taxation
Short Title
Imposing sales and compensating use tax on digital property and subscription services and providing for the decrease in sales and compensating use tax rates in certain circumstances.
Minutes Content for Tue, Feb 6, 2024
Chairperson Smith opened the hearing for HB2584.
Adam Siebers, Assistant Revisor, provided an overview on HB2584 that imposes sales and compensating use tax on sales of digital property and subscription services. The bill also sets out by formula a potential decrease in the rate of sales and compensating use tax (Attachment 1). Mr. Siebers stood for questions from Committee members.
Kathleen Smith, Kansas Department of Revenue, provided an overview on the fiscal note for HB2584 noting it would increase state revenues by $33.7 million in FY2025. Of that total, the State General Fund is estimated to increase by $27.8 and the State Highway Fund will increase by $5.9 million. In FY2026, the estimate is $37.1 million, FY2027 the estimate is $5.5 million, FY2028 the estimate is a negative $26.1 million and for FY2029 the estimate is a negative $26.2 million. She stated in order to come up with the estimate, the Department reviewed industry data on music, video games, and other online media subscription services, and reviewed data from other states that tax the sale of digital products. Ms. Smith stood for questions from Committee members.
Proponents:
Representative Bergkamp, 93rd District, testified as a proponent for HB2584 noting this bill is nearly identical to the Governor's bill from (2121)HB2230 which introduces the sales tax on digital goods. This bill offers a corresponding 0.1 percent rate reduction to the existing 6.5 percent overall sales tax rate to have a net tax reduction to keep it revenue neutral as possible. He noted as the world continues to evolve into further electronification, Kansas needs to continually update tax statutes to reflect the changing environment. (Attachment 2). Representative Bergkamp stood for questions from Committee members.
Opponent:
Written testimony was submitted as an opponent for HB2584 by Ganon Evans, Kansas Policy Institute (Attachment 3).
Neutral:
Eric Stafford, Kansas Chamber, testified as neutral to HB2584 on behalf of the Kansas Chamber, thanking the sponsor of the bill which would use revenue generated by this change to lower the sales tax rate. He noted feedback received from members of the Kansas Chamber was lukewarm due to adding more services or products subject to sales tax out of concern for compliance. He noted if language remains consistent with what other states have especially for those members who operate in multiple states referencing the state of Connecticut as a model state to go by to ensure as much uniformity as possible. Proposed language was included in Mr. Stafford's testimony regarding legislation for a business-to-business exemption for digital property (Attachment 4). Mr. Stafford stood for questions from Committee members.
Chairperson Smith closed the hearing on HB2584.
Chairperson Smith stated the Committee will be working on bills previously heard and noted several Senate bills in tax contain either the contents that has been vetoed or the contents have already been passed. The Committee will use SB127 as a shell that is currently the sales tax authority for Dickinson County. Chairperson Smith stated it is his intent to place the contents of (2023)SB8 into SB127.
There being no further business, Chairperson Smith adjourned the meeting.
