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Minutes for HB2143 - Committee on Taxation

Short Title

Making exemption permanent for certain cash rebates on sales or leases of new motor vehicles for sales tax purposes.

Minutes Content for Thu, Feb 11, 2021

Adam Siebers, Assistant Revisor, presented an overview for HB2143 that provides for exemption from sales tax owed on manufacturers rebates on the sales of new motor vehicles (Attachment 1).

Kathleen Smith, Kansas Department of Revenue provided information on the fiscal note for HB2143 estimating it would decrease state revenues by $4.5 million in FY2022.  The State General Fund is estimated to decrease by $3.8 million in FY2022 and the State Highway Fund is estimated to decrease by $700,000 in FY2022.  She noted the bill would decrease local sales tax revenues but the estimate of lower local sales tax revenues was not calculated by the Department of Revenue.    

Don McNeely, President, Kansas Automobile Dealers Association, testified as a proponent for HB2143.  The bill provides for an exemption from sales tax owed on manufacturers rebates on the sales of new vehicles and would make the exemption permanent.  Currently, the exemption will sunset June 30,2021.  He stated the selling price of a new vehicle is approximately $40,000 and the average combined sales tax rate is close to 10.0%.  The charge of a sales tax on the rebates is detrimental to new vehicle sales noting the State of Kansas makes more money off the sale of a vehicle then the selling dealer.  Mr. McNeely remarked the industry is an essential part of the State's economy generating close to $6.0 billion in annual sales and the industry represents approximately 20% of the retail sales in the State of Kansas (Attachment 2).

Mr. McNeely stood for questions from the Committee.