On March 5, the House’s Taxation Committee held a hearing over HB 2685, a bill requiring sales tax from all sales of digital property and subscription services beginning on July 1.
The bill was introduced on Feb. 13 by Rep. Jerry Stogsdill, D-Prairie Village, on behalf of the Governors Tax Council. If passed, it is expected to bring in over $45 million in revenue to the state.
All products, services and subscriptions that are considered digital are included in the bill description. This would include online subscriptions offered by companies like Amazon, Netflix, Spotify, Blue Apron and Ipsy.
Out of the 45 states that collect a sales tax, 29 also impose a digital tax. If the bill passes, it will mark the fourth consecutive year that the Legislature has raised taxes.
Three supporters of the bill shared verbal testimonies during the hearing.
Michael Hale, a representative from the Kansas Department of Revenue argued that the tax will level the playing field between brick and mortar businesses and businesses that work primarily or solely through digital services and products. As of right now, brick and mortar businesses are at a 7 to 10% tax disadvantage because digital businesses do not have to pay the same sales tax.
Trey Cocking, deputy director of the League of Kansas Municipalities, said the bill “is about fairness.” Cocking argued that because the number of brick and mortar businesses has declined over the years, so has the sales tax. Cocking said this decline has led to a deficit in the sales tax revenue of the state and argued that this bill would not be a tax increase, but a “tax revival.”
Mark A. Burghart, secretary of the Kansas Department of Revenue, agreed with Cocking and argued a similar case.
“Our sales tax base is shrinking because of technology,” Burghart said.
Michael Austin, the director for Entrepreneurial Government at the Kansas Policy Institute, opposed the legislation, arguing that the bill would “penalize innovation instead of celebrating it.” Austin argued that people have innovated new ways to shop, buy and rent items and thus shouldn’t have to pay for their taking advantage of the new ways of technology.
“HB 2685 isn’t a brilliant bill, it’s a tax on the brilliant,” Austin said.
Republican legislators like Rep. Ken Corbet, R-Topeka, echoed Austin’s rebuke of the bill, claiming that the tax increase was an unnecessary venture.
“People are taxed enough in this state,” Corbet said.
Kansas is currently ranked eighth in the nation for highest sales taxes.
The bill will move next to final action, during which the committee will vote on whether or not to send the bill to the full House.