One of the amazing things about life in the Statehouse is that nearly everything that happens here has a political edge to it. Or two or three edges.
The latest scrap? Probably the Kansas Department of Revenue’s notice to the rest of the folks in the nation that if they sell stuff over the phone or internet or plain old mail and ship it to Kansas, they have to collect Kansas sales tax on the merchandise and send that money to Kansas, just like Kansas stores do. Those folks who don’t have a store in Kansas? They are “remote sellers” and the U.S. Supreme Court has held that they can be required to collect and remit sales tax just like the stores on any street in Kansas.
Well, Revenue has now put all those remote sellers on notice that Kansas wants that sales tax, and they should spend the morning filling out forms, registering with the state, and collecting and remitting those taxes to Kansas. Starting Oct. 1.
Sorta evens-up the prices, you don’t save 7.5 percent by just ordering stuff from out of state.
As it turns out, that notice is essentially a recitation of current state law.
Well, that notice of state law by Democrat Gov. Laura Kelly’s Department of Revenue and her agency’s intent to enforce it have become a political time bomb for conservative Republicans.
Senate President Susan Wagle, R-Wichita, has blasted the governor for enforcing that state law because she believes that Kansas is going to be sued over it at some cost to the state, or at least diverting state lawyers who could presumably be doing something else, to defend it.
Oh, and the reason Wagle’s upset? It comes down to the governor vetoing a bill that cut $35 million in income taxes to generally upper-income individuals, $72 million to corporations that do business overseas, maybe in a few years reduce the sales tax on food, and…put some limits on just which out-of-state merchants have to collect Kansas sales tax.
Nope, the out-of-state sales tax wasn’t a big deal in the bill, and the political aspects of the corporation-oriented income tax cuts don’t appear to be as heart-rending as the sales tax on food for Wagle…at least in press releases.
And, that lawsuit over that out-of-state sales tax collection might actually happen because the U.S. Supreme Court has indicated that states probably ought to have some provision for exempting some minor-league businesses from the state’s strict sales tax rules. Something like maybe $100,000 in annual sales, and maybe 200 distinct transactions.
But that’s not state law now, and we’re wondering whether the Department of Revenue just administratively allowed those exemptions, so-called “safe harbor” exemptions, without legislative authority, whether there would be an arrest warrant out for Revenue Secretary Mark Burghart…
Any chance lawmakers will consider some low-cost exemptions to the sales tax law next session? Or whether that “safe harbor” will become part of another major tax cut bill next session?
It could go either way.
If there’s a lawsuit, asserting that the state’s current law unconstitutionally hampers interstate commerce, it could take years to make its way through the U.S. Supreme Court.
If there’s a “safe harbor” bill that lets small and infrequent sales into Kansas without sales tax and the hassle of registering with the state? Well, that’s an amendment magnet that will undoubtedly wind up as an income tax cut bill that will include as frosting reduction in sales tax on food.
This may become a big issue in the election-year legislative session which starts Jan. 13.