TOPEKA — Viking Auto Supply owner Dennis Blomberg thought of the future of Lindsborg and hundreds of other Kansas communities Thursday when endorsing a House bill requiring online retailers to collect sales tax.
He offered a specific example of the problem. Last week, he said, a customer determined he needed a piece of equipment priced in excess of $4,000. Instead of making the deal, the customer bought it online and avoided $380 in sales tax.
“We lost the sale. The state lost the sales tax. The state lost the income tax I would have paid,” Blomberg said. “Very few like to pay tax, but in this case, it is necessary to make a level playing field for businesses in Kansas.”
Under current state law, retailers with a “nexus” in Kansas, such as a brick-and-mortar building, must collect sales tax, based on a 1992 U.S. Supreme Court ruling. Kansans who buy products remotely and don’t pay compensating use tax are supposed to report that transaction on their tax form, but a small percentage comply.
Ed Eilert, chairman of the Johnson County Commission, was among a throng of people who testified to House Taxation Committee in support of the Kansas Main Street Parity Act. House Bill 2756 requires online retailers with gross receipts of more than $50,000 from sales into Kansas to collect and remit sales tax.
“Remote sales, primarily internet sales, have increased since 1992, while sales tax collection declined,” said Eilert, who presides in the state’s most prosperous county. “Brick-and-mortar stores are at 7 percent to 10 percent disadvantage.”
A recent report by the Government Accountability Office indicated Kansas could have gained between $113 million and $170 million in revenue from taxes on internet sales during 2017, said Heidi Holliday, executive director of the Kansas Center for Economic Growth.
The proposed House bill, like in Minnesota, requires online sellers to collect and remit sales tax on third-party sales, she said. It also followed the lead of Massachusetts to require out-of-state retailers with software “cookies” in Kansas to collect and remit sales tax.
Lona Duall, president of the Finney County Economic Development Corp., said the internet helped rural Kansas maintain population by connecting people to the world.
“The time is now to act on capturing sales tax related to internet sales so that we can invest those dollars into the services and amenities that future generations will seek,” she said.