The Kansas Legislature is looking to sales tax for help in solving some of its ongoing fiscal problems. This session, several bills have been introduced that would broaden sales tax to many currently exempt services and reduce the rate of sales tax on food and food ingredients, including HB 2384, HB 2131, HB 2250, and HB 2369. But the measure that has had the most success so far is amended HB 2380, which originally sought only to authorize Marion County to increase its local sales tax rate. The amended version both expands the sales tax base and reduces the rate on food.
Extend sales tax to services
The following services would be taxed under HB 2380:
- Cleaning services (nonresidential only)
- Collection agencies
- Investigation services
- Motor vehicle towing
- Pet care (excluding veterinarians)
- Security and patrol services and security systems (excluding locksmiths)
- Storage services (mini-warehouse and self-storage)
If enacted as written, the above services would be taxed as of July 1, 2017.
Reduce the tax on food
The amended version of HB 2380 also seeks to reduce the rate of tax on food and food ingredients to 5.5 percent as of July 1, 2020. “Food and food ingredients” does not include alcoholic beverages, candy, dietary supplements, soft drinks, tobacco, or food sold through vending machines, but it does include bottled water “not otherwise sold as prepared food.”
A more dramatic reduction in the sales tax on food is also under consideration: SCR 1604 proposes amending the state constitution to gradually reduce the rate of sales and use tax on food and food ingredients. The rate would drop to 4 percent on July 1, 2019, and then to 2 percent on July 1, 2020.
Two-thirds of the legislature would have to approve the resolution for it to become law. Several people stood before the Senate Committee on Assessment to speak on behalf of the rate reduction. Sen. Tom Holland noted that “Kansas has the highest sales tax rate on food in the Midwest and is second overall in the entire United States.” Several other proponents said reducing the rate would help the state’s businesses, families, and overall economy.
The only argument against SCR 1604 was presented in writing by the Kansas Policy Institute, which maintained that although the bill “is conceived with the best of intentions, … it will only end up shifting the burden amongst Kansas taxpayers.” However, reducing the sales tax on food has been proposed in the past, without success.
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