It’s not often that the Kansas Legislature, which is comprised mostly of Republicans, smiles on a new tax destined to affect tens of thousands of consumers.
But that’s exactly what’s happening now as the House Taxation Committee, with bipartisan backing, has signaled support for imposing sales taxes on online purchases. This is a common-sense idea that lawmakers and Gov. Jeff Colyer should back this year. It will help level the playing field for Main Street businesses because they already charge their customers sales taxes, while online retailers do not.
“Brick-and-mortar stores are at a 7 percent to 10 percent disadvantage,” Ed Eilert, chairman of the Johnson County Commission, told the committee.
By the way, the same arguments apply in Missouri, where Gov. Eric Greitens has proposed a similar idea.
It should be lost on no one that Kansas is desperate for new revenue as the state digs out from the Gov. Sam Brownback years. As of last summer, about $2.5 billion intended for state highways had been diverted to cover holes in other parts of the budget as a result of Brownback’s tax cuts. That money will have to be replaced someday.
Meantime, Kansas has among the highest sales taxes in the nation on groceries. That, too, needs to change and the up to $170 million a year the online sales tax would generate could put a serious dent in that misguided policy.
This is the second year in a row that the House Tax Committee has passed such a measure. But this year’s effort is viewed as a more serious push to get online taxes in place.
Kansas essentially is following the lead of a slew of other states that have become more aggressive about pursuing online sales taxes in the wake of a 1992 U.S. Supreme Court ruling. That ruling said states could require sellers to collect sales taxes only if the business has a physical presence in the state.
But with the online world exploding and eating up an ever increasing share of retail sales, states are feeling more urgency to act. In a perfect world, Congress would step in and establish uniform standards for online sales tax collections.
Congress, though, remains too mired in dysfunction for that to happen. As a result, states are stepping into the fray. They’re ignoring the court’s physical presence standard in lieu of one that calls for a company to have only an “economic presence” in the state. By that measure, states are saying that once companies reach a certain threshold for sales, they’ve established enough of an economic presence to start collecting sales taxes.
Passing any significant tax increase obviously is a challenge in a state like Kansas. That this is a midterm election year makes passing one doubly tough.
Colyer remains a wild card. His position on the issue is unknown. He’s battling Kris Kobach for the GOP gubernatorial nomination, and that may make backing such a tax unlikely.
But this also represents something of a breakthrough moment. Republicans have long opposed taxing the internet. But a surge of pressure from those Main Street businesses has changed the political math. And the state’s ongoing revenue needs are only compounded by the imperative to respond to the state Supreme Court ruling on schools.
The time for collecting online sales taxes has finally arrived.