A Netflix tax? Kansas budget calls for tax on video streaming, music, game downloads
Should you pay sales tax on your Netflix subscription, music from iTunes, or video games you download from Google Play?
Kansas Gov. Laura Kelly thinks you should.
That new sales tax is included in the governor’s budget proposal, presented Thursday to the House and Senate budget committees.
It would apply to streaming video services such as Netflix, Amazon Prime, Disney+, AT&T TV and a host of other paid-TV subscription services over the internet, according to the budget document.
Also taxed would be paid online music from services like Spotify; along with video games, apps, e-books and newspaper and magazine subscriptions that are downloaded directly to personal computers, tablets and cell phones.
The new tax would raise an estimated $26.7 million for the state, including $22.4 million for the general fund and $4.3 million for the state Highway Fund, according to the proposed budget.
It also would generate $6.7 million for local governments around the state, the budget estimates.
The effort to tax products delivered online is in addition to the Kelly administration’s efforts to collect more sales tax on tangible goods ordered from out-of-state online retailers.
That effort is expected to generate nearly $30 million for the state budget and $7.5 million for local government, the budget said.
The governor’s budget director, Larry Campbell, told lawmakers that “the governor thinks this a fairness issue for our mom and pop retailers” who have seen sales bled away to the Internet.
“If you were to go into a retail store today, you would pay taxes on books, magazines, DVDs, video games, etc.,” he said. “If you buy the same products online, you pay no taxes. Kansas tax policy is antiquated.”
Several lawmakers said they were surprised to see the proposed tax on digital downloads and streaming, which emerged from a council appointed by the governor to reform state taxes.
“First I’ve heard of it,” said Sen. Dan Kerschen, R-Garden Plain and a member of the Ways and Means Committee.
Brenda Landwehr, R-Wichita and member of the House Appropriations Committee, said she also wasn’t expecting the the digital sales tax proposal. She said it would be a nightmare to collect because modern electronics are mobile and people download digital products at home or on the road in a different tax jurisdiction.
She said Kelly “is just trying to find tax money to pay for her Medicaid expansion and her growth of government.”
Landwehr’s colleague on Appropriations, Rep. Barbara Ballard, D-Lawrence, said she needs to know more before deciding on whether to support the digital tax.
While store owners and their customers use state and local services to transact business, digital buys are made by wire or wireless communication with little to no services provided by government.
She said she needs to ask “Why are we looking at this? Is it just a way to make additional revenue?”
Appropriations member Tom Burroughs, D-Kansas City, said he supports the tax because the state needs to acknowledge that commerce is changing and increasingly online.
“It does level the playing field for the businesses in our communities, brick and mortar businesses,” he said. “It’s about time.”
Other highlights of the fiscal 2021 budget include:
▪ Food sales tax relief — The budget proposes a $53.2 million program to provide tax credits to low-income households, ranging from $60 for singles making less than $30,000 a year to $240 for married couples making less than $40,000.
▪ Property tax relief — The budget would restore a program of payments to local governments to be applied to lowering property taxes. It would cost $54 million. The last such payments were made by the state in 2003.
▪ Mental health — $10.8 million in increased funding for Osawatomie State Hospital and regional mental-health hospitals.
▪ Expanded Medicaid — $17.5 million for the first six months of the program, starting in January 2021. The full-year cost, starting in fiscal 2022, would be $35 million. The money would be used to expand the state’s Medicaid program to cover working-poor Kansans who make too much to qualify for Medicaid, but not enough to be eligible for subsidized private coverage under the federal Affordable Care Act.
▪ Transportation — The budget would reduce the annual transfer of money from the Kansas Department of Transportation to the state general fund, from $158.7 million this year to $73.1 million in 2021, a step toward Kelly’s promise to “close the Bank of KDOT” by the end of her first term in office.
This story was originally published January 16, 2020 at 3:07 PM with the headline "A Netflix tax? Kansas budget calls for tax on video streaming, music, game downloads."
