Online shopping just got a little more expensive for Kansans. And while no one is clamoring for more taxes, the decision to tax internet-bought products should be welcomed.
The Kansas Department of Revenue has decided to begin taxing out-of-state retailers for sales in Kansas, most of which are obviously online. Until now, such sales had been unfairly exempt from sales taxes due to concerns about interference with interstate commerce.
But because of last year’s U.S. Supreme Court decision in South Dakota v. Wayfair Inc. — in which the court gave states the green light to tax remote sales — the Kansas Department of Revenue and Gov. Laura Kelly’s administration announced Aug. 1 that it would start imposing the state’s 6.5% tax on those sales this month. Local sales taxes also will apply.
There’s a legal squabble between the administration and Attorney General Derek Schmidt’s office, which declared in a nonbinding opinion last week that the Department of Revenue had erred in how it imposed the tax. And this may end up in court if a retailer or some other party sues.
But the state is forging ahead with the tax, just in time for holiday shopping. Since the Wayfair decision, the Department of Revenue says 3,200 out-of-state businesses have registered to collect Kansas sales taxes — nearly 600 of them since the Aug. 1 announcement.
Without taking sides in that wonky legal dispute, we heartily agree with the Kelly administration that Kansas ought to charge sales tax to out-of-state retailers, which have for years unduly avoided the taxes dutifully paid by the state’s brick-and-mortar stores. Many of them are mom-and-pop enterprises that have been crippled by out-of-state retailers.
Nor are we alone in that assessment: The Kansas Legislature agrees too, having already proposed taxing internet sales in two larger bills the governor vetoed last session.
The tax is needed, and not just out of sheer fairness. The Kansas Department of Revenue estimates the state is losing out on an additional $20 million to $40 million a year on additional revenues from remote retailers.
And while no one likes paying more for anything, supporting one’s community, state and nation through reasonable and fair taxation is simply a matter of good citizenship.
“This is about protecting our friends and neighbors doing business on Main Street and throughout our local communities across Kansas,” the governor said in a written statement Tuesday. “They are working hard, playing by the rules and deserve to be on a level playing field with out-of-state retailers.”
One note of caution: If the attorney general is right, the Kansas sales tax needs to include an exemption for small business and smaller sales. In the Wayfair decision, the Supreme Court took special pains to note the South Dakota law’s “safe harbor” provision exempting total sales of less than $100,000 or fewer than 200 separate transactions.
While not a hard-and-fast directive by the court — and there’s nothing sacrosanct about South Dakota’s particular sales thresholds — the fact that the high court took note of the safe harbor exemption is a historical marker, a huge cue to states to set their own sales thresholds, certainly, but to at least set them.
The experts can decide the details. For now, it remains that equitable taxation of sales for hometown and out-of-state business is an inarguable societal good.
And a little holiday cheer for the underappreciated home team.