Division of the Budget
Landon State Office Building Phone: (785) 296-2436
900 SW Jackson Street, Room 504 adam.c.proffitt@ks.gov
Topeka, KS 66612 Division of the Budget http://budget.kansas.gov
Adam Proffitt, Director Laura Kelly, Governor


March 10, 2023


The Honorable Adam Smith, Chairperson
House Committee on Taxation
300 SW 10th Avenue, Room 346-S
Topeka, Kansas 66612
Dear Representative Smith:
SUBJECT: Fiscal Note for HB 2256 by Representatives Sawyer, Clayton, and Corbet
In accordance with KSA 75-3715a, the following fiscal note concerning HB 2256 is
respectfully submitted to your committee.
HB 2256 would exempt food and food ingredients, including prepared foods and food sold
at restaurants from state retail sales and compensation use tax on July 1, 2023. The bill would
decrease the distribution of state retail sales and compensating use tax revenue to the State General
Fund from 83.0 percent to 80.264 percent and increase the distribution to the State Highway Fund
from 17.0 percent to 19.736 percent. Local governments that have a sales tax would continue to
charge a retail sales tax on food and food ingredients, including prepared foods and food sold at
restaurants.
Estimated State Fiscal Effect
FY 2023 FY 2023 FY 2024 FY 2024
SGF All Funds SGF All Funds
Revenue -- -- ($610,100,00) ($610,200,000)
Expenditure -- -- $3,600 $3,600
FTE Pos. -- -- -- --
The Department of Revenue estimates that HB 2256 would decrease state revenues by
$610.2 million in FY 2024. Of that total, the State General Fund is estimated to decrease by $610.1
million in FY 2024, while the State Highway Fund is estimated to decrease by $100,000 in FY
2024. The bill would have no fiscal effect on local sales tax revenues. The fiscal effect to state
revenues would be as follows:
Tax Policy Changes (SGF Only) FY 2024 FY 2025 FY 2026
Retail Sales Tax ($581,800,000) ($449,300,000) ($388,200,000)
Compensating Use Tax (28,300,000) (24,400,000) (31,200,000)
Total SGF ($610,100,000) ($473,700,000) ($419,400,000)
The Honorable Adam Smith, Chairperson
Page 2—HB 2256

Tax Policy Changes (SHF Only) FY 2024 FY 2025 FY 2026
Retail Sales Tax ($28,400,000) ($13,200,000) ($31,000,000)
Compensating Use Tax 28,300,000 24,400,000 31,200,000
Total SHF ($ 100,000) $11,200,000 $ 200,000
Tax Policy Changes (Total) FY 2024 FY 2025 FY 2026
Retail Sales Tax ($610,200,000) ($462,500,000) ($419,200,000)
Compensating Use Tax -- -- --
Total ($610,200,000) ($462,500,000) ($419,200,000)
To formulate the estimates of the sales tax exemption for food and food ingredients,
including prepared foods and food sold at restaurants, the Department assumes that 24.0 percent
of all current sales tax collections are collected on food and food ingredients, including prepared
foods and food sold at restaurants. The fiscal effect was calculated in relation to current law that
reduces and eventually sets a 0.0 percent state sales tax rate specifically on food and food
ingredients (not prepared foods and food sold at restaurants) and planned changes to the
distribution of overall state retail sales and compensating use tax revenue contained in 2022 HB
2106. The Department estimates that exempting food and food ingredients (including food sold
at restaurants) would result in a reduction in state sales tax collections of $610.2 million in FY
2024, $462.5 million in FY 2025, and $419.2 million in FY 2026. According to the Department
of Revenue, reissuing sales tax publications and updating forms would cost $3,600 from the State
General Fund in FY 2024.
The Kansas Department of Transportation indicates that the bill would provide a net
increase to state revenues to the State Highway Fund as noted above. However, the fiscal effect
on the Eisenhower Legacy Transportation Program would be negligible. Any fiscal effect
associated with HB 2256 is not reflected in The FY 2024 Governor’s Budget Report.
The League of Kansas Municipalities and the Kansas Association of Counties indicate that
the bill would have no fiscal effect on local government sales tax revenues. The bill also has the
potential to reduce revenues that are pledged to repay STAR bond projects; however, it is unknown
what impact this bill would have on the viability of those projects.


Sincerely,

Adam Proffitt
Director of the Budget

cc: Lynn Robinson, Department of Revenue
Brendan Yorkey, Department of Transportation
Wendi Stark, League of Kansas Municipalities
Jay Hall, Kansas Association of Counties


Statutes affected:
As introduced: 79-3603, 79-3603d, 79-3620, 79-3703, 79-3710