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 15, 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 2281 by House Committee on Taxation
In accordance with KSA 75-3715a, the following fiscal note concerning HB 2281 is
respectfully submitted to your committee.
HB 2281 would provide a sales tax exemption on all sales of tangible personal property or
services, except sales of motor vehicles, to Kansas residents who are certified by the U.S.
Department of Veterans Affairs to receive 100.0 percent disability compensation and considered
to be permanently disabled. Sales qualifying for this exemption would be capped at $100,000 per
year for each qualifying person. The Department of Revenue would be required to issue an
exemption certificate in the form of a driver’s-license-size card to each eligible person that includes
the veteran exemption identification number. This sales tax exemption would begin on January 1,
2024.
Estimated State Fiscal Effect
FY 2023 FY 2023 FY 2024 FY 2024
SGF All Funds SGF All Funds
Revenue -- -- ($15,700,000) ($18,900,000)
Expenditure -- -- $44,120 $44,120
FTE Pos. -- -- 1.00 1.00
The Department of Revenue estimates that HB 2281 would decrease state revenues by a
maximum of $18.9 million in FY 2024. Of that total, the State General Fund is estimated to
decrease by a maximum of $15.7 million while the State Highway Fund is estimated to decrease
by a maximum of $3.2 million. This bill also is estimated to decrease local sales tax revenues;
however, the specific estimate of lower local sales tax revenues was not calculated by the
Department of Revenue. The fiscal effect to state revenues during subsequent years would be as
follows:
The Honorable Adam Smith, Chairperson
Page 2—HB 2281

FY 2025 FY 2026 FY 2027 FY 2028
State General Fund ($36,400,000) ($34,400,000) ($34,700,000) ($35,000,000)
State Highway Fund (7,700,000) (7,500,000) (7,600,000) (7,700,000)
($44,100,000) ($41,900,000) ($42,300,000) ($42,700,000)
To formulate these estimates, the Department of Revenue reviewed veteran disability data
from the Kansas Commission on Veterans Affairs. In 2022, there were 8,538 Kansas veterans that
had a 100.0 percent disability compensation rating, and these estimates assume that each eligible
veteran would use the maximum $100,000 exemption each year. The estimate assumes that card
holders will use the exemption on purchases of food and food ingredients to exempt those
purchases from local sales tax and any existing state sales tax. For every $10,000 in purchases
subject to the full 6.5 percent state sales tax rate, excluding vehicles, the disabled veteran would
save $650 for not paying the state sales tax on those purchases. Under this scenario, the disabled
veteran would also save unknown amounts of local sales taxes on those purchases depending on
the local sales tax rate.
The Department of Revenue indicates that it would require a total of $44,120 from the State
General Fund in FY 2024 to hire 1.00 new FTE position to manage this new sales tax exemption
program and to change forms and publications. The Department estimates that ongoing expenses
for salaries and wages for the 1.00 FTE position would total $61,947 from the State General Fund
in FY 2025 and subsequent fiscal years.
The Kansas Department of Transportation (KDOT) indicates that the bill would reduce
revenues to the State Highway Fund as noted above. KDOT indicates that when the state receives
fewer State Highway Fund dollars, it may be required to make corresponding reductions to planned
expenditures for projects funded under the comprehensive transportation plan. Any fiscal effect
associated with HB 2281 is not reflected in The FY 2024 Governor’s Budget Report.
The Kansas Association of Counties and the League of Kansas Municipalities indicate that
the bill would provide a net reduction to local sales tax collections that are used in part to finance
local governments. 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
Jay Hall, Kansas Association of Counties
Wendi Stark, League of Kansas Municipalities
Brendan Yorkey, Department of Transportation