Division of the Budget
Landon State Office Building Phone: (785) 296-2436
900 SW Jackson Street, Room 504 larry.campbell@ks.gov
Topeka, KS 66612 Division of the Budget http://budget.kansas.gov
Larry L. Campbell, Director Laura Kelly, Governor


April 2, 2019
REVISED

The Honorable Steven Johnson, Chairperson
House Committee on Taxation
Statehouse, Room 185-N
Topeka, Kansas 66612
Dear Representative Johnson:
SUBJECT: Revised Fiscal Note for HB 2086 by House Committee on Taxation
In accordance with KSA 75-3715a, the following revised fiscal note concerning HB 2086
is respectfully submitted to your committee.
HB 2086 would create the Kansas Mechanical Amusement Device Tax Act. The bill
defines a mechanical amusement device as any machine that, upon insertion of a coin, currency,
credit card, or substitute into the machine, which can be used for a game, contest, or amusement.
Examples of a mechanical amusement device would include pinball, shuffleboard, bowling games,
radio-ray rifle games, baseball, football, racing, boxing games, coin-operated musical devices, and
coin-operated pool tables. The definition of a mechanical amusement device does not include
vending machines, private use machines, lottery machines, or electronic gaming machines.
Beginning on January 1, 2020, all operators and distributors of mechanical amusement devices
would be required to obtain an annual license from the Department of Revenue to operate or
distribute these devices. No fees would be charged to obtain an annual operator or distributor
license.
Beginning January 1, 2020, the bill would exempt mechanical amusement devices from
sales tax and charge an annual tax of $50 that would be imposed on each mechanical amusement
device. Mechanical amusement devices placed into operation after July 1 would be subject to a
tax of $30 for the remainder of the year. Each mechanical amusement device would be required
to have an affixed decal that shows that the tax has been paid. The bill includes an administrative
penalty of $75 for each violation of not having the required license and fine of $200 for not paying
the tax which would be a misdemeanor offense. The Director of Taxation at the Department of
Revenue would seal the mechanical amusement device if the tax has not been paid, and if the seal
is broken before the tax is paid then the devise would be subject to forfeiture and sale by the
Director. The Department of Revenue would have the authority to write rules and regulations to
implement the bill.
The Honorable Steven Johnson, Chairperson
Page 2—HB 2086


Estimated State Fiscal Effect
FY 2019 FY 2019 FY 2020 FY 2020
SGF All Funds SGF All Funds
Revenue -- -- $895,000 $875,000
Expenditure -- -- $1,134,925 $1,134,925
FTE Pos. -- -- -- 3.00
The Department of Revenue estimates that HB 2086 would increase state revenues by
$875,000 in FY 2020 and by $750,000 in FY 2021. Of those totals, the State General Fund is
estimated to increase by $895,000 in FY 2020 and by $790,000 in FY 2021, while the State
Highway Fund is estimated to decrease by $20,000 in FY 2020 and by $40,000 in FY 2021. 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:
FY 2022 FY 2023 FY 2024
State General Fund $790,000 $790,000 $790,000
State Highway Fund (40,000) (40,000) (40,000)
$750,000 $750,000 $750,000
To formulate these estimates, the Department of Revenue reviewed data from the U.S
Census Bureau that shows state sales tax collections from mechanical amusement devices is
approximately $250,000 each year. The Department of Revenue indicates that South Dakota
licenses approximately 5,900 mechanical amusement devices. Adjusting this number for
population, it is estimated that Kansas has about 20,000 mechanical amusement devices in service,
which would result in annual mechanical amusement device tax revenue to the State General Fund
of approximately $1.0 million. The bill is estimated to increase annually total state revenue by a
total of $750,000 ($1.0 million from the new mechanical amusement device tax minus $250,000
from exempting the sales tax for these devises). Because the provisions of the bill would begin on
January 1, 2020, the bill would increase total state revenue by $875,000 in FY 2020 ($1.0 million
from the new mechanical amusement device tax minus $125,000 from exempting the sales tax for
these devises for the remaining half of the fiscal year). The fiscal note assumes that the annual
mechanical amusement device tax will be paid in the first part of the calendar year.
The Department indicates that the bill would require $1,134,925 from the State General
Fund in FY 2020 to implement the bill and to create a new tax return that requires modifications
to the automated tax system. The bill would require the Department to hire 3.00 new FTE positions
to manage licensing, tax collection, and to perform additional processing, tracking, and reporting
requirements to properly implement and administer this new tax program. On-going expenses for
the salary and wages and operational expenses of the 3.00 new FTE positions would require
$154,514 from the State General Fund in FY 2021. The required programming for this bill by
itself would be performed by existing staff of the Department of Revenue and outside contract
The Honorable Steven Johnson, Chairperson
Page 3—HB 2086

programmer services. In addition, if the combined effect of implementing this bill and other
enacted legislation exceeds the Department’s programming resources, or if the time for
implementing the changes is too short, additional expenditures for outside contract programmer
services beyond the Department’s current budget may be required. Since the original fiscal note
was issued, the Department of Revenue lowered its estimate on administrative costs needed to
implement the bill.
The Kansas Department of Transportation (KDOT) indicates that the bill would reduce
state revenues to the State Highway Fund as noted above. KDOT indicates that when the state
receives lower State Highway Fund dollars it may be required to make corresponding reductions
to planned expenditures for projects funded under the comprehensive transportation plan, known
as T-WORKS.
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. Any fiscal effect associated with HB 2086 is not reflected in The FY 2020
Governor’s Budget Report.


Sincerely,

Larry L. Campbell
Director of the Budget


cc: Lynn Robinson, Department of Revenue
Ben Cleeves, Transportation
Chardae Caine, League of Municipalities
Jay Hall, Association of Counties


Statutes affected:
As introduced: 79-3603, 75-5171