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

March 27, 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 2128 by Representatives Ward and Hodge
In accordance with KSA 75-3715a, the following revised fiscal note concerning HB 2128 is
respectfully submitted to your committee.
HB 2128 would reduce the state retail sales tax and compensating use tax rate for food and food
ingredients from 6.5 percent to 4.5 percent on July 1, 2019. Food and food ingredients are defined as
substances, whether in liquid, concentrated, solid, frozen, dried, or dehydrated form, that are sold for
ingestion or chewing by humans and are consumed for their taste or nutritional value. Food and food
ingredients would not include alcoholic beverages, candy, dietary supplements, food sold through
vending machines, soft drinks, tobacco, or certain prepared food. Food and food ingredients would
specifically include bottled water. The bill provides specific definitions for bottled water, candy, food
sold through vending machines, prepared food, soft drinks, and dietary supplements. The bill would
adjust the state retail sales tax rates specifically on food and food ingredients and change the distribution
of overall state sales tax revenue collected as follows:
Date of Percent to Percent to
Rate Change Tax Rate State General Fund State Highway Fund
Current law 6.5 % 83.846 % 16.154 %
July 1, 2019 4.5 83.132 16.868
July 1, 2020 4.5 83.064 16.936
The bill would adjust the state compensating use tax rates specifically on food and food
ingredients as shown above, but does not adjust the distribution of state compensating use tax revenue,
which would remain the same as current law: 83.846 percent to the State General Fund and 16.154
percent to the State Highway Fund.
Estimated State Fiscal Effect
FY 2019 FY 2019 FY 2020 FY 2020
SGF All Funds SGF All Funds
Revenue -- -- ($119,600,000) ($119,600,000)
Expenditure -- -- $2,092,046 $2,092,046
FTE Pos. -- -- -- 6.00
The Honorable Steven Johnson, Chairperson
Page 2—HB 2128

The Department of Revenue estimates that HB 2128 would decrease State General Fund revenues
by $119.6 million in FY 2020. This bill would have no effect on either the State Highway Fund or local
sales tax revenues. The fiscal effect to state revenues during subsequent years would be as follows:
FY 2021 FY 2022 FY 2023
State General Fund ($132,100,000) ($134,200,000) ($136,400,000)
The estimate assumes that 15.0 percent of all current sales tax collections are collected on food
and food ingredients. State General Fund revenues in the out years assume a 1.6 percent annual growth
rate based on the November 2018 Consensus Revenue Estimate.
The Department of Revenue indicates that it would require a total $2,092,046 from the State
General Fund in FY 2020 to implement the bill and to modify the sales tax system. The bill would
require the Department to hire 6.00 new FTE positions to review, process, and audit sales tax returns.
The Department estimates that ongoing expenses for salary and wages for the 6.00 FTE positions and
overhead expenses would total $356,909 from the State General Fund in FY 2021. The current
composite jurisdiction sales tax system does not accommodate a second state sales tax rate. The required
programming for this bill by itself would be performed by existing staff of the Department of Revenue
and outside contract 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 indicates that the bill would have no fiscal effect on
the State Highway Fund or the planned expenditures for projects funded under the comprehensive
transportation plan, known as T-WORKS. The League of Kansas Municipalities and Kansas Association
of Counties indicate the bill would have no fiscal effect on local governments. Any fiscal effect
associated with HB 2128 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: 79-3602, 79-3606, 79-3603, 75-5171, 79-3620, 79-3703, 79-3710