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 13, 2019


The Honorable Steven Johnson, Chairperson
House Committee on Taxation
Statehouse, Room 185-N
Topeka, Kansas 66612
Dear Representative Johnson:
SUBJECT: Fiscal Note for HB 2349 by House Committee on Taxation
In accordance with KSA 75-3715a, the following fiscal note concerning HB 2349 is
respectfully submitted to your committee.
HB 2349 would amend the definition of “retailer doing business in this state” in the Kansas
Compensating Tax Act. The bill would specify that the definition would include retailers that had
any gross receipts from sales to Kansas customers in the preceding calendar year. The bill requires
that any retailer that has any gross receipts from sales to Kansas customers in the preceding
calendar year would have nexus with Kansas and would be required to collect and remit taxes.

Estimated State Fiscal Effect
FY 2019 FY 2019 FY 2020 FY 2020
SGF All Funds SGF All Funds
$4,200,000 to $5,000,000 to
Revenue -- --
$8,400,000 $10,000,000
Expenditure -- -- $505,788 $505,788
FTE Pos. -- -- -- 8.00
The Department of Revenue estimates that HB 2349 would increase state revenues by at
least $5.0 million and up to $10.0 million in FY 2020. Of those amounts, the State General Fund
is estimated to increase by between $4.2 million and $8.4 million, while the State Highway Fund
is estimated to increase by between $800,000 and $1.6 million in FY 2020. This bill also is
estimated to increase local sales tax revenues; however, the specific estimate of higher local sales
tax revenues was not calculated by the Department of Revenue.
To formulate the estimates for increased sales tax authority from out-of-state remote
sellers, the Department of Revenue reviewed data from the U.S. Government Accountability
Office (GAO) that released a study on sales taxes in November 2017. The report shows that
Kansas has the potential to receive an additional $113.0 million to $170.0 million each year in
The Honorable Steven Johnson, Chairperson
Page 2—HB 2349

increased state and local sales tax collections with expanded collection authority with out-of-state
remote sellers. The formation of this fiscal note used the lower estimate from GAO. The numbers
quoted from GAO include both state and local sales tax collections and the amounts that the state
already receives from Streamlined Sales Tax Volunteer Filers. Making these adjustments, the
Department of Revenue estimates that Kansas could potentially receive $70.9 million with
expanded sales tax collection authority, including $59.4 million to the State General Fund and
$11.5 million to the State Highway Fund. However, it could be a number of years before the state
would increase collections to those levels, plus language in the bill would not specifically compel
marketplace facilitators to collect the sales tax. The Department indicates that the state would
likely collect between $5.0 million to $10.0 million in FY 2020 under the provisions of the bill.
The amount collected would likely increase in future fiscal years; however, the Department does
not enough information to provide a precise estimate of the additional revenue that would be
collected in FY 2021 or any future fiscal years.
The Department of Revenue indicates that it would require a total $505,788 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 8.00 new FTE positions to review, process, and audit additional
sales tax returns. 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.
The Kansas Department of Transportation indicates that the bill would increase state
revenues to the State Highway Fund as noted above. The additional revenues would fund
additional 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 increase to local sales tax collections that are used in part to finance
local governments. Any fiscal effect associated with HB 2349 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: 79-3702