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


February 16, 2021


The Honorable Adam Smith, Chairperson
House Committee on Taxation
Statehouse, Room 185A-N
Topeka, Kansas 66612
Dear Representative Smith:
SUBJECT: Fiscal Note for HB 2230 by House Committee on Taxation
In accordance with KSA 75-3715a, the following fiscal note concerning HB 2230 is
respectfully submitted to your committee.
HB 2230 would require sales taxes to be collected from all sales of digital property and
subscription services beginning on July 1, 2021. The bill includes definitions for digital audio-
visual works, digital audio works, digital books, digital code, and digital property. The bill also
reorders the definitions section in the Kansas Retailers Sales Tax Act.

Estimated State Fiscal Effect
FY 2021 FY 2021 FY 2022 FY 2022
SGF All Funds SGF All Funds
Revenue -- -- $42,700,000 $50,900,000
Expenditure -- -- $200,232 $200,232
FTE Pos. -- -- -- 3.00
The Department of Revenue estimates that HB 2230 would increase state revenues by
$50.9 million in FY 2022. Of that total, the State General Fund is estimated to increase by $42.7
million in FY 2022, while the State Highway Fund is estimated to increase by $8.2 million in FY
2022. 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. The fiscal
effect to state revenues during subsequent years would be as follows:
The Honorable Adam Smith, Chairperson
Page 2—HB 2230

FY 2023 FY 2024
State General Fund $48,900,000 $51,400,000
State Highway Fund 9,400,000 9,900,000
$58,300,000 $61,300,000
To formulate these estimates, the Department of Revenue reviewed industry data on music,
video games, and other online media subscription services, and reviewed data from other states
that tax the sale of digital products. The Department indicates that 30 of the 45 states that have a
retailer’s sales tax, include the sale of digital products in their sales tax base.
The Department indicates that the bill would require $200,232 from the State General Fund
in FY 2022 to implement the bill and to modify the sales tax system. The bill would require the
Department to hire 3.00 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. 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 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. The fiscal effect associated with
HB 2230 is reflected in The FY 2022 Governor’s Budget Report.


Sincerely,

Adam Proffitt
Director of the Budget

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

Statutes affected:
As introduced: 79-3602, 79-3603