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 23, 2021
CORRECTED

The Honorable Adam Smith, Chairperson
House Committee on Taxation
Statehouse, Room 185A-N
Topeka, Kansas 66612
Dear Representative Smith:
SUBJECT: Corrected Fiscal Note for HB 2265 by Representatives Woodard and Hoheisel
In accordance with KSA 75-3715a, the following corrected fiscal note concerning HB 2265
is respectfully submitted to your committee.
HB 2265 would provide a sales tax exemption for all sales of textbooks purchased by a student
that are required for classes held by public or private postsecondary educational institutions. The bill
would require the bookstore sales to be made at the institution itself or at a bookstore operating on
the institution’s behalf. The bill would allow local governments to continue to charge a sales tax on
these textbooks.

Estimated State Fiscal Effect
FY 2021 FY 2021 FY 2022 FY 2022
SGF All Funds SGF All Funds
Revenue -- -- ($4,700,000) ($5,600,000)
Expenditure -- -- $85,705 $85,705
FTE Pos. -- -- -- 1.00
The Department of Revenue estimates that HB 2265 would decrease state revenues by $5.6
million in FY 2022. Of that total, the State General Fund is estimated to decrease by $4.7 million in
FY 2022, while the State Highway Fund is estimated to decrease by $900,000 in FY 2022. The
Department indicates that similar results would also occur in future fiscal years. Local sales tax
revenues from these textbook sales are not estimated to be affected under the provisions of this bill.
To formulate these estimates, the Department of Revenue reviewed data from The College
Board, Board of Regents, and the Kansas Independent College Association. According to The
College Board, for the 2020-2021 school year, the annual average cost of books and supplies for a
full-time undergraduate is $1,298. The Board of Regents reports a systemwide 2019 headcount of
The Honorable Adam Smith, Chairperson
Page 2—CORRECTED HB 2265

242,310 and the Kansas Independent College Association reports a 2020 headcount of 23,263 at their
20-member colleges. Assuming that 25.0 percent of the average cost of books and supplies is spent
on textbooks within a student population of about 265,500 are purchased at the school’s bookstore,
annual expenditures on textbooks would total approximately $86.2 million. Exempting sales tax from
these purchases would result in a decrease of $5.6 million in state sales tax collections annually. The
Board of Regents indicates that the bill would reduce the total amount of money that students spend
on required textbooks to attend classes at postsecondary educational institutions.
The Department of Revenue indicates that the bill has the potential to place Kansas out of
compliance with the Streamlined Sales and Use Tax Agreement. The bill would exempt the sale of
textbooks sold by or on behalf of an educational institution, but not rented textbooks or textbooks
sold by other retailers. The Department of Revenue estimates that more than $41.3 million in
revenues annually could be at risk and may no longer be received if Kansas loses its member status,
as other members would no longer be contractually required to remit retail sales and compensating
use taxes to Kansas.
The Department indicates that the bill would require $85,705 from the State General Fund in
FY 2022 to implement the bill and to modify the automated tax system. The bill would require the
Department to hire 1.00 new FTE position to review, process, and audit 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 (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.
The Kansas Association of Counties and the League of Kansas Municipalities indicate that
the bill would have no fiscal effect on local sales tax collections. In the original fiscal note issued,
the fiscal effect from the League and the Association was incorrectly stated. Any fiscal effect
associated with HB 2265 is not reflected in The FY 2022 Governor’s Budget Report.

Sincerely,

Adam Proffitt
Director of the Budget
cc: Jay Hall, Association of Counties
Kelly Oliver, Board of Regents
Lynn Robinson, Department of Revenue
Ben Cleeves, Transportation
Wendi Stark, League of Municipalities


Statutes affected:
As introduced: 79-3606, 12-189a, 74-3201b