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


March 1, 2021


The Honorable Caryn Tyson, Chairperson
Senate Committee on Assessment and Taxation
Statehouse, Room 123-E
Topeka, Kansas 66612
Dear Senator Tyson:
SUBJECT: Fiscal Note for SB 171 by Senate Committee on Ways and Means
In accordance with KSA 75-3715a, the following fiscal note concerning SB 171 is
respectfully submitted to your committee.
SB 171 would reduce the state retail sales tax and compensating use tax rate for food and
food ingredients. 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, soft drinks, food sold through
vending machines, tobacco, or certain prepared foods. 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, 2021 5.5 83.497 16.503
July 1, 2022 4.5 83.098 16.902
July 1, 2023 3.5 82.680 17.320
July 1, 2024 3.5 82.644 17.356
The Honorable Caryn Tyson, Chairperson
Page 2—SB 171

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 2021 FY 2021 FY 2022 FY 2022
SGF All Funds SGF All Funds
Revenue -- -- ($61,200,000) ($61,200,000)
Expenditure -- -- $704,839 $704,839
FTE Pos. -- -- -- 7.00

The Department of Revenue estimates that SB 171 would decrease State General Fund
revenues by $61.2 million in FY 2022. 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 2023 FY 2024 FY 2053
State General Fund ($129,200,000) ($198,600,000) ($206,300,000)
The estimate assumes that 15.0 percent of all current sales tax collections are collected on
food and food ingredients. Sales tax estimates are based on the November 2020 Consensus
Revenue Estimate.
The Department of Revenue indicates that it would require a total $704,839 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 7.00 new FTE positions to review, process, and audit sales tax
returns. The Department estimates that ongoing expenses for salary and wages for the 7.00 FTE
positions and overhead expenses would total $448,124 from the State General Fund in FY 2023.
The current composite jurisdiction sales tax system does not accommodate a second state sales tax
rate. This bill would require modifications to the automated tax system. 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 have no fiscal effect
on the State Highway Fund or the planned expenditures for projects funded under the
comprehensive transportation plan. The League of Kansas Municipalities and Kansas Association
The Honorable Caryn Tyson, Chairperson
Page 3—SB 171

of Counties indicate the bill would have no fiscal effect on local governments. Any fiscal effect
associated with SB 171 is not 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, 79-3620, 79-3703, 79-3710