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


January 24, 2022


The Honorable Adam Smith, Chairperson
House Committee on Taxation
Statehouse, Room 346-S
Topeka, Kansas 66612
Dear Representative Smith:
SUBJECT: Fiscal Note for HB 2484 by House Committee on Taxation
In accordance with KSA 75-3715a, the following fiscal note concerning HB 2484 is
respectfully submitted to your committee.
HB 2484 would exempt food and food ingredients, including food sold at restaurants, from
state retail sales and compensation use tax on January 1, 2023. Food and food ingredients would
be 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 or tobacco. Food and
food ingredients would specifically include bottled water, candy, dietary supplements, food sold
through vending machines, prepared food (food sold at restaurants), and soft drinks. The bill
would provide specific definitions for bottled water, candy, dietary supplements, food sold through
vending machines, prepared food, and soft drinks. The bill does not adjust the distribution of state
retail sales and 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.
Under current law, Kansas residents with qualifying income of $30,615 or less are able to
claim the non-refundable food sales tax credit if the taxpayer is 55 years of age or older, or be
blind or disabled, or have a dependent child under 18 who lived with you all year whom you claim
as a personal exemption. The bill would repeal the non-refundable food sales tax credit beginning
in tax year 2023.
Estimated State Fiscal Effect
FY 2022 FY 2022 FY 2023 FY 2023
SGF All Funds SGF All Funds
Revenue -- -- ($268,100,000) ($319,800,000)
Expenditure -- -- $812,795 $812,795
FTE Pos. -- -- -- 8.00
The Honorable Adam Smith, Chairperson
Page 2—HB 2484

The Department of Revenue estimates that HB 2484 would reduce state revenues by
$319.8 million in FY 2023. Of that total, the State General Fund is estimated to decrease by $268.1
million in FY 2023, while the State Highway Fund is estimated to decrease by $51.7 million in FY
2023. The bill would have no fiscal effect on local sales tax revenues. The fiscal effect to state
revenues during subsequent years would be as follows:
Tax Policy Changes (SGF Only) FY 2023 FY 2024 FY 2025
Food and Food Ingredients ($268,100,000) ($655,700,000) ($668,200,000)
Foods Sales Tax Credit -- 10,300,000 10,300,000
Total SGF ($268,100,000) ($645,400,000) ($657,900,000)
Tax Policy Changes (SHF Only) FY 2023 FY 2024 FY 2025
Food and Food Ingredients ($ 51,700,000) ($ 126,300,000) ($128,700,000)
Total ($319,800,000) ($771,700,000) ($786,600,000)
To formulate the estimates of the sales tax exemption for food and food ingredients
(including food sold at restaurants), the Department assumes that 24.0 percent of all current sales
tax collections are collected on food and food ingredients (including food sold at restaurants). The
Department estimates that exempting food and food ingredients (including food sold at restaurants)
would result in a reduction in state sales tax collections of $319.8 million in FY 2023, $782.0
million in FY 2024, and $796.9 million in FY 2025. Retailers would be required to collect retail
sales or compensating use tax at two different rates depending on the products sold. The bill would
require food retailers to file two returns each month, one for food sales only subject to the local
tax (similar to the current utility return) and the current return for items subject to the state and
local sales tax. The Department indicates these additional requirements could be burdensome to
some retailers.
The bill would repeal the current non-refundable food sales tax credit after December 31,
2022. The current non-refundable food sales tax credit is restricted to taxpayers that earn $30,615
or less and are over the age of 55, or disabled or blind, or have at least one dependent under the
age of 18 living with them the entire year. Under the provisions of the federal Tax Cut and Jobs
Act of 2017, the IRS no longer collects the number of dependent exemptions claimed on federal
income tax returns, which places the burden to verify and audit dependent exemption data for the
current food sales tax credit on the Department of Revenue. The Department of Revenue indicates
that 69,307 taxpayers claimed $9,966,464 in non-refundable food sales tax credits in tax year 2020.
Repealing this tax credit would save approximately $10.3 million in State General Fund refunds
in FY 2024 and in future fiscal years.
The Department indicates that the bill would require $812,795 from the State General Fund
in FY 2023 to implement the bill and to modify the automated tax system. The bill would require
that the Department hire 8.00 new FTE positions to provide customer relations and business
support and meet additional accounting and audit needs. Ongoing administrative costs of $525,864
from the State General Fund for the salaries and wages for the 8.00 FTE positions would be
required in FY 2024 and in future fiscal years. The required programming for this bill by itself
would be performed by existing staff of the Department of Revenue. In addition, if the combined
The Honorable Adam Smith, Chairperson
Page 3—HB 2484

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 reduce state
revenues to the State Highway Fund as noted above. The Kansas Department of Transportation
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 League of Kansas Municipalities and Kansas Association of Counties indicates the bill
eliminates the state sales tax on food and food ingredients while allowing local governments to
continue to charge a sales tax on food and food ingredients, including food sold at restaurants, has
the potential to alter shopping habits, especially near the border, and could increase local sales tax
revenues that that are used in part to finance local governments. The fiscal effect associated with
HB 2484 is not reflected in the in The FY 2023 Governor’s Budget Report.


Sincerely,

Adam Proffitt
Director of the Budget


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

Statutes affected:
As introduced: 12-189a, 79-32, 79-3602, 79-3603, 79-3703