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Archive for Thursday, August 7, 2003

Sales tax stopgap

August 7, 2003

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The state's bungling of a sales tax law will require attention but not an expensive special session.

Kansas lawmakers and Gov. Kathleen Sebelius have more or less acknowledged that they made a mess of the state's sales tax collections last session when they approved a "streamlined sales tax" law. There's no reason, however, to compound the mistake by spending taxpayer money on a special legislative session for the sole purpose of repealing that law.

The six-month moratorium, ordered by Sebelius, on enforcing the law may not be the ideal approach but it is a sufficient temporary solution to a situation the Legislature will have to revisit next session.

The streamlined tax law requires businesses that deliver goods to other locations to charge sales tax at the rate charged at the destination point. That means if a piece of furniture purchased in Lenexa is delivered to Lawrence, the buyer would be charged the Lawrence sales tax rate. The local sales tax revenue for that sale then would go to Lawrence. It's obvious that such a system would affect retail businesses, as well as local governments, in many ways.

Businesses would have to bear the burden of calculating and collecting sales tax at many different rates. This could be a horribly onerous job for companies that deliver products to a broad area. If some version of the streamlined tax eventually is implemented, one wonders whether an enterprising software producer could also streamline the tax collections by developing computer software that automatically calculates sales tax at many different local rates.

The system of distributing sales tax at those destination points also could have a significant effect on municipal budgets that depend on sales tax revenue for part of their funding. Any major shopping area would presumably see a net loss in sales tax revenue that would be redirected to the local governments where goods are delivered.

Leaders of both the Kansas House and Senate are saying that they rushed into approving the new law without considering its full impact. The purpose of the measure was to prepare Kansas to participate in a multistate effort to collect sales tax on Internet sales, but legislators apparently put the cart before the horse.

Some lawmakers are advocating a special session to clean up the mess right now before merchants start to implement the new system, but it seems unlikely, given the uncertain status of the tax measure, that many businesses would move forward on expensive solutions. It's unfortunate the state has found itself in the position of saying it temporarily will forgo enforcement of one of its laws, but that is the most sensible and least costly course of action.

In the meantime, a group of legislators is embarking on an eight-city tour to talk to retailers about the new sales tax law. Clearly this is what the lawmakers should have done before they passed the ill-advised measure. It's better late than never, we suppose, and perhaps lawmakers will learn a lesson about the need to look before they leap into poor public policy.

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