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Archive for Thursday, July 3, 2003

Area retailers seek simpler sales tax

Secretary of Revenue defends new system as way to eventually collect tax revenue from Internet

July 3, 2003

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About 40 area business owners and managers pleaded with the state's revenue secretary at a Lawrence meeting Wednesday to simplify the state's sales tax code.

Under new regulations that took effect Tuesday, retailers who make deliveries of their products must begin using the sales tax rate in the city they're delivering a purchase to rather than the rate used in the city in which the item was sold.

Retailers told Secretary of Revenue Joan Wagnon they believed the system would create a bookkeeping nightmare.

"Nobody is objecting to paying the tax," said Bob Black, owner of Lenexa-based Light Bulbs Etc., which sells products across the state. "We're objecting to all the extra work this will make us do. I work 14 hours a day under the current system. I don't have many more hours to give."

Several said that if the state insisted on making the changes it should dramatically change the sales tax system and create a flat rate sales tax that is used in every city and county of the state.

The Revenue Department has received several hundred phone calls complaining about the changes, and Wagnon tried to reassure those gathered at the Lawrence Public Library that the state would be lenient in its enforcement.

"I believe you are all honest people and will do your best to comply," Wagnon said. "I want to reassure you that I'm not going to pull the rug out from underneath you."

Gov. Kathleen Sebelius also said Wednesday that state officials won't expect retailers to become in immediate compliance with the new rules. She said it is expected to take at least six months for the state to fully implement the changes. She said business owners will be notified when the state expects business owners to be in full compliance.


Area legislators who attended the meeting said changes to the sales tax code likely would be looked at during the next session. The system could be simplified by charging a flat sales tax rate and dividing the money among cities and counties based on population. Such a change, though, likely would spark opposition from local governments.

"I think it is an idea that merits discussion, but I'm afraid that it probably has a lot of political hurdles," Rep. Paul Davis, D-Lawrence, said.

Wagnon said the department was committed to keeping the new system. It is designed to ultimately help the state collect sales taxes from out-of-state Internet companies. The state estimates it loses about $70 million a year in untaxed Internet sales.

Wagnon conceded the department didn't spend enough time thinking about how businesses would be able to change their cash registers, bookkeeping software and other business systems to adapt to the regulations.

She said the department recently had added information to its Web site that should make it easier for businesses to find the appropriate tax rates for different cities and counties in the state. The department hoped to have a new database that would allow businesses to search for sales tax rates by address early this fall, she said.

The new changes won't allow the state to immediately begin collecting sales taxes from out-of-state Internet companies. Congress still must give states permission to begin those collections. The fate of such legislation is uncertain.

"It seems like I'm still going to be at a competitive disadvantage with the Internet, but now it is going to cost me more to comply with this law," said Ernie Cummings, owner of Lawrence's Kizer Cummings Jewelers.

Businesses interested in finding more information on the sales tax collection changes can log onto the Kansas Department of Revenue's Web site at www.ksrevenue.org. State Treasurer Lynn Jenkins also has a sales tax calculator available at www.kansasstatetreasurer.com/salestax.

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