Kansans voluntarily pony up taxes for online purchases

You may have been among the many Kansans who noticed that new line on this year’s state income tax form.

You may even have been one of those who helped surprise state officials by admitting to making an online purchase in 2004, thereby producing more revenue for the Kansas treasury.

“Frankly, we got more revenue than expected at this time,” said Richard Cram, director of policy and research at the Kansas Department of Revenue. “People aren’t used to paying that, so it’s a behavior change and it’s something new. Certainly, not everyone is going to ‘fess up to owing this. But we have a decent amount.”

Buyers making online purchases from out-of-state companies are required to pay what is called the compensating use tax in Kansas. The tax has been in place for several years. But most people tend to ignore it or don’t know it exists. And the law has been weakly enforced.

“In the past we have not devoted a lot of our audit resources to individuals,” Cram said. “I’m not going to tell you that we’re not going to pay attention to it at all. But most of our focus is on businesses, not individuals. It’s all a matter of how to best allocate resources.”

The use tax made its way onto the state income tax form this year at the suggestion of legislators. Tax returns must by filed by Friday.

“I think this is really a way for the state to say ‘Hey, if you have some of this stuff, you need to pay for it,'” Lawrence accountant Jim Long said.

Cram said the state had received $344,000 in use taxes by March 22, not that much in the big picture of Kansas tax collections. But it was more than revenue officials had expected, given the novelty of the line on the tax form.

It’s unknown how much money would be generated by the use tax if the amount due from all individual and nonbusiness purchases was collected.

Not being able to collect tax on Internet sales has been a problem for the revenue department, which has no ability to collect state sales tax from companies or retailers that have no physical presence in Kansas. The state law is that the buyer owes the use tax, Cram said.

But the method to report and pay the use tax in the past hasn’t been convenient. It required filling out a different form and sending it into the state.

It’s been a self-assessed tax, Long said. “So, even though in the past people may not have done it they should have been doing it,” he said.

As of April 6, 886,615 people had filed state tax returns. Of those, 550,083 were filed online, Cram said.