Sachi Hamada has eagle eyes.
There was something amiss about the receipt she’d just received for the $20.47 worth of purchases she made at the new CVS store at Sixth Street and Wakarusa Drive.
There it is. A sales tax rate of 8.85 percent. That’s not Lawrence’s sales tax rate, she asks her husband, Tom Kurata. No, Lawrence’s rate is 7.85 percent.
Hamada thought the discrepancy was interesting. Kurata thought it was something else.
Was this a typo? Some sort of scam?
Nope. None of the above. Just the new reality in retail. You may think you know what sales tax you’re paying, but you may very well be wrong. The days of one sales tax applying for an entire city are quickly disappearing.
“I don’t think the general public really knows anything about this,” Kurata said.
A special tax
What’s going on here is that Lawrence now has two special sales tax districts in the city. The Bauer Farm development on the northeast corner of Sixth and Wakarusa — currently home to a CVS and a Taco Bell — comprises one district. The Oread hotel — and all the businesses inside of it — at 12th and Indiana streets is the other.
Both districts are legally authorized to charge an extra 1 percent sales tax on all purchases made inside the district. The extra sales tax money is used to reimburse developers for public infrastructure improvements — such as streets, sidewalks and storm sewers — that the city requires as part of the development.
But Kurata believes there’s a problem with the new districts: There’s no good way for consumers to know about the tax until after they’ve purchased something — and that’s only if they take the time to examine their receipts.
“There are no signs out there that I can see,” Kurata said. “I think it needs to be more transparent. There already is so little trust in the environment we live in.”
A public process
But it is legal, and was all done out in the open. The City Commission in October 2008 approved the special taxing district — called a Transportation Development District — for the Bauer Farm Development. The commission approved the same type of taxing district for The Oread in April 2008. Both special taxing districts were the subject of Journal-World articles prior to their passage, but neither districts drew large amounts of public comment.
At least one city commissioner believes many residents likely have forgotten about the districts, especially since they were approved more than a year in advance of any sales taking place on the sites.
“I think it is only fair to consider ways to help people adjust to the fact that we have different sales tax rates now,” City Commissioner Mike Dever said. “I think that is a fair request, but how we implement something like that needs to be discussed.”
Requiring businesses in special districts to post a sign stating the higher rate, could be problematic and might not be overly effective, Dever said. A representative with the Lawrence-based group developing Bauer Farm said he was not in favor of city government telling businesses what type of signs they must post.
“We think the best thing that can be done is to make sure that the people who work out there understand it and can explain it to customers,” said Bill Fleming, a partner in the Bauer Farm development.
Fleming said he’s offered to talk to Kurata and anybody else who has concerns about the special taxing district. He said he thinks the public will be accepting of the district once they understand the special tax is being used to create new pieces of public infrastructure, such as streets, turning lanes, sidewalks, lighting and storm water ponds.
Fleming said he also believes the type of development will make the tax palatable.
“For most people buying a taco, I don’t think the tax is a big deal,” Fleming said. “The type of development we’re doing is centered on neighborhood convenience. It is nice to have those type of activities close to home so you don’t have to drive far to get those items. But you also have to pay for it.”
A manager at CVS referred all questions about the tax to CVS’s corporate office. Attempts to reach the designated spokesman were not successful.
Across the state
Lawrence is far from alone in creating special taxing districts for new retail developments. Several communities started offering the incentive to retail developments — which under state law can’t receive property tax abatements — in 2006.
According to the latest report from the Kansas Department of Revenue, there are now 29 of the transportation development districts scattered across the state. Among cities that have the special districts are: Basehor, Ellsworth, Hays, Kansas City, Lansing, Leawood, Manhattan, Olathe, Overland Park, Pittsburg, and Roeland Park.
The Kansas City and Johnson County area has multiple special taxing districts. The area around the Kansas Speedway in western Wyandotte County has at least six of the special districts, with sales taxes in the area varying from 7.55 percent to 8.55 percent.
Olathe has several districts along the 119th Street corridor; Overland Park has districts near 135th and Metcalf and near Quivira Road and 95th Street; and Leawood has districts near Nall Avenue and 117th Street and near 119th and Roe. The Leawood districts charge a tax rate of 9.05 percent, currently the highest in the state. Lawrence’s two special districts, at 8.85 percent, are currently the second-highest sales tax locations in the state.
Figuring out exactly where the districts are, though, can be difficult. For people who take the time to look at the Department of Revenue’s quarterly listing of sales tax rates, there is a list of the special taxing districts with a brief geographic description.
But sometimes those descriptions are vague. In the Kansas Speedway District, the department listing says “various addresses within the range of 10500 to 10824 Parallel Parkway, even only,” charge a rate of 8.15 percent. That’s the exact same description for a separate district that charges 8.55 percent, meaning that within one block there are two separate sales tax rates.
Thus far, the issue hasn’t been drawing concern at the Statehouse. Sen. Tom Holland, D-Baldwin City and a member of the Senate’s Assessment and Taxation Committee, said he hasn’t heard from constituents concerned about sales tax confusion.
“There probably is an awareness issue, though,” Holland said.
Kurata knows how he’s going to deal with that issue.
“I tell people they really need to check their receipts,” Kurata said.