Archive for Monday, August 8, 2011

State plans audit of K-State athletic department’s online sales tax practices

August 8, 2011


That new K-State jersey you purchased may draw more than just scorn from Jayhawk fans. It soon may be the subject of a state investigation.

The Kansas Department of Revenue confirmed it has asked its audit division to look into the online sales practices of Kansas State University’s Athletic Department to determine whether the school is failing to collect sales taxes on merchandise sold through its online store.

The Journal-World received a tip last week that purchases made by Kansas residents on the “K-State Official Online Store” were not being charged any sales taxes. The Journal-World made a purchase on the site last week and received a receipt that listed a category of “state taxes,” but the receipt showed that no state taxes were charged.

Throughout the day Friday, a K-State Athletic Department spokesman said he was confident that the site was charging the proper sales tax on in-state sales. But then, early Monday evening, the department conceded sales taxes were not being charged.

Now, K-State Athletic Department spokesman Kenny Lannou said the department has adopted the position that online sales don’t have to be taxed because the online orders are filled in a Florida center owned by Team Fan Shop, an online company that has no stores or employees in Kansas.

“It is not Kansas State Athletics,” Lannou said. “It is Team Fan Shop. They are in control of our online site.”

A leader with the Kansas Department of Revenue isn’t so sure he buys that argument. The store is named the “K-State Official Online Store,” is accessed through K-State’s Athletic Department website, and the store would not exist without the permission of Kansas State Athletics.

“I suppose we would have to look at it more, but I think we would take the position that it is a Kansas entity that is making the sale,” said Richard Cram, the revenue department’s director of policy and research. “I don’t think we would care where the product is coming from.”

Cram said he was forwarding the information to the department’s audit division. State auditors can examine the sales records of the online store and assess up to three years worth of back taxes and penalties, if they find the online store was not properly collecting sales taxes.

“We’re certainly going to address this,” Cram said.

K-State’s partnership with Florida-based Team Fan Shop, which manages online stores for a host of colleges and pro teams, is entering its third year. Lannou didn’t have sales totals for the online store immediately available. He said about 40 percent of all the sales at the online store are made to in-state residents. A representative of Team Fan Shop did not return a call for comment.

Kansas University’s Athletic Department does charge sales tax on in-state purchases, said Jim Marchiony, a spokesman for the department. KU uses a different vendor, Lids, which has stores in Kansas. Marchiony said that fact made it clear state sales taxes had to be charged. Marchiony said he was uncertain whether KU charged sales taxes on in-state purchases previously, when the online site was managed by another vendor.

K-State leaders said they don’t have any plans to change their practices.

“We’re going to let Team Fan Shop make that determination,” Lannou said. “If they ask us for any input, we could provide that.”

Some regional retailers that sell K-State gear said they would be surprised if K-State doesn’t change its policies.

“I would be surprised that now that they know about it that they will condone it,” said Steve Levin, general manager of Varney’s a major bookstore and apparel retailer in Manhattan. “If they don’t fix it, I think that will be a very unwise move. Even if they think they can get away with it, that’s not what this should be about.”

Varney’s charges sales tax on both its in-state and out-of-state sales made online. The Kansas Sampler also charges sales tax on online sales. Aaron Liebert, CEO and owner of the regional chain, said K-State’s practice wasn’t fair to Kansas companies that are providing jobs and tax revenue to the state.

“As a public institution, they should be going out of their way to help state businesses, but right now it looks like they’re stacking the deck against local businesses,” Liebert said.

K-State’s Lannou said the university has paid about $1.2 million in sales taxes related to other sales not connected to the online site.

“We are trying to do our part,” Lannou said.

But retailers said K-State’s online store is a good example of why traditional, locally owned retailers are struggling to survive.

“If you can save 8 to 9 percent by purchasing from an out-of-state site, consumers are going to do it unfortunately,” Liebert said. “It is a tremendous detriment to local retailers who produce local jobs.”

At the end of the day, Levin said he thinks it will be a detriment to the university as well.

“You know, all the K-State fans come to our games on highways built by tax dollars,” Levin said.


guess_again 6 years, 9 months ago

“We’re going to let Team Fan Shop make that determination,” Lannou said

Uh, Mr. Lannou, when the department of Revenue writes K-State Athletics corporation (not Team Fan Shop) a tax determination letter, I am guessing you will have an enhanced interest in 'making that determination.'

2002 6 years, 9 months ago

Get those stupid looking shirts off the front page!!!! What is your problem?

Haiku_Cuckoo 6 years, 9 months ago

If the retailer is based in Florida why would Kansas residents be expected to pay tax? Florida is where the money is collected. The fact the K-State has a link to the retailer on their website is irrelevant. The Journal-World should have had a friend in Florida make an online purchase as well to see if they get charged tax. I'm not a fan of K-State but they did nothing wrong here.

squawkhawk 6 years, 9 months ago

Agree. This is a waste of time. This is a common practice with a lot of gray area. Even if they eventually do need to pay the $4000 in back taxes, this is less than what Lew Perkins had to pay for his exercise equipment scandal.

pittstatebb 6 years, 9 months ago

Any purchase made by a Kansas resident through an online, mail, or phone order is required to have sales tax applied (as long as the item is used, stored, or consumed in the state of Kansas). This is called the use tax and has been on your state taxes for as long as you have been filing a state tax form. What this article is about is who has to collect the sales tax (the firm in Florida or the individual KS resident). There is no LEGAL way around paying the use tax. If the company does not collect it for you (or they collect a lesser state tax) you are required to report it on your KS income tax form. You can file for the actual value or you can use their formula.

Haiku_Cuckoo 6 years, 9 months ago

Interesting. I wasn't aware of that, thanks for the clarification. KS should crack-down on it then. If the state did a better job of collecting these taxes there may not be a need to defund social services, arts, etc.

puddleglum 6 years, 9 months ago

if they cut a check for that much, how could they possibly pay for next year's silos?

lunacydetector 6 years, 9 months ago

if k-state owes sales tax will the state reimburse the state for the state sales tax since k-state is state owned in the state of kansas even if k-state sales are made from the state of florida that doesn't charge a kansas state sales tax?

Thats_messed_up 6 years, 9 months ago

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Kontum1972 6 years, 9 months ago

This comment was removed by the site staff for violation of the usage agreement.

Mangino_saurus 6 years, 9 months ago

What happend to the T-Rob comment about the crooked chicken-hawk basketball program??? LJW, please comment on what violation was made to cause it to get yanked???

KU_Dude 6 years, 9 months ago

Mangino_saurus can't be a KSU fan because none of them are smart enough to use computers.

Sigmund 6 years, 9 months ago

Taking more taxes from consumers (either online or face-to-face) hurts both consumers, because they have less money to spend and merchants, because consumers have less money to spend. Overall this is a lose-lose situation for consumers and businesses with only the government benefiting from collecting more taxes. As has been pointed out, everyone rich or poor pay sales taxes.Therefore expect a series of articles from Chad Lawhorn in the LJWorld arguing in favor of higher taxes at the expense of all its readers who have to pay the price.

In a somewhat related story ... I have never seen anything like this," said Clancy Graham, a manager at Little Rock's RK Collections Boutique, an independently owned store. "If we could do this three times a year, it would be amazing. It has done crazy good stuff for our business." "First tax-free holiday in Arkansas a boon for business"

Just in case you haven't got the point, if you want to increase economic activity in the private sector decrease taxes (sales, income, capital gain, take your pick). If you want to grow the power and control of government, increase taxes.

KU_Dude 6 years, 9 months ago

I'm shocked that KSU even sells t-shirts. Don't most of their fans wear wife beaters anyway? T-shirts are formal wear for their fans.

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