It is hard to find an issue that poses a greater threat to small retailers than online stores that refuse to charge sales taxes on their merchandise.
To its credit, the state of Kansas over the years has recognized the negative impact this can have on both Kansas retailers and the state’s coffers. The Kansas Department of Revenue has been a strong voice in a national effort to get a federal law that levels the playing field, and the department has worked to get out-of-state companies to collect voluntarily the tax on sales made in Kansas.
That is why it is particularly disappointing to learn that a retailer controlled by a state entity is failing to collect Kansas sales taxes on Internet purchases.
The Journal-World reported last week that Kansas residents who make purchases at the “K-State Official Online Store” are not being charged any sales taxes. A Kansas Department of Revenue official said he has serious questions about whether Kansas State’s athletic department is violating the state’s sales tax law, and the matter has been referred to the department’s audit staff for further investigation.
Whether K-State’s actions have violated the law is still in question. Whether they have violated common sense is not.
KSU is a state-assisted institution. Although, its athletic department is a separate entity in some ways, it would not exist without the university. For any state-supported entity to think that it doesn’t need to charge sales tax on items that private, sales tax-paying merchants sell is galling.
The response from K-State’s athletic department was equally frustrating. A spokesman for the department said the issue really wasn’t in K-State’s control. A Florida-based company runs the online store for K-State. Because that company has no physical presence in Kansas, it does not have to charge sales taxes on goods sold in the state.
The Department of Revenue has questions about that logic, but that is almost beside the point. The point is that the store is named the “K-State Official Online Store.” The store would not exist without K-State’s blessing. The university and its athletic department have had ample opportunity to tell the store’s vendor that it must charge sales tax on K-State items. As a matter of fairness, as a matter of making your actions match your words, that should be done.
We believe states across the country also should look at this issue and make sure their public universities are charging sales tax on online purchases — whether the law requires it or not. Kansas University happens to charge sales tax on online purchases, but we’re confident many other universities do not. If states truly are interested in promoting tax fairness in the online world, here’s a good place to start.