The issues surrounding the tax-free online sale of Kansas State University merchandise stretch far beyond purple T-shirts.
It recently has come to light that the “K-State Official Online Store” is using a Florida-based shop to process and ship its online orders. Because that shop isn’t located in Kansas, no sales tax is collected on the purchases. Whether the practice falls within the letter of the law is debatable. Online retailers aren’t required to collect Kansas sales taxes if they have no brick-and-mortar presence in the state. The question then becomes: Is the “official” K-State store based in Manhattan or is it based in Florida?
A number of people, including some state legislators, think the common sense answer is that K-State is selling the merchandise and should collect the proper sales taxes. The situation is exacerbated by the fact that K-State receives significant support from state tax dollars and it just doesn’t seem right for the school to take advantage of any sales tax loophole even if it falls within the letter of the law.
There is, however, a much broader issue to consider. State Sen. Robert Reitz, R-Manhattan, told the Journal-World it wasn’t right for a state entity not to collect sales tax while Kansas-based retailers selling the same merchandise are required to collect the tax. “I think what is good for the goose is good for the gander,” he said.
That’s true, and, as we noted above, it applies to a lot more than Wildcat T-shirts.
Online shopping provides serious competition for traditional retail stores. It is convenient and allows people to shop around easily for the best price on about any item. It’s common practice for shoppers to examine a product in a local store then go home to see if they can find the same product at a lower price online.
Requiring online retailers to collect state sales taxes may not stop that practice but it is at least a step toward leveling the playing field — not to mention the additional sales tax revenue that would flow into state and local government coffers.
Kansas legislators can work to clean up the state law on online tax collections, but the issue may be better dealt with at the federal level. In July, the Main Street Fairness Act was introduced in the U.S. Senate. Its supporters say the measure is designed to simplify and modernize sales tax collections to make it easier for online retailers. It seems that computerized accounting systems would make such collections, if not simple, at least eminently doable.
Brick-and-mortar retailers across Kansas have to collect and remit those sales taxes. It’s only fair that the online retailers that compete against them should have to do the same.