Kansas House advances bill to keep sales tax on some beer sales

The House of Representatives chamber of the Kansas Statehouse is pictured July 23, 2014 in Topeka.

? The Kansas House gave first-round approval Wednesday to a bill that would allow the state to collect sales tax instead of a liquor enforcement tax on beer sold at convenience stores and grocery stores starting in 2019.

The bill is intended to correct one of the unintended consequences of a law enacted last year that allowed convenience stores and grocery stores, starting in April 2019, to sell “strong” beer instead of cereal malt beverages.

As part of what Rep. Les Mason, R-McPherson, called “the great beer compromise,” that new law also will allow retail liquor stores to start selling other items besides alcoholic beverages.

Strong beer has an alcohol content up to 6 percent by volume. Cereal malt beverage, also known as “3.2 beer,” has 3.2 percent alcohol by weight.

In Kansas, though, the sale of cereal malt beverages in grocery stores and convenience stores is currently subject to retail sales tax, while alcohol purchased from liquor stores is subject to a liquor enforcement tax.

The change to selling strong beer — and collecting liquor tax instead of sales tax — could have a big impact on some local governments, especially small towns where the local convenience store or bait shop with a CMB license is a major contributor to the town’s overall sales tax base.

The state collects an 8 percent liquor enforcement tax on the sale of liquor by retailers, microbreweries, microdistilleries and farm wineries. It also imposes the tax on the sale of liquor by distributors to clubs, drinking establishments, public venues and caterers. All of that money goes into the state treasury to pay for the cost of enforcing state liquor laws.

By contrast, most retail sales tax revenues go into the state general fund, with a small portion carved out for the state highway fund. In addition, cities and counties can impose their own sales taxes, usually up to 1 percent, to pay for general operations of local units of government.

As a result, many local governments stand to lose substantial amounts of sales tax revenue if the state stops collecting sales taxes on beer sales from grocery stores and convenience stores.

The bill provides that beer sales at stores that formerly could sell only cereal malt beverages would continue to be subject to retail sales taxes instead of the liquor enforcement tax.

The House advanced the bill toward final action by an unrecorded voice vote, with no audible opposition. If approved on final action Thursday, the bill will go to the Senate.