A LEVEL PLAYING FIELD ; TOPEKA MERCHANTS WANT ONLINE BUSINESSES TO PAY SALES TAX [Topeka Capital Journal (KS)]
(Topeka Capital Journal (KS) Via Acquire Media NewsEdge) Topeka retailers were divided on whether the state should let the sales tax drop, but agreed online sellers need to pay it too, at whatever level the state sets.
Kansas currently has a state sales tax of 6.3 percent. That is scheduled to roll back to 5.7 percent later this year.
The Kansas Chamber has supported letting the tax rate fall as scheduled, while Republican Gov. Sam Brownback has suggested letting it stay at the higher level temporarily to help address a $267 million budget shortfall expected in the next fiscal year. Brownback's spokeswoman, Sherrienne Sontag-Jones, declined to discuss whether the governor was still considering that strategy before he presents his agenda to the legislature next week.
Some Topeka businesses said the sales tax rate has hurt their sales, while others said it made little difference to their customers.
Joel Edison, who repairs instruments at Manning Music, 3400 S.W. 6th, said extending the sales tax at a higher level would hurt businesses that already feel pressured to match online prices and promote the support services they offer.
"It does have a huge impact," he said. "Retailers are becoming more of a show room for online all the time."
Todd Manning, who owns the instrument store, said Kansas is limited in what it can do to address taxes on online sales, because many are completed across state lines or even national borders. He said he hopes to see a solution at the federal level.
"Initially they did not charge sales tax on online sales because they were trying to build online and 'dot coms.' It would seem they've done that," he said. "Right now, it seems that small businesses pay a disproportionate amount for the local, county (and) state governments."
Melanie Kline, who owns The Linen Tree, 2841 S.W. 29th, said her customers sometimes make remarks about the sales tax, but since she sells relatively inexpensive items, the tax doesn't bother them too much.
"For my type of business it's not that big of a deterrent," she said.
Kline said she is in favor of keeping the sales tax at the 6.3 percent rate as one of the more business-friendly ways to plug the expected hole in the state budget.
"I'd just as soon they left it alone so they don't have to raise something else," she said. "Sales tax hits you a little bit at a time so you don't really notice it."
Kline also suggested the state could help businesses by extending the sales tax to cover items bought online. Currently, Kansas residents who order items from online retailers and auction sites don't pay sales tax, which places businesses with a physical presence at a disadvantage, she said.
"I think that really hurts Kansas's economy," she said.
The Congressional Research Service estimated online transactions accounted for about 16 percent of American sales in 2010, and that states lost about $8.6 billion by not collecting sales taxes on online purchases that year. Kansas is a member of Streamlined Sales and Use Tax Agreement, a coalition that simplified and standardized its sales tax laws in the hope Congress would authorize taxes on out- of-state vendors.
The state, however, is limited in what it can charge online retailers, said Richard Cram, director of policy and research for the Kansas Department of Revenue. He said a study from University of Tennessee looking at states' tax losses from online commerce estimated Kansas lost $158.7 million in taxes it would have collected if online purchases had been made at physical stores in the state.
The U.S. Supreme Court ruled in 1967 that out-of-state vendors don't have to pay sales tax to a state if they don't have a physical location there. That means Amazon, which has a Kansas location, has to pay sales tax even if the item is shipped from another state to a Kansas resident, Cram said. Retailers who have stores in Kansas also have to pay the same state sales tax as if residents had made their purchases in those physical locations, he said, so only websites without a location or representative in Kansas don't have to pay the sales tax.
"We can't require them to collect that," he said.
In states with "use taxes," including Kansas, residents are required to pay a tax on items they bring in from outside the state, including those ordered online or through the mail. Enforcement, however, is difficult.
Not all items, however, lend themselves to online sales. Cathi Buckley, a store manager at Patio, Pool and Fireside, 3109 S.W. Huntoon, said local sales taxes is more of concern for her employer than the state one. Shoppers in Topeka pay a 1.5 percent city sales tax, a 0.5 percent county tax and a 0.65 percent tax to support Washburn University, for a total of a 8.95 percent sales tax.
"The bigger purchases like hot tubs, it sure does affect that," she said.
Some customers find it worthwhile to drive outside the city or county, where they only have to pay the 6.3 percent state sales tax, but most don't want to drive to a neighboring state for a large item or pay to have it shipped, Buckley said.
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