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To compete with neighboring states, some Kansas legislators want to host a back-to-school sales tax holiday.
Under a proposal in the Kansas Senate, SB 432, school-related sales of clothing, clothing accessories, school supplies and instructional materials, art supplies, computer software, school computers and computer supplies would be exempt from sales taxes for four days in August.
Sen. John Doll, a Republican from Garden City, is one of the bill’s primary supporters. He hopes it will provide Kansas businesses a boost and prevent the state from losing shoppers to Missouri, Oklahoma and Texas, which already have back-to-school tax holidays.
“I hope it’s a Black Friday in August for my merchants,” he said. “That’s one of the things I hope, that people come from Oklahoma, and from Texas, and from Colorado and from Missouri into our stores, you know, and buy our products, eat at our places, buy gas in our state.”
Another major goal is to make the supplies more affordable for families and teachers.
“I want people who might not be able to buy a computer, for example, if you get a 6.5% discount on it, maybe that’s just enough to allow them to buy it,” Doll said.
The proposal is sponsored by the Senate Committee on Assessment and Taxation, which took the bill up at the request of Sen. Virgil Peck, a Republican from Havana, according to a supplemental note for the legislation.
Peck said Doll brought the proposal to him this year. But Peck has made multiple attempts in the past to promote similar legislation in an effort to “see Kansans do their shopping in Kansas.”
The supplemental note says Doll and Peck testified in favor of the bill at a hearing of the same committee. On Feb. 17, the committee recommended the proposal pass, one of the first steps toward it becoming a law.
But on Monday, the committee folded the bill and several other tax-related measures into a Senate Substitute for HB 2316. The committee didn’t take any further action before the legislature adjourned for a long weekend on Wednesday. Lawmakers return to the Kansas Statehouse next week before adjourning the current session on April 1.
A fiscal note for the proposal created by the Kansas Division of the Budget estimates Kansas would see at least a threefold increase in business during the sales tax holiday based on data from other states, which see anything from a “slight” increase in sales to a fivefold increase, with decreases during surrounding days.
The proposal would cost Kansas about $8.35 million in lost tax revenue in 2023, including $7 million from general revenue and $1.35 million from the State Highway Fund, the fiscal note estimates. By 2027 the impact could increase to about $9 million total.
Peck said he disagrees with the fiscal note because it doesn’t account for business that gets lost to other states but could return to Kansas.
He lives within walking distance of the Oklahoma border and about an hour and a half from Joplin, Mo.
“Many citizens would drive from my area to Joplin during that sales tax holiday weekend,” he said, buying school supplies but also “taxable items.”
Peck added that even taking the fiscal note’s estimate, he doesn’t expect the cost to be as much of a concern this year because of “excess revenue” in the state’s budget.
Doll agreed Kansas can handle the price tag. He said he would expect the legislature to cut the tax holiday in the future if money gets tight.
Doll said he would want local governments, like cities and counties, to have the option to choose whether to participate.
In Missouri, which holds a three-day sales tax holiday in early August, local governments are allowed to opt out.
Dozens of cities, counties and districts chose to opt out in 2021, according to lists on the Missouri Department of Revenue web page devoted to the tax holiday.
The Missouri Department of Revenue did not respond to questions about the financial impact of the tax holidays.
Back-to-school tax holidays in other states
Doll, who represents Kansas’ southwest corner, said he’s worried that businesses in his district lose sales during other states’ tax holidays.
Oklahoma exempts clothing items valued at less than $100 during the first Friday through Sunday in August.
Missouri exempts clothing items that cost less than $100, up to $50 worth of school supplies per purchase and up to $1,500 for personal computers. Computer software, graphing calculators and computer-related devices are also tax-free up to spending limits.
Texas, which is less than 40 miles away from parts of southwest Kansas, exempts purchases of clothing, school supplies or backpacks up to $100.
According to a list of 2022 tax holidays compiled by the Federation of Tax Administrators, there are 23 state sales tax holidays in 16 states. Kansas neighbors Nebraska and Colorado are not among them.
The August holiday in Massachusetts offers a broad exemption for nearly all products.
Fourteen others include clothing and take place in either July or August. Nine of those 14 also include school supplies, with five of the nine including computers and several adding categories like books or sports equipment.
Most last between two and seven days, but three days is the most common number and the one used by Kansas’ neighboring states.
The proposed tax holiday in Kansas would last four days, which is one of several ways Doll hopes it will have an edge over its neighbors’ holidays.
Doll also hopes his colleagues in the legislature pass the bill with the expansive list of eligible items intact.
For example, some of the clothing accessories listed as eligible purchases in the Kansas bill — including watches, handbags, jewelry and umbrellas — are specifically excluded in Missouri.
Peck said a key advantage of the Kansas proposal is that it doesn’t cap tax-free purchases at a specific dollar amount.
“If you’ve got, honestly, three or four children or even less sometimes, and you’re doing back to school shopping because you know they need new clothes, they’ve grown, $100 does not buy them many clothes,” he said.
Doll said he expects objections or changes to the proposal and was pleasantly surprised that it made it through the committee without changes.
He doesn’t think the proposal will be a top priority for most legislators.
“But to me it’s a priority,” he said. “I don’t know who the losers would be on this kind of a bill because it’s not a heavy hit on the budget.”
Peck said he’s worried there’s some reluctance to pass any kind of tax exemption in the Senate.
“I really hope that we can get this across the floor, across the finish line, but I don’t know that there’s real willingness or desire — and I don’t know that there is opposition,” he said. “It just seems like there’s hesitation. Maybe as we get close to the station, the hesitation will go away.”