An appetite for sales tax change is growing in Kansas
For years lawmakers in Kansas have been trying to change the way food is taxed. Will 2020 be the year they succeed?
House Bill 2616 seeks to lower the sales and use tax rate on food and food ingredients, at some point. The thing is, it wouldn’t be a rate change you can plan for in advance: A rate drop would occur only if compensating use tax revenue “exceeds the revenue of the base year amount plus 3% annually.”
The director of legislative research would certify the excess by September 1. The secretary of revenue would then use the certified amount (in dollars) to compute “a reduction rounded down to the nearest 0.1% in the sales and compensating use tax rates on food and food ingredients.”
If the rate needs to drop, the change would go into effect for the next calendar year. This process would be repeated “until the state rates for sales and compensating use taxes on food and food ingredients are reduced to 0%.” Currently, food and food ingredients are taxed at the general rate in Kansas, which ranges from 6.5% to 10.6%.
In addition to changing the rate, maybe, the measure seeks to remove “dietary supplements” from the definition of “food and food ingredients” (alcoholic beverages and tobacco are already excluded). It also states, “Food and food ingredients does include bottled water, candy, food sold through vending machines or soft drinks.”
Kansas governor supports reducing taxes on food
Though the enactment of HB 2616 would leave next year’s sales tax rate on food in doubt, the desire to tie a rate reduction to excess revenue makes sense.
After the Great Recession, Kansas suffered from years of what Governor Laura Kelly recently called “financial chaos.” She noted in her 2020 State of the State address, “By the time I stood before you as governor in 2019, Kansas was on life support,” with “record amounts of debt.” She and other legislators are reluctant to do anything that would bring back those dark days.
Yet, recognizing that “Kansas families are taxed more for food than anywhere else in the United States,” the governor wants to provide food tax relief now that the state’s economy has stabilized. Her budget proposal “will take the first step in lowering taxes on groceries, starting with Kansans who need help the most.” She mentioned “a targeted food sales tax cut through a refundable rebate.”
A food sales tax refund was eliminated in 2012, the last time Kansas lawmakers amended the food sales tax laws. Since then, numerous attempts to reduce the sales tax on food have failed:
- A bill enacted in 2015 raised the state sales tax rate from 6.15% to 6.5%, but a section that would have reduced the rate for food and food ingredients to 4.95% was struck from the final version.
- An exemption for fresh, unprepared fruits, vegetables, honey, and herbs died in committee in 2016.
- Another proposal to reduce the rate for food and food ingredients to 2.6% died in committee in 2016.
- Multiple bills seeking to reduce the rate for food died in 2017.
- A 2019 bill that would have reduced the rate for food to 5.5% was passed but ultimately vetoed.
While there now seems to be an appetite for a new food tax policy Kansas, there may not be consensus on the best way to serve it up.
Learn more about sales and use tax in the Sunflower State by reading this Kansas sales tax guide.
The 2021 sales tax changes report: midyear update
Your guide to navigating the complicated world of tax compliance and preparing for the future
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