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Minutes for HB2173 - Committee on Taxation
Short Title
Requiring marketplace facilitators to collect and remit sales, use, transient guest taxes and 911 fees from sales made through their platforms, providing nexus for certain retailers and removing click-through nexus provisions.
Minutes Content for Wed, Feb 10, 2021
Chairperson Smith recognized Adam Siebers, Assistant Revisor, who provided an overview on HB2173 requiring the collection and remittance for sales, compensating use and transient guest taxes and prepaid wireless 911 fees by marketplace facilitators with sales subject to tax in the state in excess of $100,000 (Attachment 1).
Mr. Siebers responded to questions from Committee members.
Kathleen Smith, Kansas Department of Revenue provided information on the fiscal note for HB2173 estimating it would increase the state revenue by $42.4 million in FY2022. The State General Fund would be increased by $35.5 million in FY2022 and the State Highway Fund would be increased by $6.9 million. In FY2023, the increase is $49.8 million and FY2024 the increase is $52.7 million. She noted the formula for the estimates began with a study completed by the US Government Accountability Office in 2017. The information provided was used as well as industry data and actual data that was provided by other states which produced the estimate for the market place facilitators. The estimate was formulated for the remote sellers because HB2173 does provide a de minimus threshold of $100,000.
Proponents:
Eric Stafford, Kansas Chamber testified for HB2173 noting there is a companion bill SB50 in the Senate and an issue the Kansas Chamber has been trying to complete for the last three years. The bill is very similar to last year's bill, (2020) HB2513 and is based off the National Conference of State Legislatures (NCSL) model language. HB2173 requires marketplace facilitators to collect and remit sales tax to the State of Kansas when annual sales exceed $100,000. He noted Kansas is one of three states that does not have this legislation. HB2173 is a slightly different version of the marketplace facilitator that was introduced in the past but complies with the court's Wayfair checklist. He remarked there was a split among telecommunications and retail members regarding the effective date for collection of prepaid 911 fees. He stated HB2173 has an effective date of July 1, 2022 and SB50 has an effective date of January 1, 2022 noting the effective date could not be left out of the provision; therefore, the effective date will be decided by the legislature (Attachment 2).
Mr. Stafford stood for questions from the Committee members.
Natalie Bright testified on behalf of the Travel Industry Association of Kansas for HB2173 noting the bill levels the playing field for 3rd party marketplace facilitators for lodging to make sure they are collecting and remitting tax for transactions which are collected by the brick and mortar taxpayers residing in Kansas. Ms. Bright will present an amendment for HB2173 changing "lodging establishment" to "hotel" which would prevent confusion regarding tax collection requirements (Attachment 3).
Ms. Bright stood for questions from the Committee members.
Trey Cocking, League of Municipalities testified for HB2173 stating the League supports state legislation for a program to help the state collect state and local sales and compensating use taxes due from in-state purchasers. Brick and mortar sellers are at a 7% to 10% price disadvantage depending on their location in Kansas compared to online sellers if this tax is not collected (Attachment 4).
Mr. Cocking stood for questions from the Committee members.
Written testimony was submitted by the following:
Brian Huseman, Vice President, Public Policy, Amazon (Attachment 5).
Stuart J. Little, Ph.D., Little Government Relations (Attachment 6).
Mark Manning, Finance Director, City of Wichita (Attachment 7).
Kevin Walker, Senior Vice President of Public Policy, Overland Park Chamber of Commerce (Attachment 8)
Neutral:
John Cmelak, Director of State Tax Policy, West Area, Verizon testified via Webex for HB2173 stating his testimony is marked neutral but Verizon supports HB2173 which creates parity on the collection of sales and use taxes for every distribution channel. The prepaid wireless 911 fee was enacted in 2011 in Kansas. He stated when the 911 law was enacted the marketplace facilitator transactions were not as commonplace as they are now noting the law is unclear whether the marketplace facilitators such as Amazon and E-Bay must collect the 911 fees on prepaid wireless sales. Last year's (2020) HB2014 fixed the loophole and everybody was to collect the tax uniformly; however, due to the COVID shutdown the bill did not move forward. During the interim, there were conference calls with the telecom industry, retailers, and marketplace facilitators to decide the effective date and it was agreed upon for January 1, 2022. HB2173 was introduced with an effective date of July 1, 2022 due to one stakeholder who did not agree on the effective date. Verizon is in support of HB2173 with an amendment requiring marketplace facilitators to collect prepaid fees beginning January 1, 2022 (Attachment 9)
Written testimony was submitted by the following:
Molly Kocour Boyle, President AT&T Kansas; Patrick Fucik, Director State Government Affairs, T-Mobile; John Cmelak, Director of State Tax Policy, Verizon (Attachment 10)
Emily Fetsch, Director of Fiscal Policy, Kansas Action for Children (Attachmen11)
Chairperson Smith closed the hearing on HB2173.
