(The Center Square) – Gov. Laura Kelly's latest budget presentation includes a proposal that would implement digital sales taxes on streaming services and online purchases.
Streaming services including Netflix and Hulu, and online market facilitators like Etsy and Ebay, would have Kansas state sales tax applied to its transactions.
"For the last 15 years, main street retailers have been put in a place of competition where their competitor has the advantage of not paying state income tax, the property tax or state sales tax," Trey Cocking, deputy director at League of Kansas Municipalities, told The Center Square. "We think this puts everyone on the same footing and allows main street businesses not even a leg up, but at least makes them competitive."
Not everyone agrees with the proposal.
"You don’t level the playing field among businesses by making one group of companies worse off," Michael Austin, director of the Sandlian Center for Entrepreneurial Government at Kansas Policy Institute, told The Center Square. "Increasing taxes on streaming services when many Kansans are stuck at home due to a job loss or business closure is effectively kicking Kansans while they are down."
Cocking said the proposal will have a positive impact on the state's economy because the money stays in the community and can be used to pay a police officer's salary or to fix a pothole, for example.
Austin said the rule would have the reverse impact on local entrepreneurs.
"Small businesses are already adversely impacted by tax compliance costs," Austin said. "Adding more taxes to their burden in the middle of a COVID downturn is the farthest thing to a beneficial impact on Kansas’ economy."
A combined digital sales tax and state sales tax on out-of-state transactions are estimated to generate more than $85 million for the state.
"The true government tax burden isn’t how much it taxes, but how much it spends," Austin said. "If this sales tax hike goes through, Kansans will be on the hook to financially support a record $8 billion budget."