Division of the Budget
Landon State Office Building Phone: (785) 296-2436
900 SW Jackson Street, Room 504 adam.c.proffitt@ks.gov
Topeka, KS 66612 http://budget.kansas.gov
Adam Proffitt, Director Laura Kelly, Governor
Division of the Budget
January 19, 2023
The Honorable Caryn Tyson, Chairperson
Senate Committee on Assessment and Taxation
300 SW 10th Avenue, Room 548-S
Topeka, Kansas 66612
Dear Senator Tyson:
SUBJECT: Fiscal Note for SB 29 by Senator Peck, et al.
In accordance with KSA 75-3715a, the following fiscal note concerning SB 29 is
respectfully submitted to your committee.
SB 29 would expand the state’s sales tax exemptions to include a sales tax holiday for
back-to-school related sales of clothing, clothing accessories or equipment, school supplies, school
instructional materials, school art supplies, prewritten computer software, personal computers, and
school computer supplies. There would be no maximum caps for any items for the back-to-school
sales tax holiday. The sales tax holiday would occur on the first Thursday in August at 12:01 a.m.
and end at midnight on the following Sunday. The bill provides definitions for clothing, clothing
accessories or equipment, school supplies, school instructional materials, school art supplies,
prewritten computer software, personal computers, and school computer supplies. The first sales
tax holiday for school supplies would occur in August 2023. The bill would become effective
upon its publication in the Kansas Register.
Estimated State Fiscal Effect
FY 2023
SGF
FY 2023
All Funds
FY 2024
SGF
FY 2024
All Funds
Revenue -- -- ($7,700,000) ($9,300,000)
Expenditure -- -- $1,800 $1,800
FTE Pos. -- -- -- --
The Department of Revenue estimates that SB 29 would decrease state revenues by $9.3
million in FY 2024. Of that total, the State General Fund is estimated to decrease by $7.7 million The Honorable Caryn Tyson, Chairperson
Page 2—SB 29
in FY 2024, while the State Highway Fund is estimated to decrease by $1.6 million in FY 2024.
This bill also is estimated to decrease local sales tax revenues; however, the specific estimate of
lower local sales tax revenues was not calculated by the Department of Revenue. The fiscal effect
to state revenues during subsequent years would be as follows:
FY 2025 FY 2026 FY 2027 FY 2028
State General Fund ($7,700,000) ($7,700,000) ($7,800,000) ($7,900,000)
State Highway Fund (1,600,000) (1,700,000) (1,700,000) (1,700,000)
($9,300,000) ($9,400,000) ($9,500,000) ($9,600,000)
To formulate these estimates, the Department of Revenue reviewed data on state sales tax
collections and consumer expenditure data. Consumer expenditure data from the U.S. Department
of Labor show that the average Midwestern household annually spends $1,749 on clothing and
$1,159 on education. It is estimated that 100.0 percent of the clothing and 40.0 percent of the
education purchases would qualify for exempt status during the proposed sales tax holiday. The
Department estimates that sales tax collections from computer-related expenditures at electronic
stores totaled $53.3 million in FY 2022 based on data from the state sales tax collections report.
These collections are estimated to represent 10.0 percent of the total sales tax from computer
equipment and software. Data from other states indicate there is an increase in purchases during
a sales tax holiday that ranges from “slight” to a five-fold increase in purchases and corresponding
decreases in sales volume before and after the holiday period as shoppers shift their purchases to
take advantage of the sales tax holiday. For the Kansas sales tax holiday, it is assumed that sales
during the four-day period would be at least triple the normal purchases, with corresponding
decreases in sales volume before and after the sales tax holiday period.
Experiences from other states point to the need for an extensive guidebook on what
purchases are exempt, how to report the exempt sales, and provide other sales tax holiday
instructional material. The Department anticipates there will be extensive questions and concerns
from retailers that will result in allocation of available resources to administer the holiday vs.
performing other duties. Any additional personnel expenses that may be required to implement
the bill are not included in the fiscal note.
The Department indicates that the bill includes definitions of school supplies that are
inconsistent with the approved definitions in the Streamlined Sales and Use Tax Agreement.
Those inconsistencies have the potential to cause compliance issues. The Department indicates
that the bill would require $1,800 from the State General Fund in FY 2024 to update sales tax
forms and publications.
The Kansas Department of Transportation (KDOT) indicates that the bill would reduce
state revenues to the State Highway Fund as noted above. KDOT indicates that when the state
receives lower State Highway Fund dollars it may be required to make corresponding reductions
to planned expenditures for projects funded under the comprehensive transportation plan. The
Kansas Association of Counties and the League of Kansas Municipalities indicate that the bill
would provide a net reduction to local sales tax collections that are used in part to finance local
governments. The Honorable Caryn Tyson, Chairperson
Page 3—SB 29
The fiscal effect associated with SB 29 is partially reflected in The FY 2024 Governor’s
Budget Report. The back-to-school sales tax holiday included in The FY 2024 Governor’s Budget
Report includes caps of $300 on clothing and clothing accessories; $100 for school supplies, school
instructional materials, and school art supplies; $300 for prewritten computer software, and $2,000
for computers, which reduces the fiscal effect.
Sincerely,
Adam Proffitt
Director of the Budget
cc: Lynn Robinson, Department of Revenue
Brendan Yorkey, Department of Transportation
Wendi Stark, League of Kansas Municipalities
Jay Hall, Kansas Association of Counties