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 25, 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 55 by Senate Committee on Assessment and Taxation
In accordance with KSA 75-3715a, the following fiscal note concerning SB 55 is
respectfully submitted to your committee.
SB 55 would create a sales tax holiday for back-to-school related sales of certain items.
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 would exempt all back-to-school related sales of:
1. Any article of clothing or clothing accessories with a sales price of $300 or less per item;
2. All school supplies, school instructional materials, or school art supplies with a sales price
of $100 or less per item;
3. All prewritten computer software with a sales price of $300 or less per item; and
4. All computers or school computer supplies with a sales price of $2,000 or less per item.
The bill provides definitions for clothing, clothing accessories or equipment, school
supplies, school instructional materials, school art supplies, school computer supplies, and other
items used to implement the back-to-school sales tax holiday. The first back-to-school sales tax
holiday would occur in August 2023.
The Honorable Caryn Tyson, Chairperson
Page 2—SB 55
Estimated State Fiscal Effect
FY 2023
SGF
FY 2023
All Funds
FY 2024
SGF
FY 2024
All Funds
Revenue -- -- ($5,400,000) ($6,500,000)
Expenditure -- -- $1,800 $1,800
FTE Pos. -- -- -- --
The Department of Revenue estimates that SB 55 would decrease state revenues by $6.5
million in FY 2024. Of that total, the State General Fund is estimated to decrease by $5.4 million
in FY 2024, while the State Highway Fund is estimated to decrease by $1.1 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 ($5,600,000) ($5,600,000) ($5,600,000) ($5,700,000)
State Highway Fund (1,100,000) (1,200,000) (1,300,000) (1,300,000)
($6,700,000) ($6,800,000) ($6,900,000) ($7,000,000)
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 75.0 percent of the clothing and 25.0 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.
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. 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 Honorable Caryn Tyson, Chairperson
Page 3—SB 55
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
fiscal effect associated with SB 55 is reflected in The FY 2024 Governor’s Budget Report.
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 bill also has the potential to reduce revenues that are pledged to repay
STAR bond projects; however, it is unknown what impact this bill would have on the viability of
those projects.
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