AG Derek Schmidt speaks out against legality of new Kansas tax policy
TOPEKA, Kan. (KSNT) – Attorney General Derek Schmidt spoke out against the legality of the Kansas online sales tax policy that will go into effect on Tuesday.
Out-of-state and online businesses were told that starting Oct. 1, they need to collect Kansas state and local sales taxes anytime someone from Kansas makes a purchase.
On Monday, Attorney General Derek Schmidt declared that Governor Laura Kelly lacks the legal authority to impose such a rule.
The rule is intended to level the playing field for businesses in the state. Some experts are calling it the most aggressive policy in the nation for collecting state sales tax from online sales.
The State Department of Revenue estimates that the new requirement will bring in $20 million to $40 million in sales tax revenue to Kansas.
The Kelly Administration is basing their decision off of a U.S. Supreme Court decision, South Dakota v. Wayfair. Wayfair is an online furniture and home store.
By changing the tax structure, it takes away some of those out-of-state company’s competitive edge of allowing people to shop without state sales tax.
“The critical element of the Wayfair case was that it allowed states to impose sales taxes on online sales regarding companies that did not have a physical presence in the state,” Richard E. Levy, J.B. Smith Distinguished Professor of Constitutional Law at the University of Kansas, said.
Levy broke down the attorney general’s opinion.
“The attorney general’s opinion correctly notes that South Dakota v. Wayfair does not give states absolute discretion to tax any sales that occur online to citizens so they still have to have a substantial nexus meaning some connection to the state,” Levy said.
They also can’t impose taxes if that’s a burden on the party collecting the tax.
“Part of the attorney general’s opinion is based on the notion that the notice went beyond that which Wayfair allows,” Levy said.
That’s because the policy change in Kansas is much stricter than the South Dakota law.
With the Kansas policy, there would be no exemptions, no matter how small the business. Even a single sale in Kansas would require the business to register with the state and remit taxes.