A sales tax directive, issued by Gov. Laura Kelly’s administration, exceeds the Governor’s authority, according to a legal opinion issued today by Kansas Attorney General Derek Schmidt’s office.
Kelly’s directive, issued on Aug. 1, would require all out-of-state internet sellers making Kansas transactions to begin collecting and remitting sales taxes to the Sunflower State beginning tomorrow, Oct. 1. Schmidt’s office determined that Kelly’s directive isn’t legal, because “it was not lawfully adopted in compliance with Kansas law.”
A recent U.S. Supreme Court decision, known as Wayfair, paved the way for states to begin collecting sales taxes from online retailers, but Kelly vetoed two attempts by lawmakers to pass laws that would have imposed sales taxes on remote sellers during the last legislative session. Without legislative authority, the Kansas Department of Revenue issued its directive several months after lawmakers adjourned for the year.
Senate President Susan Wagle and Kansas House Speaker Ron Ryckman, both Republicans, immediately called on Schmidt to issue a legal opinion on the matter. Wagle called the directive “an abuse of power and radical departure for the rule of law.”
Today, Wagle and Ryckman are calling on the Governor to rescind the Aug. 1 directive.
“As a state that values doing right and playing by the rules, we’re hopeful Governor Kelly will honor the Attorney General’s findings and rescind what appears to be an unlawful tax mandate by her administration,” Ryckman said in a statement.
In his analysis, Schmidt says the revenue department’s notice “exceeds the authority the Legislature has granted the Department.” The legal opinion also notes that the Kelly administration issued its directive only after lawmakers and the Governor failed to reach an agreement on internet sales tax legislation.
“The Attorney General’s analysis is on-point,” said Sam MacRoberts, the litigation director at the Kansas Justice Institute. “The Department did not have the authority to re-write the tax code by issuing a notice. It’s important to keep the administrative state in check, and that happened today.”
The legal finding marks a second time the Attorney General’s office has slapped back at the Kelly administration for overstepping its executive authority. Schmidt threatened to file a lawsuit against the Kelly administration earlier this summer after the Governor quietly issued an executive order to waive work requirements for childless, able-bodied adults receiving welfare benefits, despite a state law prohibiting it.
“The separation of our three branches of government is under attack by this administration and it needs to end,” Wagle said in a statement issued today. She called on Kelly to rescind the sales tax directive “to prevent costly litigation against the state.”
Schmidt hasn’t threatened a lawsuit over the sales tax directive, but others have warned lawsuits against the state by internet retailers are a likely consequence.
“The last thing Kansans want is to be on the hook for more costly lawsuits,” Ryckman said in a statement.
MacRoberts is confident that Kelly’s directive is unconstitutional.
“It’s in the best interest of the state and taxpayers to withdraw the notice immediately,” he said. “Otherwise, prolonged, unnecessary, and expensive litigation will all but certainly ensue.”
