June 24, 2024

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AG Schmidt to issue legal opinion on Kelly’s internet sales tax increase

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Attorney General Derek Schmidt will issue a legal opinion on Gov. Laura Kelly’s directive to expend the internet sales tax on remote sellers. Earlier this month, the Kelly administration issued an order requiring all out-of-state internet sellers with Kansas transactions to begin collecting and remitting sales taxes by October.

Schmidt said he will provide a legal opinion at the request of Senate President Susan Wagle and Speaker of the House Ron Ryckman.

“After conducting a preliminary review of the issues involved, we have decided to consolidate the two requests and will provide our legal opinion on issues they raise,” Schmidt said in a press release issued today.

Kelly issued her order on the heels of a U.S. Supreme Court decision, South Dakota v. Wayfair, which offered guidelines that will allow states to collect sales taxes from sellers who don’t have a physical presence in the state. Instead, the Court determined that a seller must have an economic connection to the state. The decision didn’t establish standards. Those details are being handled by legislatures in other states.

In South Dakota, for instance, the legislature adopted provisions in which businesses with less than $100,000 in sales to South Dakota or fewer than 200 South Dakota transactions aren’t required to collect and remit sales taxes. Kelly’s directive is an aggressive one, requiring any Etsy or eBay seller to collect and remit taxes to the state of Kansas for even a single internet transaction.

The Kansas Legislature twice adopted legislation to tax internet sales on businesses without a physical presence in Kansas. Kelly vetoed both because the legislation would have offset a state income tax increase created by changes in the federal tax code.

Wagle called for Kelly to reverse the directive on Aug. 2. The Senate President warned that the executive action could create a situation where the state of Kansas could face serious litigation because Kelly made the decision without any legislative authorization.

“Governor Kelly’s unconscionable decision, after twice vetoing a bill that lowered food sales tax while putting Kansas in compliance with the Wayfair decision, is an abuse of power and radical departure from the rule of law,” Wagle said in a press release in early August.

Schmidt intervened on another matter earlier this year after Kelly authored a directive that effectively eliminated work requirements for able-bodied adults without dependents to be eligible for welfare benefits. In a letter to the Democratic Governor, the Republican Attorney General Schmidt said that policy violated the spirit of a law passed a few years prior by the Kansas Legislature. He threatened a lawsuit, and Kelly reversed course the next day.

Schmidt hasn’t said that he’ll take legal action on Kelly’s sales tax directive. He didn’t close the door on the possibility, but the clock is ticking.

“We recognize the timely nature of the request,” he said in a press release. “We will work diligently to issue a formal opinion before the new policy takes effect October 1 so all involved may see our legal analysis in deciding how to proceed.”

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