Kansas Overrules Governor Veto to Enact New Exemptions, Deductions from Tax Base

At the end of April, the Kansas legislature overrode the governor’s veto of a bill that provided multiple new exemptions and changed the treatment of manufacturer’s coupons for sales and use tax. The Governor originally denied House Bill 2098 out of concerns about the bill’s impact on the State General Relief Fund. The state House voted to override on April 26th, 2024, and the Senate also voted to override on April 30, 2024.

The bill contains multiple rule changes and exemptions, including:

• Effective July 1, 2026, purchases made by or on behalf of permanently disabled United States veterans will be exempt from sales tax. The exemption does not apply to motor vehicles, alcoholic beverages, tobacco, or electronic cigarettes, and applies up to $24,000 in purchases per year. To claim the exemption, qualified veterans should apply with the Secretary of Revenue, and each eligible person will be issued an exemption number and driver’s license sized certificate to present to retailers. This exemption also applies to a surviving spouse of an eligible person that was receiving this exemption at the time of their death and will remain in place until the surviving spouse remarries.
• Effective January 1, 2025, individuals who sell a used motor vehicle may deduct the value of the sale from the taxable purchase price of a new or used vehicle purchased within 120 days before or after the sale. If the vehicle sold is sold for a greater value than the purchased vehicle, no tax will be due on the purchased vehicle. Purchasers may either provide both bills of sale to the county assessor at the time the vehicle is registered or apply for a refund from the Department of Revenue if tax was already paid at the time of the purchase.
• As of the enactment of the bill on May 1, 2024, coupons issued by a manufacturer, supplier, or distributor that are reimbursed to the seller are included in the sales price used to calculate tax. Sales tax is only due on the amount paid by the purchaser.
• As of May 1, 2024, all sales of equipment, machinery, software, ancillary components, appurtenances, accessories, or other infrastructure purchased for use in the provision of communications services, and all services purchased by a provider in the provision of the communications service used in the repair, maintenance or installation in such communications service are exempt from sales tax.

The act also includes specific exemptions for not-for-profit organizations and specific projects, including the Kansas Fairgrounds Foundation, Kansas Children’s Discovery Center in Topeka, Exploration Place in Wichita, and the short-term emergency aid organization Doorstep, Inc. (2023 KS H 2098, Enacted – Veto Override – Final, (May. 1, 2024))