House Status:
Senate Status:
Senate Status:
Minutes for HB2106 - Committee on Taxation
Short Title
Providing a sales tax exemption for sales of property and services used in the provision of communications services.
Minutes Content for Tue, Jan 31, 2023
Chairperson Smith opened the hearing for HB2106.
Adam Siebers, Assistant Revisor, provided an overview for HB2106 stating the bill would provide for a sales tax exemption for property and services used in provision of communications services. (Attachment 1) Mr. Siebers stood for questions from Committee members.
Kathleen Smith, Kansas Department of Revenue, provided an overview for the Fiscal Note for HB2106 noting the bill would decrease state revenues by $16.8 million in FY2024. Of that total, the State General Fund is estimated to decrease by $13.9 million in FY2024, and the State Highway Fund is estimated to decrease by $2.9 million in FY2024. In FY2025 the total impact would be $17.0 million and for FY2026, $17.1 million. Ms. Smith stated to formulate the estimates, they used data from the telecommunications industry that was supplied to the Department of Revenue. Ms. Smith stood for questions from Committee members.
Jim Jamison, President, AT&T, Kansas, testified as a proponent for HB2106 to allow communication companies to connect more Kansans to high-speed broadband by exempting the equipment used to expand and improve the networks from sales taxes. The bill will increase the number of Kansas homes and businesses connected to high-speed fiber as well as expanding wireless 5G networks. Mr. Jamison provided a map showing states that exempt or provide a refund of sales tax on communications equipment noting several neighboring states are among the states to make it easier to expand broadband. Mr. Jamison also provided to Committee members a memo from Scott Mackey of Leonine Public Affairs who is a nationally recognized expert in tax policy who did a cost comparison in exempting communications equipment from taxes showing $16.8 million less in tax revenue for the state. (Attachment 2) (Attachment 3) (Attachment 4) (Attachment 5) Mr. Jamison stood for questions from Committee members.
John Federico, President, KCTA, testified as a proponent for HB2106 stating they provide more broadband in the state than any other provider and approach as an entire telecommunications industry. He noted the telecommunications industry should be eligible for the machinery and equipment tax exemption when other industries have the benefit. He stated the telecommunications industry is constantly trying to provide what the customer wants which is better and faster telecommunications and the only way to do that is to invest in technology infrastructure. In response to a previous question regarding AT&T, he noted with scarce dollars the companies set aside for infrastructure improvement or upgrades there are also other of factors such as the regulatory environment and tax environment. All of the money that flowed into the state from the federal government was for Broadband expansion it was not to invest money to improve the product that was already delivered to the customer. Mr. Federico noted HB2106 is about lowering the cost of doing business to attract more investment and deliver a better product to the customer. (Attachment 6) Mr. Federico stood for questions from Committee members.
John Idoux, Brightspeed Director of Government Affairs for Kansas, testified as a proponent for HB2106 stating in Kansas, Brightspeed will expect to finish by the end of 2023 the first phase of construction to deliver over 10,000 fiber passings in Gardner, Osawatomie and Hiawatha. The bill directly impacts not the corporate coffers of the telecommunication companies including Brightspeed but directly benefits Kansas consumers. The first benefit is how companies set their budgets which is completed by the corporate finance department on an annual basis and is the amount the companies spend in Kansas. If the telecommunications industry spends 10.0 percent on sales tax, it means companies do not have the money to spend for infrastructure but with a sales tax exemption offered in HB2106 the companies will be able to invest more dollars directly into Kansas. (Attachment 7) Mr. Idoux stood for questions from Committee members.
Written testimony was submitted by the following as proponents for HB2106:
Eric Stafford, Kansas Chamber, (Attachment 8)
Patrick Fucik, T-Mobile, (Attachment 9)
David Soffer, Director of Business Development, WANRack, Private Fiber Networks, (Attachment 10)
John Cmelak, Director of State Tax Policy, West Area, Verizon (Attachment 11)
Opponent:
Spencer Duncan, League of Kansas Municipalities, testified as an opponent for HB2106 stating the League of Municipalities would like to have an adjustment made for the bill to give the proponents the relief they are requesting without doing harm to the cities across the State of Kansas. The amendment would be to remove local sales tax from the exemption and the local sales tax collection should remain in local control. If cities choose to provide a tax exemption for communication services for the local portion of sales tax, they would have the ability to do so. (Attachment 12) Mr. Duncan stood for questions from Committee members.
Chairperson Smith closed the hearing for HB2106.
