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Minutes for HB2585 - Committee on Taxation
Short Title
Excluding from sales taxation services for installing or applying tangible personal property for the reconstruction, restoration, remodeling, renovation, repair or replacement of a building or facility.
Minutes Content for Wed, Feb 7, 2024
Chairperson Smith opened the hearing for HB2585.
Adam Siebers, Assistant Revisor presented an overview for HB2585 that would exclude from sales tax the service of installing or applying tangible personal property in connection with the original construction, reconstruction, remodeling, repair or replacement of a building or facility (Attachment 1). Mr. Siebers stood for questions from Committee members.
Kathleen Smith, Kansas Department of Revenue, provided an overview for HB2585 noting the Department estimates the bill would decrease the state revenues by $70.7 million in FY2025. This would include $58.3 million to the State General Fund and $12.4 million to the State Highway Fund. To formulate the estimates, the Department looked at NAICS Code 23 which is construction services and provided estimates for FY2026 through FY2029 by looking at their actual gross sales and their actual deductions that were represented on their returns for the last four year and came up with the estimate of approximately 71.0 percent of their gross sales. A large portion is exempt based upon if they are doing construction for residential and or original construction of a building or facility. Ms. Smith stood for questions from Committee members.
Randy Stookey, testified on behalf of the Kansas Grain and Feed Association, Kansas Agribusiness Retailers Association, and Renew Kansas Biofuels Association as a proponent for HB2585. The agriculture industry operates a competitive, profitable business and often depends upon overhead costs, such as taxes. Mr. Stookey stated every year Kansas has better and larger harvests and noted there is a need to build new or refurbished existing grain storage elevators with concrete and steel across Kansas. Costs have increased and the bill would be a great benefit to the industry to help pay for the investments back into the property. HB2585 would clarify the tax laws, provide greater consistency and curb some of the cost increases due to inflation (Attachment 2).
Eric Stafford, Kansas Chamber testified as a proponent for HB2585 noting sales tax is a significant line item on commercial development and remodels. The bill modifies the commercial construction sales tax exemption to include restorations and remodels of buildings, identical to the residential exemption (Attachment 3)
Gus Rau Meyer, President of Rau Construction Company, testified as a proponent for HB2585 stating the company is a mid-size construction company founded in 1870 and does business in the Kansas City metropolitan area since the early 1900's. He noted the remodel tax impacts their customers in many ways regarding renovation of an existing space, new finishes in a previously unfinished space, and spaces never finished out 1 day later or 2 years after the building is built has a significant tax collected due to it was not part of the original construction (Attachment 4).
Mark Hutton, Hutton Construct, testified as a proponent for HB2585 that would level the playing field for small businesses related to the difference between how sales tax is charged on commercial and residential remodeling projects. (Attachment 5)
Jason Watkins testified on behalf of the Wichita Regional Chamber of Commerce, as a proponent for HB2585, noting materials are subject to sales tax relating to a residential remodeling project. He stated for commercial remodeling projects, labor and other project related services are subject to sales tax in addition to the materials. The disparity in tax treatment sometimes results in commercial remodeling projects not taking place (Attachment 6).
Mike Gibson, Executive Vice President for Association General Contractors of Kansas, testified as a proponent for HB2585 noting Kansas does not tax the services of construction of new commercial buildings, however, does tax the remodeling of existing structures that keeps the existing building in proper condition (Attachment 7).
Courtney Kounkel, Founder and Owner of Monarch Build, testified as a proponent for HB2585 that will increase the renovation quality and investment in aging commercial real estate which will increase property values, therefore, increasing property taxes. (Attachment 8).
Each proponent speaking to HB2585, stood for questions from Committee members.
Written only testimony as a proponent for HB2585 was submitted by the following:
Allen Dillingham, The Builders, A Chapter of the AGC,(Attachment 9)
Mark Tomb, Kansas Association of Builders, (Attachment 10)
Whitney Damron on behalf of J.E. Dunn Construction Company, (Attachment 11)
Daniel Murray, Kansas State Director, National Federation of Independent Business, (Attachment 12)
Katrina Abraham, The Greater Kansas City Chamber of Commerce, (Attachment 13)
Shahira Stafford on behalf of Kansas Cooperative Council, (Attachment 14)
There was no testimony submitted as neutral or opponent to HB2585.
Chairperson Smith closed the hearing for HB2585.
