Committee opens hearing on bill to exempt bowling-center purchases from sales tax

The Senate Assessment and Taxation Committee opened a hearing on Senate Bill 26, which would amend K.S.A. 79-306 to add a new subsection to exempt purchases by bowling centers from sales tax.

The bill’s sponsor staff explained the proposal would "exempt all sales of tangible personal property or services, including the renting and leasing of tangible personal property that is purchased by a bowling center and used in such bowling center business." The staff member said the definition for a bowling-center business would include the operation of a bowling alley and associated food and beverage operations, vending machines, pro shop services, shoe rentals, arcade and video games, and pool tables, but would not apply to miniature golf or go-kart items.

Proponents who spoke at the hearing said the change would lower a recurring cost on inputs for proprietors who operate small-town alleys. "All we're looking for is just a little relief," said Frank D'Socio, who identified himself as executive director of the Kansas State Bowling [Proprietors] Association. Proprietors described large capital investment and ongoing input costs, including parts for pinsetters, lane oil, trash bags and arcade machines, and said taxing those inputs increases the cost of operating bowling centers in smaller communities.

"It takes a lot to open a bowling alley. It's a big capital investment," said Kelly Hill of Liberal, Kansas, who testified that input taxes add up and make it harder to keep small venues open. Hill gave examples from his business, saying he recently spent about $8,000 on two arcade machines and paid roughly $780 in sales tax on them, and that a rebuild after flooding cost about $1,300,000 in 2016.

Mark Martin, vice president of the Kansas State Bowling Proprietors Group and owner of Flint Hills Lanes, said proprietors simply want parity with other local hospitality businesses that receive exemptions for certain inputs. "We're not asking for anything extra. We're just wanting to be an equal," Martin said.

Opponents and municipal representatives said the committee should weigh local revenue impacts before granting another statewide exemption. Spencer Duncan of the League of Kansas Municipalities said the state has about $8.7 billion in foregone revenue from exemptions and that removing state or local sales-tax collections shifts pressure to property taxes and local budgets. Duncan suggested an alternative approach used previously for food: set the state rate to 0 while leaving voter-approved local sales-tax rates intact to reduce state revenue impact but preserve local funding.

Committee members asked several procedural and fiscal questions, including whether the exemption would apply to both state and local sales tax (staff said it would be a complete sales-tax exemption) and the fiscal-note estimate reported to the committee (staff noted a fiscal note estimating a roughly $2,000,000 reduction in collections in the first year, rising to about $2,200,000 in the second year; municipal shares would represent a fraction of that amount). Senators also discussed whether the exemption should be narrowly tailored to equipment versus consumable items, and several members urged broader review of exemptions and possible sunset provisions.

No committee action on Senate Bill 26 was recorded at the hearing.