Kansas Environmental Tax

Oh, the drama...

Hangers has been open for 10 years and for 10 years we've never charged an environmental tax in the state of Kansas.  We were specifically given a waiver by the state because we don't do any cleaning in the state and we don't use any cleaning solvents like perchloroethylene, which is the nasty stuff that many other cleaners use.

On November 18, 2013 I received a call from a representative at the Kansas Department of Revenue.  The representative said he was calling in response to a competitor that saw one of our marketing pieces that stated Hangers does not charge environmental tax.  Gee, I wonder which competitor did that?!  Could it be someone with deep pockets and friends in Topeka and DC?

On December 2, 2013 I received a letter from the state of Kansas that rescinded our waiver to not collect environmental taxes.  Ironically, it was written by the exact same person that gave us the waiver many years ago! 

Hangers appealed the decision using what seemed to be pretty sound logic.  Here's an excerpt from our appeal:

As I pointed out in my 2007 letter and recently discussed on the phone with you, my company does all of the cleaning for our customers in the state of Missouri.  We do not own or lease any property in the state of Kansas so it would be impossible for us to contaminate anything in Kansas.  Per K.S.A. (Kansas Statute Annotated) “Any rules and regulations so adopted shall be reasonably necessary to preserve, protect and maintain the waters and other natural resources of this state and reasonably necessary to provide for prompt corrective action of releases from drycleaning facilities."

Furthermore, Chapter 65 of the statute (65-34,150) reads “Subject to the provisions of K.S.A. 65-34,152, and amendments thereto, there is hereby imposed an environmental surcharge in the form of a gross receipts tax for the privilege of engaging in the business of laundering and drycleaning garments and other household fabrics in this state." Again, we are not doing any cleaning in the state.

You mentioned that any drycleaning retailer that collects and pays sales tax in Kansas, which Hangers does, needs to also collect and pay the environmental tax.  I understand the logic but disagree with it.  Hangers uses the roads and infrastructure in Kansas to conduct our pickup & delivery business so it makes sense that we would have to collect and pay sales tax.  However, the same logic does not apply to the environmental tax since the money will be used to clean up contaminated sites in Kansas and we, without question, will never contaminate the state of Kansas with drycleaning solvents or other hazardous waste.

Unfortunately, on February 13, 2014 we received a letter from Kansas indicating that we lost our appeal.  Here is part of their rationale:

Currently, because you provide dry cleaning services to individuals in Kansas you are "engaged in the business of laundering and dry-cleaning garments...in this state." This surcharge is to be applied for the privilege of doing so and therefore the fact your business is not domiciled in the state does not exempt you from collecting this tax at the time of sale.

So, my interpretation of this letter from Kansas is basically that we can appeal and spend all the money we want...but we are NOT going to win.  Even if we got a judge or some other impartial arbitrator to rule in our favor, the Department of Revenue would simple re-write the statute to ensure they got their money. 

Sadly, we decided to give up the fight and are now charging an environmental tax on our cleaning, for Kansas customers only, that is neither environmentally harmful nor done in the state of Kansas.



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