Kansas movie theater owners write legislative script for two-year state sales tax break

Potential state tax revenue reduction pegged at $3.8 million annually

by Tim Carpenter, Kansas Reflector
March 2, 2023

TOPEKA — Scott Zaremba owns the world’s oldest purpose-built cinema in downtown Ottawa, and asked the Kansas Senate for help keeping the two-screen venue’s doors open to movie fans.

“We’re working very hard to keep it, and keep it operational. We’re at 116 years and counting,” he said. “The Plaza has been through its share of challenges, from floods, fire, wars. We’ve been through two pandemics, right, not just one, because its been open that long.”

On Thursday, Zaremba requested senators endorse a bill that would enable Kansas movie theater owners to retain the state portion of sales tax collected on ticket admissions and theater concessions. The local sales tax wouldn’t be amended by Senate Bill 227, he said, but from July 1, 2023, to June 30, 2025, theater operators statewide would retain all the state’s 6.5% sales tax on those transactions.

The Kansas Department of Revenue estimated the financial loss to the state would be $3.8 million annually.

“All we’re looking for is to keep those tax dollars right where they were produced, and keep them right there so we can go back and pay our employees and pay our accelerated expenses,” Zaremba said. “As you know, our expenses didn’t go down. They’ve actually gone up.”

What about streaming?

Sen. Usha Reddi, a Manhattan Democrat, said she wasn’t convinced the recommended tax relief would be pivotal for the theater industry given consumer demand for in-home streaming services.

“Is it going to be helpful when a lot more people are streaming their movies? They’re not even going to a movie theater,” she said.

No one testified in opposition to the bill during a hearing of the Senate Assessment and Taxation Committee. Senators didn’t take action on the proposal.

Todd Halstead, a lobbyist with the National Association of Theatre Owners, said Kansas had 60 cinema companies operating about 450 screens in 90 locations. Theater owners welcomed state and federal COVID-19 relief programs to help bridge the darkest days of the pandemic, he said, but government mandates during the health crisis upended the industry with closure orders, capacity restrictions and mask rules.

“Industry analysts, however, say it will be at least 2024 before theatrical attendance in the United States comes even close to pre-pandemic levels,” Halstead said. “Tax relief would provide a critical lifeline to help movie theaters until blockbusters consistently return to our screens.”

Derek Hein, who represents the largest theatrical exhibitor in Kansas, AMC Theatres, said theaters have struggled because the business was labor intensive, required expensive technology and theater locations were often located in expensive, desirable locations. AMC Theatres, he said, closed all 67 locations during the pandemic.

“Movie theaters are economic anchors in many communities across the state, providing job opportunities to many Kansans, driving foot traffic to neighboring restaurants and businesses and fostering cultural vibrancy,” Hein said.

‘Just not sustainable’

Bobbie Bagby Ford, executive vice president of B&B Theatres, said the sales tax break would benefit the company’s theaters in Iola, Topeka, Overland Park, Junction City, Chanute, Emporia, Dodge City, Hutchinson, Leavenworth and other communities in Kansas.

She said the pandemic kept patrons away from theaters but also interrupted the supply of new Hollywood films. She said many of the company’s theaters lost money in 2022, a year in which 71 movies came out compared to 112 in 2019.

“The problem is the last three years have been so devastating that those losses are just not sustainable,” Bagby said. “If we can get some additional movies in, which it looks like we’re going to, and some relief from the state we’ll be able to keep those smaller movie theaters open.”

Sen. Chase Blasi, R-Wichita, said he was concerned ticket prices had risen to the level it wasn’t affordable for families to take in movies in the manner of his youth.

“How do we make the experience what it used to be? It was fun, but now it seems like the price has gone up so much. How do we make it more affordable?” Blasi said.

Bagby said going to a movie was considered among the less-expensive options for out-of-home entertainment and many theaters offered discount tickets on certain days of the week.

“To follow up on Sen. Blasi’s question,” said Sen. Caryn Tyson, a Parker Republican, “wouldn’t it be more beneficial, if this tax cut occurred, to actually return it to the patrons instead of putting it in the theater’s coffers?”

Bagby said the two-year redirection of state sales tax revenue could make the difference in whether some remained in operation.

“If those smaller locations close, they won’t reopen,” Bagby said. “It’s just too big and expensive of an endeavor.”

Kansas Reflector is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Kansas Reflector maintains editorial independence. Contact Editor Sherman Smith for questions: info@kansasreflector.com. Follow Kansas Reflector on Facebook and Twitter.

Derek Nester
Derek Nesterhttp://www.sunflowerstateradio.com
Derek Nester was born and raised in Blue Rapids and graduated from Valley Heights High School in 2000. He attended Cowley College in Arkansas City and Johnson County Community College in Overland Park studying Journalism & Media Communications. In 2002 Derek joined Taylor Communications, Inc. in Salina, Kansas working in digital media for 550 AM KFRM and 100.9 FM KCLY. Following that stop, he joined Dierking Communications, Inc. stations KNDY AM & FM as a board operator and fill-in sports play-by-play announcer. Starting in 2005 Derek joined the Kansas City Chiefs Radio Network as a Studio Coordinator at 101 The Fox in Kansas City, a role he would serve for 15 years culminating in the Super Bowl LIV Championship game broadcast. In 2020 he moved to Audacy, formerly known as Entercom Communications, Inc. and 106.5 The Wolf and 610 Sports Radio, the new flagship stations of the Kansas City Chiefs Radio Network, the largest radio network in the NFL. Through all of this, Derek continues to serve as the Digital Media Director for Sunflower State Radio, the digital and social media operations of Dierking Communications, Inc. and the 6 radio stations it owns and operates across Kansas.


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