What sales tax exemptions and changes took effect in Kansas on July 1, 1998?

Plain-English summary

This notice to all registered retailers summarizes the 1998 Kansas sales tax legislation, most of it effective July 1, 1998:

• Aircraft sales (K.S.A. 79-3606(g)): the air-carrier exemption now covers sales made through the carrier's authorized agent for eventual interstate/foreign-commerce use.
• Religious organizations (K.S.A. 79-3606(aaa)): direct purchases by 501(c)(3) religious organizations used exclusively for religious purposes are exempt (contractor purchases are not, unless bought directly by the organization; fuller guidance later -- see Notice 99-14).
• Direct payment authority (K.S.A. 79-3619): certain large businesses may apply to pay sales/use tax directly to the state on a permit.
• Educational institutions (K.S.A. 79-3602(s)): new statutory definition (post-12th-grade nonprofit schools) that also covers supporting endowment associations, athletic-receipt entities, research organizations, and groups like the NCAA; project exemptions allowed for non-dormitory buildings.
• Broadcast equipment (K.S.A. 79-3606(zz)): equipment used directly and primarily to generate over-the-air free-access radio/TV signals, and its electricity, are exempt (see Notice 98-04).
• Manufacturing machinery (K.S.A. 79-3606(kk)): exemption broadened to repair and replacement parts and accessories (belts, drill bits, dies, jigs, molds, refractory items).
• Membership dues (K.S.A. 79-3603(m), (n)): dues/recreational fees to qualifying nonprofit community-service organizations (Red Cross, Scouts, YMCA/YWCA, etc.) and to veterans organizations (VFW, American Legion) are exempt.
• Nonprofit zoos (K.S.A. 79-3606(xx)), nonprofit food distribution (K.S.A. 79-3606(bbb)), and nonsectarian youth-development sales including Girl Scout cookies and Boy Scout popcorn (K.S.A. 79-3606(ii)) are exempt.
• Parent-teacher associations (K.S.A. 79-3606(yy)): exempt on their purchases and relieved of collecting tax on fundraising sales.
• Prepaid telephone calling cards (K.S.A. 79-3602(f), 79-3603(b)): taxable at the time of sale as tangible personal property; debited calls are no longer taxed.
• Residential labor services (K.S.A. 79-3603(p)): labor to remodel, reconstruct, restore, renovate, repair, or replace a residence (an enclosure where people customarily live) is exempt on or after July 1, 1998; materials remain taxable, and the original-construction exemption continues.

What this means for you

If you sell to or operate a Kansas nonprofit, school, broadcaster, PTA, or scouting group -- or you do residential remodeling -- the 1998 changes likely made some of your purchases or labor charges exempt starting July 1, 1998. Retailers of prepaid phone cards began charging tax at the point of sale.

Common questions

Q: Did residential remodeling labor become tax-exempt in 1998?
A: Yes. Labor services to remodel, reconstruct, restore, renovate, repair, or replace a residence are exempt on or after July 1, 1998, though materials remain taxable.

Q: How are prepaid telephone calling cards taxed after July 1, 1998?
A: They are taxed at the time the card is purchased as a retail sale of tangible personal property; calls later debited to the card are not separately taxed.

Citations and references

• K.S.A. 79-3606(g) (aircraft sales through authorized agent)
• K.S.A. 79-3606(aaa) (religious organizations)
• K.S.A. 79-3619 (direct payment authority)
• K.S.A. 79-3602(s) (educational institution definition; project exemptions)
• K.S.A. 79-3606(zz) (broadcast-signal equipment)
• K.S.A. 79-3606(kk) (manufacturing machinery repair/replacement parts)
• K.S.A. 79-3603(m); K.S.A. 79-3603(n) (membership dues; veterans organizations)
• K.S.A. 79-3606(xx) (nonprofit zoos)
• K.S.A. 79-3606(bbb); K.S.A. 79-3606(ii) (nonprofit food distribution; youth development sales)
• K.S.A. 79-3606(yy) (parent-teacher associations)
• K.S.A. 79-3602(f); K.S.A. 79-3603(b) (prepaid telephone calling cards)
• K.S.A. 79-3603(p) (residential labor services)

Subject

1998 Sales Tax Changes and Exemptions

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 98-01

Original ruling text

Notice
Notice Number: 98-01
Tax Type: Kansas Retailers' Sales Tax
Brief Description: 1998 Sales Tax Changes and Exemptions
Keywords:
Effective Date: 07/01/1998

Body:
Office of the Secretary

       1998 SALES TAX CHANGES AND EXEMPTIONS
               The following is a summary of this year's sales tax legislation that becomes law on July 1, 1998.

Aircraft Sales. Certified and licensed air carriers are currently exempt from sales tax on their purchases of aircraft, aircraft
replacement parts, and aircraft repair and modification services, when the aircraft being sold or serviced is for use in interstate or
foreign commerce. This exemption is expanded to exempt these sales when they are made through an authorized agent of the air
carrier for the carrierís eventual use in interstate or foreign commerce. K.S.A. 79-3606(g).

Churches and Religious Organizations. Sales of tangible personal property and services purchased by nonprofit 501(c)(3) religious
organizations are exempt from sales tax if the property or services are used exclusively for religious purposes. This exemption does
not apply to sales made to contractors who purchase materials to perform work on property owned by these organizations. However,
any sale of materials will be exempt if made directly to the exempt church or other religious organization. The department will
publish more complete information on this exemption later this month. K.S.A. 79-3606(aaa).

Direct Payment Authority. Certain large businesses are now eligible to apply to the department to make sales and use tax payments
directly to the state. Businesses granted this direct payment authority may present their permit to their vendors to claim exemption
and pay any sales or use tax due directly to the department. K.S.A. 79-3619.

Educational Institutions. Schools and educational institutions are exempt from sales tax. The 1998 legislature defined an
"educational institution" to mean a nonprofit school, college, or university that offers educational courses at a level above the twelfth
grade and meets certain requirements fixed by the statute. This new definition also includes:

         Nonprofit endowment associations and foundations that operate exclusively for the support and benefit of an educational
         institution;
         Nonprofit entities whose principal purpose is to hold receipts from intercollegiate sporting events and to disburse these
         receipts, as well as grants and gifts, for the sole benefit of the athletic programs of an educational institution;
         Nonprofit research organizations whose primary purpose is to pursue scholarly investigation and research for the sole
         benefit of an educational institution; and
         A group of educational institutions that operate exclusively for an educational purpose, such as the NCAA.

Educational institutions are eligible to obtain a project exemption when constructing, equipping, reconstructing, maintaining,
repairing, enlarging, furnishing, or remodeling buildings other than dormitories, and when they make other improvements to
property. K.S.A. 79-3602(s).

Equipment used in Certain Types of Broadcasting. The legislature exempted sales of equipment that is used directly and primarily
to generate broadcast signals for over-the-air free access radio and television stations. The electricity the station uses to power the
equipment that generates its signal is also exempt. K.S.A. 79-3606(zz).

Manufacturing Machinery and Equipment. The sales tax exemption for manufacturing machinery and equipment is now
broadened to exempt repair and replacement parts and accessories. Exempt parts include, but are not limited to: belts, drill bits,
grinding wheels, cutting bars, saws, dies, jigs, and molds. Refractory items used in production are also exempt. K.S.A. 79-3606(kk).

Membership Dues and Fees. The 1998 legislature exempted membership dues and recreational activity fees that are paid to certain
nonprofit community service organizations. For this exemption to apply, the organization must qualify for exemption from property
tax under the Ninth paragraph of K.S.A. 79-201. These organizations may include but are not limited to: the American Red Cross,
Big Brothers & Big Sisters, Boy Scouts, Girl Scouts, YMCA, YWCA, community health centers, local community organizations,
and social services organizations. K.S.A. 79-3603(m).

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Also exempted are the membership dues paid to military veterans organizations, such as the Veterans of Foreign Wars and the
American Legion, and their auxiliaries. These dues were previously taxed when payment allowed members to use the organizationís
facilities for recreation or entertainment. K.S.A. 79-3603(n).

Nonprofit Zoos. Purchases by a nonprofit 501(c)(3) zoo, or purchases made on behalf of the zoo by a nonprofit 501(c)(3)
organization that operates the zoo, are now exempt from sales tax. Nonprofit zoos, like political subdivisions and schools, are
eligible to receive project exemption certificates to exempt contractor purchases of materials and supplies used to improve their
facilities. Membership dues charged by such nonprofit organizations whose sole purpose is to support a nonprofit zoo are also
exempt from sales tax. K.S.A. 79-3606(xx); K.S.A. 79-3603(n).

Other Nonprofit Organizations. Sales of food for human consumption are now exempt when made by a nonprofit 501(c)(3)
organization under a food distribution program that sells the food below cost in exchange for community service. K.S.A. 79-
3606(bbb).

Sales of tangible personal property made by or on behalf of a nonprofit organization for nonsectarian multidiscipline youth
development programs are now exempt from sales tax. This includes Girl Scout cookie sales and Boy Scout popcorn sales. K.S.A.
79-3606(ii).

Parent-Teacher Associations. Parent-teacher associations and organizations are now exempt from paying sales tax on their
purchases. Parent-teacher associations and organizations are also relieved of the responsibility of collecting sales tax on fund raising
sales they make on behalf of the association. K.S.A. 79-3606(yy).

Prepaid Telephone Calling Cards. Prepaid telephone calling cards, which are denominated in minutes, are now taxable at the time
of sale as the retail sale of tangible personal property. Since tax is paid at the time of the card is purchased, calls debited to the card
are no longer subject to sales tax. Charges for prepaid authorization numbers and for the recharge of a calling card are taxed in the
same way as the sale of the calling card itself. K.S.A. 79-3602(f); K.S.A. 79-3603(b).

Residential Labor Services. Labor services performed on or after July 1, 1998 to remodel, reconstruct, restore, renovate, repair, or
replace a residence are exempt. A "residence" is defined to mean "only those enclosures within which individuals customarily live."
Sales of materials and supplies for use in residential or commercial construction projects remain taxable. The exemption for original
construction also remains in place. The department will publish more complete information on these changes later this month.
K.S.A. 79-3603(p).
Taxpayer Assistance

If you have any questions about this notice, please contact the customer service representatives in one of our taxpayer assistance
offices:
Topeka
Docking State Office Building
915 SW Harrison St., 3rd Floor
Phone: (785) 296-0222
Hearing Impaired TTY: (785) 296-6461
Fax: (785) 291-3614
Overland Park
Cloverleaf Office Park, Bldg. 3
6405 Metcalf Ave., Suite 120
Phone: (913) 677-0158
Fax: (913) 677-6649
Wichita
State Office Building
230 E. William, Room 7150
Phone: (316) 337-6140
Fax: (316) 337-6162

Notice 98-01 (June 5, 1998)
To: All Registered Retailers
Re: 1998 Sales Tax Legislation

Date Composed: 06/08/1998 Date Modified: 10/10/2001

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