Are purchases of medical supplies and equipment by a nonprofit nursing home exempt from Kansas sales tax?

Plain-English summary

The Department explained how Kansas sales tax applies to a nonprofit nursing home's purchases. The short version: medical supplies and equipment the nursing home buys directly to provide medical services to residents are exempt, but property used for human habitation is not, and a bond-financed building project can get its own exemption certificate. The Department noted the reply "is an informational letter only and not a private letter ruling pursuant to K.A.R. 92-19-59."

Two points:

• Medical supplies and equipment — exempt. "Senate Bill 309, enacted by the 1987 Kansas Legislature, provided that all sales of medical supplies and equipment purchased directly by a nonprofit skilled nursing home or nonprofit intermediate nursing care home, as defined by K.S.A. 39-923, for the purpose of providing medical services to residents thereof, shall be exempt from sales tax in the state of Kansas." The catch: "this exemption does not apply to tangible personal property customarily used for human habitation purposes." So furnishings and other living-space items remain taxable.
• Construction projects — a separate exemption. "Construction projects that are fully financed by industrial revenue bonds could qualify for a project exemption certificate." The political subdivision issuing the bonds "shall obtain from the Kansas Department of Revenue, a project exemption certificate prior to the start of the project," using Form PR-76 (a Request for Project Exemption Certificate).

What this means for you

Nonprofit nursing homes

Medical supplies and equipment you purchase directly to provide medical services to your residents are exempt from Kansas sales tax. But items customarily used for human habitation (living-space furnishings and the like) are taxable. Buy on the exemption only for the qualifying medical items.

Nursing-home building projects

If a project is fully financed by industrial revenue bonds, it can qualify for a project exemption certificate that covers the project's purchases. The certificate must be obtained by the political subdivision issuing the bonds, and it must be in hand before the project begins — file Form PR-76 early.

Everyone else

This exemption is specific to nonprofit skilled and intermediate nursing care homes as defined by K.S.A. 39-923. A for-profit facility, or purchases not for providing medical services to residents, do not fall within it.

Common questions

Q: Does a nonprofit nursing home pay sales tax on medical supplies and equipment?
A: No — sales of medical supplies and equipment purchased directly by a qualifying nonprofit nursing home to provide medical services to residents are exempt.

Q: Is everything the nursing home buys exempt?
A: No. The exemption does not apply to tangible personal property customarily used for human habitation purposes; those items remain taxable.

Q: How does a construction project avoid tax?
A: A project fully financed by industrial revenue bonds can qualify for a project exemption certificate. The bond-issuing political subdivision must obtain it from the Department (Form PR-76) before the project starts.

Citations and references

• K.S.A. 39-923 — supplies the definition of the nonprofit skilled nursing home and nonprofit intermediate nursing care home whose direct purchases of medical supplies and equipment are exempt.
• Senate Bill 309 (1987 Kansas Legislature) — enacted the exemption for medical supplies and equipment purchased directly by these nonprofit nursing homes to provide medical services to residents; the exemption excludes property customarily used for human habitation.
• Project exemption certificate / Form PR-76 — the mechanism for exempting purchases on a construction project fully financed by industrial revenue bonds; obtained by the bond-issuing political subdivision before the project starts.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: O-1998-14

Original ruling text

Opinion Letter

Body:

Office of Policy & Research

October 6, 1998

TTTTTTTTTT
TTTTTTTTTT
TTTTTTTTTT
TTTTTTTTTT
TTTTTTTTTT

Dear Ms. TTTTT:

We wish to acknowledge receipt of your letter dated September 19, 1998, regarding the application of Kansas Retailers’ Sales tax.

This is an informational letter only and not a private letter ruling pursuant to K.A.R. 92-19-59.

Senate Bill 309, enacted by the 1987 Kansas Legislature, provided that all sales of medical supplies and equipment purchased directly by a nonprofit skilled nursing home or nonprofit intermediate nursing care home, as defined by K.S.A. 39-923, for the purpose of providing medical services to residents thereof, shall be exempt from sales tax in the state of Kansas. However, this exemption does not apply to tangible personal property customarily used for human habitation purposes.

Construction projects that are fully financed by industrial revenue bonds could qualify for a project exemption certificate. The political subdivision issuing the bonds shall obtain from the Kansas Department of Revenue, a project exemption certificate prior to the start of the project. For your convenience, I have enclosed Form PR-76, which is a Request for Project Exemption Certificate. If I may be of further assistance, please contact me at your earliest convenience at (785) 296-7776.

Sincerely yours,

Thomas P. Browne, Jr.
Tax Specialist

TPB

Enc

Date Composed: 10/19/1998 Date Modified: 10/10/2001

Table 1

Table 2