Can a church buy its utilities free of Kansas sales tax, and what if the utility serves both exempt and taxable uses?

Plain-English summary

A church asked whether it can buy utilities free of Kansas sales tax under the religious-organization exemption.

The exemption. The Department quoted K.S.A. 79-3606(aaa), which exempts "all sales of tangible personal property and services purchased by a religious organization which is exempt from federal income taxation pursuant to section 501(c)(3) … and used exclusively for religious purposes." So "if the tangible personal property and services that your church purchases are used exclusively for religious purposes, the purchase could be made by the church without having to pay Kansas sales tax."

Exclusive religious use — no worksheet needed. "If the utility is purchased exclusively for religious purposes, you will not need to fill out worksheets to determine how much of the utilities qualify for exemption."

Mixed use — apportion it. "[I]f the utility is purchased for both a taxable and a non-taxable use, then a determination would need to be made as to how much of the purchase is exempt from sales tax."

How to claim it. "You should supply your utility company with a copy of the exemption certificate (BT/ST-28B)." The Department enclosed Revenue Notice 98-5, "Sales Taxation of Purchases by Religious Organizations."

Bottom line: a qualifying church's utilities used exclusively for religious purposes are exempt from Kansas sales tax, claimed by giving the utility company Form BT/ST-28B. If the same utility serves both religious and taxable uses, the church must figure out and document the exempt portion.

What this means for you

Utilities count as exempt religious-use purchases

The religious-organization exemption covers a church's purchases used exclusively for religious purposes, and utilities are within its reach. A qualifying church can buy them without paying Kansas sales tax.

Exclusive religious use is the clean case

When a utility is used only for religious purposes, the church does not need to complete an apportionment worksheet — the whole purchase is exempt.

Mixed use must be apportioned

If a utility serves both exempt religious use and some taxable use, the church has to determine what share is exempt. Only the religious-use portion is tax-free, and the church should be able to support that split.

Claim the exemption with Form BT/ST-28B

The mechanism is to give the utility company a copy of the exemption certificate, Form BT/ST-28B, so it stops charging sales tax on the exempt utility purchases.

Common questions

Are a church's utilities exempt from Kansas sales tax?
Yes, to the extent they are used exclusively for religious purposes under K.S.A. 79-3606(aaa). The church claims the exemption with Form BT/ST-28B.

Does the church need a worksheet?
Not if the utility is used exclusively for religious purposes. A worksheet/apportionment is only needed when the utility serves both taxable and non-taxable uses.

What if a utility is used for both religious and non-religious purposes?
The church must determine how much of the purchase is exempt; only the religious-use portion qualifies.

How does the church stop the utility company from charging tax?
By supplying the utility company with a copy of the exemption certificate, Form BT/ST-28B.

Citations and references

• K.S.A. 79-3606(aaa) — exempts a 501(c)(3) religious organization's purchases of tangible personal property and services used exclusively for religious purposes; the Department applied it to church utilities.
• Form BT/ST-28B — the exemption certificate the church gives its utility company to claim the exemption.
• Revenue Notice 98-5, "Sales Taxation of Purchases by Religious Organizations" — the Department's implementing guidance, enclosed with the ruling.
• K.A.R. 92-19-59 — authorizes Kansas private letter rulings; this ruling binds the Department only as to the requesting taxpayer and the facts presented.
• Issued August 28, 1998 by Thomas P. Browne, Jr., Tax Specialist, Kansas Department of Revenue.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1998-119

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

August 28, 1998

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Dear Mr. TTTTTT:

We wish to acknowledge receipt of your letter which was received by this office on August 22, 1998, regarding the application of Kansas Retailers’ Sales tax.

K.S.A. 79-3606(aaa) exempts from sales tax: “all sales of tangible personal property and services purchased by a religious organization which is exempt from federal income taxation pursuant to section 501(c)(3) of the federal internal revenue code, and used exclusively for religious purposes.”

Therefore, if the tangible personal property and services that your church purchases are used exclusively for religious purposes, the purchase could be made by the church without having to pay Kansas sales tax.

If the utility is purchased exclusively for religious purposes, you will not need to fill out worksheets to determine how much of the utilities qualify for exemption. However, on the other hand, if the utility is purchased for both a taxable and a non-taxable use, then a determination would need to be made as to how much of the purchase is exempt from sales tax. You should supply your utility company with a copy of the exemption certificate (BT/st-28B).

For your convenience, I have enclosed a copy of Revenue Notice 98-5, entitled, “Sales Taxation of Purchases by Religious Organizations”.

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: 09/14/1998 Date Modified: 10/10/2001

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