Are Habitat for Humanity's materials and construction services for its housing projects exempt, and must it still collect tax on fundraising sales?

Plain-English summary

A Habitat for Humanity organization asked how Kansas sales tax applies to the materials and services for its housing projects and to its fundraising.

Materials are exempt. K.S.A. 79-3606(ww) exempts "all sales of tangible personal property purchased by the Habitat for Humanities for the exclusive use of being incorporated within a housing project constructed by such organization." The Department confirmed the organization "may purchase materials and items to be installed in your housing projects" and enclosed an exemption certificate for those purchases.

Construction services are exempt too. While "the exemption does not exempt [the organization] for purchases of enumerated taxable services," the Department noted that "services performed in the original construction of a building and services to repair residential property are exempt from sales tax." So the organization "would be exempt from sales tax when you contract for services to construct or renovate residential property." The Department enclosed Notice 98-02 on that exemption.

Fundraising sales are still taxable. The organization "would be required to maintain it['s] sales tax registration to report taxable sales from fund raising sales of tangible property or services."

Bottom line: Habitat for Humanity buys its housing-project materials tax-free under K.S.A. 79-3606(ww), and its residential construction and repair labor is exempt as well — but it remains a retailer for its fundraising, so it must keep its sales tax registration and collect and remit tax on fundraising sales of property or services.

What this means for you

The materials exemption is project-specific

K.S.A. 79-3606(ww) covers property purchased "for the exclusive use of being incorporated within a housing project constructed by" the organization. Use the enclosed exemption certificate for those buys, and keep purchases tied to the housing projects.

Construction labor is exempt on its own footing

Even though the organization's exemption does not cover enumerated taxable services generally, residential construction and repair services are separately exempt. Contracting to construct or renovate residential property is tax-free — see Notice 98-02.

Fundraising keeps you a retailer

The exemption on the building side does not turn the organization's fundraising sales tax-free. Selling tangible personal property or taxable services to raise funds is a taxable retail activity, so the organization must keep its sales tax registration and collect tax on those sales.

Two different roles, two different rules

Think of the organization as wearing two hats: an exempt builder of low-income housing (materials and labor exempt) and a taxable retailer when it fundraises. The paperwork — an exemption certificate for purchases, an active registration for sales — reflects both roles.

Common questions

Can Habitat for Humanity buy building materials tax-free?
Yes. Under K.S.A. 79-3606(ww), materials incorporated into a housing project the organization constructs are exempt; use the exemption certificate the Department enclosed.

Is the construction labor taxable?
No. Services in the original construction of a building and services to repair residential property are exempt, so contracting to construct or renovate residential property is tax-free.

Do we still charge tax on our fundraising sales?
Yes. The organization must keep its sales tax registration and collect tax on fundraising sales of tangible property or taxable services.

Where can we read more on the construction exemption?
See Notice 98-02, which the Department enclosed with the ruling.

Citations and references

• K.S.A. 79-3606(ww) — exempts tangible personal property purchased by Habitat for Humanity for the exclusive use of being incorporated within a housing project the organization constructs.
• Notice 98-02 — Department guidance on the construction-services exemption, 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 October 9, 1998 by Mark D. Ciardullo, Tax Specialist, Office of Policy & Research, Kansas Department of Revenue.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1998-154

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

October 9, 1998

XXXXXXXXXXXXXXXXX
XXXXXXX
XXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXX

Dear XXXXXXXXXXXXXXXXXX:

The purpose of this letter is to respond to your letter dated September 21, 1998.

K.S.A. 79-3606 (ww) exempts from Kansas retailers’ sales tax,

“ all sales of tangible personal property purchased by the Habitat for Humanities for the exclusive use of being incorporated within a housing project constructed by such organization.”

XXXXXXXXXXXXXXXXXXXXXX may purchase materials and items to be installed in your housing projects. I have enclosed an exemption certificate for these purchases.

The exemption does not exempt XXXXXXXX for purchases of enumerated taxable services. However, services performed in the original construction of a building and services to repair residential property are exempt from sales tax. Your organization would be exempt from sales tax when you contract for services to construct or renovate residential property. I have enclosed Notice 98-02 to assist you on this exemption.

XXXXXXX would be required to maintain it’s sales tax registration to report taxable sales from fund raising sales of tangible property or services.

This is a private letter ruling pursuant to Kansas Administrative Regulation 92-19-59. It is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects this ruling.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

encl.

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

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