Must a youth baseball organization collect Kansas sales tax on its candy fundraising sales?

Plain-English summary

A youth baseball organization asked how Kansas sales tax applies to retail sales — candy fundraising — made by its youth participants.

The youth-development sales exemption does not fit. The Department quoted the exemption for "all sales of tangible personal property purchased directly by a non-profit organization for nonsectarian comprehensive multidiscipline youth development programs ... and all sales of tangible personal property by or on behalf of any such organization," which also exempts sales "by or on behalf of" such programs. But "[i]t is the opinion of the Kansas Department of Revenue that a 'youth baseball program' does not come within the meaning of 'nonsectarian comprehensive multidiscipline youth development programs.'" So that sales exemption does not apply.

Participation fees are a different, exempt category. The Department then quoted the recreation-fee statute, which exempts fees charged by "any youth recreation organization exclusively providing services to persons 18 years of age or younger which is exempt from federal income taxation pursuant to section 501(c)(3)." It observed that "[t]his term's frame of reference is exactly the type of entity as your organization," and that "[a]t the time participation fees were exempted from sales tax your type of youth organization was specifically what the legislature had intended to exempt." So the organization's participation fees are exempt.

But candy sales are not. "No amendments to the Kansas law have exempted candy sales by a 'youth recreation organization.' Your organization must collect and remit sales tax on it['s] fund raising sales."

Bottom line: the youth baseball organization's participation fees are exempt because it is a qualifying youth recreation organization, but its candy fundraising sales are taxable — it must collect and remit sales tax on them.

What this means for you

Fee exemption and sales exemption are separate questions

Being a qualifying youth recreation organization exempts the participation fees the organization charges. It does not exempt the organization's retail sales of goods.

A youth sports program is not a "youth development program"

The broader sales exemption is reserved for "nonsectarian comprehensive multidiscipline youth development programs." The Department held a youth baseball program does not fall within that phrase.

Fundraising candy sales are taxable

No Kansas amendment has exempted candy sales by a youth recreation organization, so those retail fundraising sales are subject to sales tax; the organization must collect and remit.

Register to collect on taxable sales

An organization making taxable fundraising sales must be set up to collect Kansas sales tax and remit what it collects, even though its participation fees are exempt.

Common questions

Q: Are a youth baseball organization's participation fees taxable?
A: No. As a qualifying 501(c)(3) youth recreation organization serving persons 18 or younger, its participation fees are exempt.

Q: Are its candy fundraising sales taxable?
A: Yes. No exemption covers candy sales by a youth recreation organization, so the organization must collect and remit sales tax on them.

Q: Why doesn't the youth-development sales exemption apply?
A: Because the Department concluded a youth baseball program is not a "nonsectarian comprehensive multidiscipline youth development program."

Q: What must the organization do about its fundraising sales?
A: Collect Kansas sales tax on the candy sales and remit it to the Department.

Citations and references

• Kansas youth-development sales exemption — exempts sales of tangible personal property by or on behalf of a nonprofit "nonsectarian comprehensive multidiscipline youth development program"; the Department held a youth baseball program is not such a program, so the exemption does not reach its candy sales. The ruling quoted this provision without citing a statutory subsection number.
• Kansas recreation-fee youth exemption — exempts participation fees charged by a 501(c)(3) youth recreation organization exclusively serving persons 18 or younger; it exempts fees, not retail sales. The ruling quoted this provision without citing a subsection number.
• K.A.R. 92-19-59 — the regulation authorizing private letter rulings; this ruling was issued under it and binds the Department only as to the requesting taxpayer.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1998-189

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

November 20, 1998

XXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXX
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Dear XXXXXXXXXX:

The purpose of this letter is to respond to your letter dated November 6, 1998. You requested the Kansas Department of Revenue advise you on the application of Kansas retailers’ sales tax on retail sales by the youth participants of the XXXXXXXXXXXXXXXX.

Kansas law exempts “all sales of tangible personal property purchased directly by a non- profit organization for nonsectarian comprehensive multidiscipline youth development programs and activities provided or sponsored by such organization, and all sales of tangible personal property by or on behalf of any such organization.” The amendment to this law exempts sales by or on behalf of “nonsectarian comprehensive multidiscipline youth development programs.” It is the opinion of the Kansas Department of Revenue that a “youth baseball program” does not come within the meaning of “nonsectarian comprehensive multidiscipline youth development programs.”

Kansas law generally taxes “the gross receipts received from fees and charges by public and private clubs, drinking establishments, organizations and businesses for participation in sports, games and other recreational activities, but such tax shall not be levied and collected upon the gross receipts received from: (1) Fees and charges by any political subdivision, or any youth recreation organization exclusively providing services to persons 18 years of age or younger which is exempt from federal income taxation pursuant to section 501(c)(3) of the federal internal revenue code of 1986, for participation in sports, games and other recreational activities; [emphasis added] and (2) entry fees and charges for participation in a special event or tournament sanctioned by a national sporting association to which spectators are charged an admission which is taxable pursuant to subsection (e);”

The underlined portion of this statute that contains the term “youth recreation organization.” This term’s frame of reference is exactly the type of entity as your organization. At the time participation fees were exempted from sales tax your type of youth organization was specifically what the legislature had intended to exempt.

No amendments to the Kansas law have exempted candy sales by a “youth recreation organization.” Your organization must collect and remit sales tax on it’s fund raising sales.

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

Date Composed: 11/17/1998 Date Modified: 10/10/2001

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