When a school rents hotel rooms, are the charges exempt from Kansas sales tax, and what makes it a qualifying direct purchase?

Plain-English summary

The question concerned Kansas sales tax on a school's rental of hotel rooms.

The exemption. Kansas exempts "all sales of tangible personal property or services, including the renting and leasing of tangible personal property, purchased directly by a public or private elementary or secondary school or public or private nonprofit educational institution and used primarily by such school or institution for nonsectarian programs and activities provided or sponsored by such school or institution." K.S.A. 79-3606(c).

But it must be a "direct sale." "Direct sales to your school are exempt from Kansas retailers' sales tax. A 'direct sale' is one that meets all requirements as contained in Kansas Administrative Regulation 92-19-76. This means that the billing from the hotel must be to the school, and that payment must be made to the hotel on a school check or voucher. Purchases by teachers, students or school organizations or groups are not exempt."

Transient guest tax still applies. "Please note that while these charges are exempt [from] Kansas sales tax they are still subject to Kansas transient guest tax."

Bottom line: a school can rent hotel rooms free of Kansas sales tax — but only when the hotel bills the school and the school pays directly (school check or voucher). If a teacher, student, or group books and pays and seeks reimbursement, the sale is taxable. And the separate transient guest tax applies to the room either way.

What this means for you

The sales-tax exemption depends on how the room is billed and paid

For the exemption to apply, the hotel must bill the school and be paid on a school check or voucher. The school's status is not enough on its own — the paperwork and payment have to run through the school directly.

Individual bookings by teachers, students, or groups are taxable

When a teacher, student, or school organization books and pays for the room personally (even on official school business, and even if later reimbursed), the room is not a direct purchase and is taxable. This mirrors the direct-purchase rule the regulation applies to political-subdivision purchases.

Transient guest tax applies regardless

Kansas transient guest tax (the lodging tax on hotel rooms) is separate from sales tax. Even an exempt school room rental remains subject to transient guest tax, so the hotel still collects that on the charge.

Keep clean documentation

To support the exemption, retain the hotel invoice made out to the school and proof of payment by school check or voucher, along with the school's exemption certificate. That is what establishes the transaction as an exempt direct sale.

Common questions

Q: Are hotel rooms rented by a school exempt from Kansas sales tax?
A: Yes, if it is a direct sale — the hotel bills the school and the school pays by its own check or voucher. Then the room charge is exempt under K.S.A. 79-3606(c).

Q: What if a teacher or student books and pays for the room?
A: Then it is not exempt. Purchases by teachers, students, or school organizations/groups are taxable, even if the school later reimburses them.

Q: Is the room completely tax-free for a qualifying school?
A: No. The sales tax is exempt on a qualifying direct sale, but Kansas transient guest tax still applies to the room charge.

Citations and references

• K.S.A. 79-3606(c) — exempts direct purchases (including rentals and leases) by a public or private elementary/secondary school or nonprofit educational institution, used primarily for nonsectarian programs and activities.
• K.A.R. 92-19-76 — sets the "direct purchase" requirements: the bill/invoice must be in the exempt entity's name and payment must be made on that entity's check, warrant, or voucher; purchases by agents, employees, or representatives are taxable unless covered by a project exemption certificate.
• 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-1999-118

Original ruling text

Private Letter Ruling

Body:

Office of Policy and Research

May 21, 1999

XXXXXXXXXXXXXX
XXXXXXXXXXXX
XXXXXXXXXXX

Dear XXXXXXXXXX:

I have been asked to respond to your letter dated April 19, 1999. In it, you ask for guidance in the application sales tax on sales to educational institutions on rentals of hotel rooms.

Kansas sales tax law exempts “all sales of tangible personal property or services, including the renting and leasing of tangible personal property, purchased directly by a public or private elementary or secondary school or public or private nonprofit educational institution and used primarily by such school or institution for nonsectarian programs and activities provided or sponsored by such school or institution. . .” K.S.A. 79-3606(c).

Direct sales to your school are exempt from Kansas retailers’ sales tax. A “direct sale” is one that meets all requirements as contained in Kansas Administrative Regulation 92-19-76. This means that the billing from the hotel must be to the school, and that payment must be made to the hotel on a school check or voucher. Purchases by teachers, students or school organizations or groups are not exempt. See Kansas administrative Regulation 92-19-76 contained in Appendix. Please note that while these charges are exempt form Kansas sales tax they are still subject to Kansas transient guest tax.

This private letter ruling is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to make 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 private letter ruling.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Appendix

92-19-76

Sales to political subdivisions
of the state of Kansas. (a) All direct purchases
of tangible personal property and taxable services
by a political subdivision of the state of Kansas
shall be exempt from sales tax, unless otherwise
provided by law.
(b) To qualify as a direct purchase, each bill,
invoice, contract or other evidence of the trans-
action shall be made out in the name of the polit-
ical subdivision which qualifies for an exemption
under the act, and each payment shall be made
on the check, warrant or voucher of that political
subdivision.
(c) All sales of tangible personal property or
taxable services made to and paid for by an agent,
employee or other representative of a political
subdivision shall be subject to sales tax, unless ex-
pressly authorized under a project exemption cer-
tificate issued by the department of revenue, even
though the same purchase would have been ex-
empt from sales tax had the political subdivision
directly purchased the tangible personal property
or service. Any contractual arrangement or un-
derstanding between an agent or employee and a
political subdivision shall not be recognized by the
department, and the retailer shall charge and col-
lect the sales tax on the total selling price of tan-
gible personal property or service, even though:
(1) The agent or employee may be on official
business on behalf of the political subdivision;
(2) is on a per diem from the political subdi-
vision;
(3) is on an expense account, allowance or shall
otherwise be reimbursed by the political subdivi-
sion; or
(4) has or will receive monies, credits or other
assets from the political subdivision to pay for the
transaction.
(d) The exemption from sales tax for political
subdivisions applies only to the extent the political
subdivision is not engaged nor proposes to engage
in the business of furnishing gas, water, electricity
or heat to others and the tangible personal prop-
erty or taxable services are used or proposed to be
used in such business. When a political subdivi-
sion is engaged or proposes to engage in furnish-
ing any of these four businesses, the political sub-
division shall pay sales tax on all purchases of
tangible personal property and taxable services
used in these businesses. Nothing under this sec-
tion of the act shall be construed to limit other
exemptions which may be available to a political
subdivision which furnishes gas, water, electricity
or heat. (Authorized by K.S.A. 79-3618, imple-
menting K.S.A. 1986 Supp. 79-3606 as amended
by L. 1987, Ch. 292, Sec. 32, as further amended
by L. 1987, Ch. 64, Sec. 1; effective May 1, 1988.)

Date Composed: 05/27/1999 Date Modified: 10/11/2001

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