Are participation fees charged to youths under 18 for weekly races subject to Kansas sales tax?

Plain-English summary

The question was whether Kansas sales tax applies to fees charged to persons under 18 for participating in weekly races.

The statute taxes recreation fees — with a youth carve-out. K.S.A. 79-3603(m) imposes sales tax on "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 the tax "shall not be levied and collected upon the gross receipts received from ... 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."

The holding. "[I]t is the opinion of this department that the fees which are charged to persons under 18 years of age for participation in the weekly races would be exempt from Kansas sales tax(es), pursuant to K.S.A. 79-3603(m)."

Bottom line: participation fees generally are taxable, but the fees these youths (18 and under) pay to take part in the weekly races fall within the youth-recreation exemption and are not taxed.

What this means for you

Recreation participation fees are generally taxable

K.S.A. 79-3603(m) taxes fees and charges for participation in sports, games, and other recreational activities. As a default, charging people to take part in a recreational activity is a taxable transaction in Kansas.

The youth-recreation exemption

The statute exempts fees received by a youth recreation organization that exclusively serves persons 18 or younger and is a 501(c)(3) organization. On these facts, the fees charged to the under-18 participants in the weekly races were exempt.

Confirm you meet all parts of the carve-out

The exemption depends on the organization exclusively providing services to persons 18 or younger and holding 501(c)(3) status. An organization that also serves adults, or that lacks 501(c)(3) status, would need to look closely at whether its participation fees still qualify.

Fees from adult participants are a different question

The exemption is framed around youth participants and youth organizations. Fees charged to adults for participation in recreational activities remain within the general taxing rule of K.S.A. 79-3603(m).

Common questions

Q: Are participation fees for recreational activities taxable in Kansas?
A: Generally yes. K.S.A. 79-3603(m) taxes fees and charges for participation in sports, games, and other recreational activities.

Q: Why were these race fees exempt?
A: Because they fell within the statute's youth-recreation carve-out — fees for participation by persons 18 and younger through a qualifying 501(c)(3) youth recreation organization.

Q: Does the organization have to be a 501(c)(3)?
A: The statutory exemption is written for a youth recreation organization exclusively serving persons 18 or younger that is exempt under section 501(c)(3). Meeting those conditions is what supports the exemption.

Citations and references

• K.S.A. 79-3603(m) — imposes Kansas sales tax on fees and charges for participation in sports, games, and other recreational activities, with an exemption for a 501(c)(3) youth recreation organization exclusively serving persons 18 years of age or younger.
• 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-1999-124

Original ruling text

Private Letter Ruling

Body:

Office of Policy and Research

May 13, 1999

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Dear Ms. TTTTTTTTT:

We wish to acknowledge receipt of your letter dated April 19, 1999, regarding the application of Kansas Retailers’ Sales tax.

K.S.A. 79-3603(m) imposes a sales tax upon: “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. . . 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. . .”

In closing, it is the opinion of this department that the fees which are charged to persons under 18 years of age for participation in the weekly races would be exempt from Kansas sales tax(es), pursuant to K.S.A. 79-3603(m).

This is a private letter ruling pursuant to K.A.R. 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 ruling will be revoked in the future by the operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or published revenue ruling, that materially effects this private letter ruling.

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

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

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