Which foodservice products sold to restaurants, nursing homes, and schools are exempt from Kansas sales tax?

Plain-English summary

A distributor of foodservice products asked how Kansas sales tax applies to its sales to restaurants, nursing homes, and schools. The Department answered in three buckets.

Restaurants — disposables are exempt ingredient/component parts. K.S.A. 79-3606(m) exempts "all sales of tangible personal property which become an ingredient or component part of tangible personal property . . . produced, manufactured or compounded for ultimate sale at retail." The Department listed many restaurant purchases that "are generally exempt under K.S.A. 79-3606(m)," including "wetnaps," "paper doilies," "straws," "toothpicks," "doggie bags," "paper napkins," "disposable placemats," "carryout containers," "carryout bags," "disposable drinking cups," "coffee stirrers," "disposable silverware," "portion cups (disposable)," "plastic plates," "plastic steak markers," "plastic table covers (disposable)," "paper table covers," "paper liners for pizza boxes," and "paper liners for serving baskets." These pass to the customer along with the meal.

Restaurants — reusables and ice are taxable. "[T]he restaurant would be the ultimate consumer on purchases of reusable plastic table covers and ice, and therefore would be obligated to pay the appropriate Kansas sales/use tax(es)" on them.

Nursing homes — medical supplies exempt, habitation items taxable. Under 1987 legislation (Senate Bill 309), medical supplies and equipment "purchased directly by a nonprofit skilled nursing home or nonprofit intermediate nursing care home, as defined by K.S.A. 39-923," for providing medical services to residents are exempt. But the exemption "does not apply to tangible personal property customarily used for human habitation purposes," so "food, food preparation supplies and similar type items" bought by a nursing home are taxable.

Schools and educational institutions — exempt, and the term is broad. "Schools and educational institutions are exempt from paying sales tax on their purchases." A 1998 law defined "educational institution" as a nonprofit school, college, or university offering courses above the twelfth grade, and expanded it to include qualifying nonprofit endowment associations and foundations, nonprofit entities that hold and disburse intercollegiate-sporting-event receipts for an institution's athletic programs, nonprofit research organizations serving an institution, and "a group of educational institutions that operate exclusively for an educational purpose, such as . . . the NCAA."

Bottom line: disposable items a restaurant serves with the meal are exempt; items the restaurant consumes (reusable table covers, ice) are taxable; nursing homes buy medical supplies exempt but not food/habitation items; and schools and a broadened list of educational institutions buy exempt.

What this means for you

Sell to restaurants: disposable vs. reusable is the line

Single-use items that go out with the customer's food are exempt ingredient/component parts. Items the restaurant keeps and uses itself — reusable table covers, and ice — are taxable to the restaurant as the consumer. Classify each product accordingly.

Nursing homes: match the item to the exemption

A nonprofit skilled or intermediate nursing care home can buy medical supplies and equipment for resident care exempt, but food and food-preparation supplies are taxable. Get the right exemption documentation and do not treat the medical-supply exemption as covering the kitchen.

Schools and educational affiliates: confirm the entity qualifies

Educational institutions buy exempt, and the definition reaches beyond the school itself to certain endowment, athletic-receipt, and research affiliates (and groups like the NCAA). Confirm your buyer fits the statutory definition before treating a sale as exempt.

Common questions

Q: Are disposable restaurant supplies like napkins, straws, and carryout containers taxable?
A: Generally no. They are exempt "ingredient or component parts" under K.S.A. 79-3606(m) because they go to the customer with the meal.

Q: What restaurant items are taxable?
A: Items the restaurant itself consumes — the Department named "reusable plastic table covers and ice" — on which the restaurant owes Kansas sales/use tax.

Q: Can a nursing home buy food tax-free?
A: No. A nonprofit nursing home can buy medical supplies and equipment for resident care exempt, but "food, food preparation supplies and similar type items" are taxable.

Citations and references

• K.S.A. 79-3606(m) — exempts property that becomes an ingredient or component part of property produced for ultimate sale at retail; the basis for exempting disposable foodservice items a restaurant serves with the meal.
• K.S.A. 39-923 — defines the nonprofit skilled and intermediate nursing care homes whose direct purchases of medical supplies and equipment for resident care are exempt (per 1987 Senate Bill 309); habitation items like food remain taxable.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1999-160

Original ruling text

Private Letter Ruling

Body:

Office of Policy and Research

July 20, 1999

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Dear Ms. TTTTTT:

We wish to acknowledge receipt of your letter dated May 6, 1999, regarding the application of Kansas Retailers’ Sales tax.

K.S.A. 79-3606(m) exempts from sales tax: “all sales of tangible personal property which become an ingredient or component part of tangible personal property or services produced, manufactured or compounded for ultimate sale at retail within or without the state of Kansas. . .”

The following purchases of tangible personal property by restaurants are generally exempt under K.S.A. 79-3606(m):

• wetnaps + ice cube bags for carryout
• paper doilies + coffee stirrers
• straws + disposable silverware
• toothpicks + stir sticks
• wrapped toothpicks + portion cups (disposable)
• doggie bags + plastic plates
• paper napkins + plastic steak markers
• disposable placemats + plastic table covers (disposable)
• carryout containers + paper table covers
• carryout bags + paper liners for pizza boxes
• disposable drinking cups + paper liners for serving baskets
• paper placemats

Please be advised that the restaurant would be the ultimate consumer on purchases of reusable plastic table covers and ice, and therefore would be obligated to pay the appropriate Kansas sales/use tax(es) on the respective purchases.

Senate Bill 309, enacted by the 1987 Kansas Legislature, provided that all sales of medical supplies and equipment purchased directly by a nonprofit skilled nursing home or nonprofit intermediate nursing care home, as defined by K.S.A. 39-923, for the purpose of providing medical services to residents thereof, shall be exempt from sales tax in the state of Kansas. However, this exemption does not apply to tangible personal property customarily used for human habitation purposes. Thus, purchases of such items as food, food preparation supplies and similar type items would be subject to sales/use tax when purchased by a nursing home for consumption in the state of Kansas.

Schools and educational institutions are exempt from paying sales tax on their purchases. The 1998 legislature defined an "educational institution" to mean a nonprofit school, college, or university that offers educational courses at a level above the twelfth grade and meets certain requirements fixed by the statute. This new definition also includes:

Nonprofit endowment associations and foundations that operate exclusively for the support and benefit of an educational institution;

Nonprofit entities whose principal purpose is to hold receipts from intercollegiate sporting events and to disburse these receipts, as well as grants and gifts, for the sole benefit of the athletic programs of an educational institution;

Nonprofit research organizations whose primary purpose is to pursue scholarly investigation and research for the sole benefit of an educational institution; and

A group of educational institutions that operate exclusively for an educational purpose, such as the NCAA.

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: 08/03/1999 Date Modified: 10/11/2001

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