Does a school fundraising group qualify for the Kansas parent-teacher (PTA/PTO) sales tax exemption, and is it taxed on golf, home-tour, and raffle fundraisers?

Plain-English summary

A new nonprofit that works with a high school to raise funds for students and their extracurricular activities — the only parent-teacher organization at that school — asked to be exempt under K.S.A. 79-3606(yy), the parent-teacher association/organization exemption, and asked whether several fundraisers (a golf tournament entry fee, a home tour, membership fees, raffles) would be taxed.

The exemption. Kansas sales tax is imposed by K.S.A. 79-3603, with exemptions in K.S.A. 79-3606. Subsection (yy) exempts "all sales of tangible personal property and services purchased by a parent-teacher association or organization, and all sales of tangible personal property by or on behalf of such association or organization."

What the Department requires to qualify. The Department defines a qualifying "parent-teacher association" as one chartered by the National PTA or Kansas PTA and authorized to operate within a school by the school's governing authority, and a "parent-teacher organization" as a nonprofit that is functionally equivalent and school-authorized. To qualify, the group must "(1) operate for the benefit and support of an individual school; (2) have a defined organizational structure, purpose, and goals; and (3) be recognized by the school as a PTA/PTO," and must provide programs promoting the education, health, and safety of children — typically the single PTA/PTO in the school, with long-term goals and numerous in-school programs.

Why it wasn't granted. The letter showed the group operated for the benefit of an individual school, but it did "not indicate whether your organization has a defined organizational structure, purpose, and goals, with programs to promote the education, health and safety of children." Absent that information, "we cannot grant the exemption you have requested."

Result on the fundraisers. Without the exemption, "you would be required to pay sales tax on the entry fee for a golf tournament you sponsor, you would collect sales tax on admission charges to home tours, and you would pay sales tax on 'raffles' or similar events." Membership fees were left undecided because the letter lacked detail, but the group can submit more information.

What this means for you

School fundraising groups

The Kansas PTA/PTO exemption is not automatic for a school-supporting nonprofit. You have to show a defined organizational structure, purpose, and goals; recognition by the school; and programs promoting children's education, health, and safety. Document those points when you apply, or expect the exemption to be withheld.

Until you qualify, fundraisers are taxable

Without the exemption, common fundraisers are taxable: golf tournament entry fees, home-tour admissions, and raffles all drew tax in this ruling. Build sales tax into your fundraiser pricing and remittance unless and until the Department grants the exemption.

A denial for lack of information is not necessarily final

The Department declined for want of detail, not because the group could never qualify, and invited more information on the membership fees. If your group actually meets the tests, providing the missing structural and program details can change the outcome.

Common questions

Q: Is a school parent-teacher fundraising group automatically exempt in Kansas?
A: No. It must show it meets the K.S.A. 79-3606(yy) tests — defined structure, purpose and goals, school recognition, and programs promoting children's education, health, and safety. Here the group did not show all of that, so the exemption was not granted.

Q: Are the group's fundraisers taxable without the exemption?
A: Yes. The Department said the group must pay tax on golf tournament entry fees, collect tax on home-tour admissions, and pay tax on raffles.

Q: What about membership fees?
A: The Department did not decide — the letter lacked enough detail — and invited the group to submit more information for a determination.

Citations and references

• K.S.A. 79-3603 — imposes the Kansas retailers' sales tax; the general imposition statute that applies to the fundraiser receipts absent an exemption.
• K.S.A. 79-3606(yy) — exempts purchases and sales by a qualifying parent-teacher association or organization; the Department set out the structure, recognition, and programming tests the group did not show it met.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1999-264

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

December 10, 1999

XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX

Re: Kansas Sales Tax

Dear XXXXX:

Your correspondence of August 11, 1999, has been referred to me for response. Thank you for your inquiry.

Your letter indicates your organization is a new, non-profit organization that works with your high school (XXXXXXX High School) to raise funds to be spent on students and their extracurricular activities. Every dollar you make goes back to the school and its students to provide for things above and beyond what the school budget can afford to do. Yours is the only parent-teacher organization that works with the high school.

Your letter goes on to state, in pertinent part:

Therefore, we are requesting exemption from paying sales tax on all direct purchases of goods, merchandise, and taxable services for the use, consumption or resale by our organization and from collecting sales tax on retail sale of goods and merchandise through K.S.A. 79-3606(yy) (exemption for parent-teacher associations).

What we are unsure of, however, is the status of several of our proposed fundraisers other than the sale of goods and merchandise. If we hold a golf tournament and charge a $60 participation fee, would we pay sales tax on the entry fee? If we would have a parade of homes in which a person would pay $10 to view 5 homes, would this be something we would need to collect sales tax on? Do we pay sales tax on membership fees? Do we pay sales tax on “raffles” per se? . . . .

As you know, the Kansas sales tax is imposed by K.S.A. 79-3603. Exemptions from the tax are found in K.S.A. 79-3606. Subsection (yy) of the statute provides an exemption for:

(yy) all sales of tangible personal property and services purchased by a parent-teacher association or organization, and all sales of tangible personal property by or on behalf of such association or organization;

The Department of Revenue has determined that for purposes of the exemption extended at K.S.A. 79-3606(yy), the phrase “parent-teacher association” shall mean a nonprofit parent-teacher association chartered by the National PTA or Kansas PTA that is authorized to operate within a public or private school by the governing authority of the school. A “parent-teacher organization” shall mean a nonprofit parent-teacher organization that is functionally equivalent to a “parent-teacher association” and is authorized by the governing authority of a public or private school to operate within the school.

To qualify for the exemption, the PTA or PTO must (1) operate for the benefit and support of an individual school; (2) have a defined organizational structure, purpose, and goals; and (3) be recognized by the school as a PTA/PTO. The PTA/PTO must provide programs within a school promoting the education, health and safety of children. There is generally only one PTA/PTO within a school and they must have long term goals and objectives and numerous programs operating within the school.

Based on the information provided in your letter it is not clear your organization qualifies for the exemption. While it does operate for the benefit and support of an individual school your correspondence does not indicate whether your organization has a defined organizational structure, purpose, and goals, with programs to promote the education, health and safety of children. In the absence of this information, we cannot grant the exemption you have requested.

Therefore, in the context of your letter, you would be required to pay sales tax on the entry fee for a golf tournament you sponsor, you would collect sales tax on admission charges to home tours, and you would pay sales tax on “raffles” or similar events. Your letter also mentions membership fees, but does not provide sufficient details as to their sale or use to permit specific a determination in that regard. If you wish you may submit additional information about these fees for our consideration.

I trust this information is of assistance. If I can be of further service, please feel free to contact me.

Sincerely,

Jim Weisgerber
Attorney
Tax Specialist

JW:jw

Date Composed: 12/16/1999 Date Modified: 10/11/2001

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