Does a restaurant have to charge Kansas sales tax on meals it sells to a school district, or can it sell them tax-free?

Plain-English summary

A firm asked, on behalf of a restaurant client, whether the restaurant must charge sales tax on meals it sells to a school district. The Department's answer: the district's purchases are exempt, and the restaurant can sell them tax-free if it collects an exemption certificate.

Meals are normally taxable. "The Kansas retailers' sales tax is imposed by K.S.A. 79-3603," and subsection (d) taxes "the gross receipts from the sale of meals or drinks furnished at any . . . restaurant." So restaurant meals are a taxable sale by default.

But direct purchases by a school are exempt. K.S.A. 79-3606(c) exempts "all sales of tangible personal property or services . . . 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." A school district's direct purchase of meals falls within that exemption.

The certificate is what protects the seller. Under K.S.A. 79-3651, all gross receipts are presumed taxable until the contrary is established, and "[t]he burden of proving that a sale is not subject to tax is upon the vendor unless the vendor takes from the purchaser an exemption certificate." A good-faith exemption certificate "shall relieve the vendor from collecting and remitting tax." So the Department reframed the real question: "the real question from your client's perspective is not whether the purchase[s] being made by the School District are subject to sales tax, but whether your client can complete the transaction without being responsible for collecting sales tax. The answer to that question is yes . . . if they obtain an exemption certificate from the School District."

Practical mechanics. The school district completes the appropriate form from the Department's Kansas Exemption Certificates booklet and gives it to the restaurant. "[Y]our client can accept one form as a blanket exemption for future purchases," and "[a]ny purchases made with a School District credit card can then be considered tax exempt."

Bottom line: meals to a school district are exempt as direct educational purchases; the restaurant simply needs a properly completed exemption certificate (which can be a blanket certificate) to be relieved of collecting tax.

What this means for you

Restaurants and caterers selling to schools

You do not have to collect tax on meals sold directly to a public or private school or nonprofit educational institution — but get a completed Kansas exemption certificate from the buyer. That certificate, taken in good faith, relieves you of collecting and remitting the tax. A single blanket certificate can cover the district's future purchases.

Schools and school districts

Your direct purchases used primarily for your nonsectarian programs are exempt under K.S.A. 79-3606(c). Provide vendors a completed exemption certificate so they can sell to you tax-free; purchases on the district's credit card can be treated as exempt.

The certificate shifts the burden

Without a certificate, the seller bears the burden of proving a sale was exempt. With a good-faith certificate on file, the seller is protected. Keep the completed certificate in your records.

Common questions

Q: Are restaurant meals sold to a school district taxable?
A: The meals are exempt as a direct educational purchase under K.S.A. 79-3606(c), even though restaurant meals are normally taxable under K.S.A. 79-3603(d). The restaurant is relieved of collecting tax if it takes an exemption certificate.

Q: What does the restaurant need to sell tax-free?
A: A completed Kansas exemption certificate from the school district, taken in good faith (K.S.A. 79-3651). One certificate can serve as a blanket exemption for future purchases.

Q: Do school-district credit-card purchases qualify?
A: Yes. The Department said purchases made with a School District credit card can be considered tax exempt once the blanket certificate is on file.

Citations and references

• K.S.A. 79-3603(d) — imposes sales tax on the gross receipts from meals or drinks sold at restaurants and similar places; the default rule that makes restaurant meals taxable.
• K.S.A. 79-3606(c) — exempts sales of property and services purchased directly by a public or private elementary/secondary school or nonprofit educational institution for its nonsectarian programs; the exemption covering the district's meal purchases.
• K.S.A. 79-3651 — presumes all receipts taxable until proven otherwise, places the burden on the vendor, and relieves a vendor that takes a good-faith exemption certificate from collecting and remitting the tax.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2000-014

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

April 17, 2000

XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX

Re: Kansas Sales Tax

Dear XXXXX:

Your correspondence of February 8, 2000 has been referred to me for response. Thank you for your inquiry.

By your letter you request a private letter ruling on behalf of your client XX XXXX XXX, XX to clarify some confusion about whether sales tax is due on meals purchased by the XXXXX School District from your clients restaurant.

The Kansas retailers’ sales tax is imposed by K.S.A. 79-3603. Subsection (d) of the statute imposes sales tax on:

(d) the gross receipts from the sale of meals or drinks furnished at any private club, drinking establishment, catered event, restaurant, eating house, dining car, hotel, drugstore or other place where meals or drinks are regularly sold to the public;

Exemptions from sales tax are found in K.S.A. 79-3606. Subsection (c) of the statute provides and exemption for:

(c) 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 or in the erection, repair or enlargement of buildings to be used for such purposes. The exemption herein provided shall not apply to erection, construction, repair, enlargement or equipment of buildings used primarily for human habitation;

The manner in which an entity claiming exemption from sales tax should establish entitlement to the exemption is set forth in K.S.A. 79-3651. The statute provides, in pertinent part, as follows:

(a) For the purpose of the proper administration of the Kansas retailers’ sales tax act and to prevent evasion of the tax imposed thereunder, it shall be presumed that all gross receipts from the sale of tangible personal property or enumerated services are subject to tax until the contrary is established. The burden of proving that a sale is not subject to tax is upon the vendor unless the vendor takes from the purchaser an exemption certificate to the effect that the property or service purchased is not subject to tax.
(b) An exemption certificate shall relieve the vendor from collecting and remitting tax when taken in good faith. A vendor shall be presumed to have accepted an exemption certificate in good faith in the absence of evidence to the contrary. A vendor shall be deemed to have accepted an exemption certificate in good faith if the vendor: (1) Maintains a completed exemption certificate; (2) has ascertained the identity of the person or entity who presented the exemption certificate; and (3) has not been shown by a preponderance of the evidence to have had knowledge that the presentation of the certificate was improper.
(c) The exemption certificate shall be substantially in such form as the director may prescribe. . . . .

As provided by K.S.A. 79-3651, a vendor is relieved from collecting and remitting sales tax when they receive an exemption certificate from the purchaser. The exemption certificate shall be substantially in the form prescribed by the director. The proper use of exemption certificates is explained in the Kansas Department of Revenue publication Kansas Exemption Certificates, a copy of which is enclosed.

Under the facts presented by your letter, the real question from your client’s perspective is not whether the purchase being made by the School District are subject to sales tax, but whether your client can complete the transaction without being responsible for collecting sales tax. The answer to that question is yes, they can complete the transaction without being responsible for collecting sales tax if they obtain an exemption certificate from the School District.

The School District may complete the appropriate exemption certificate form from the Kansas Exemption Certificates booklet and provide it to your client. In this case your client can accept one form as a blanket exemption for future purchases. Any purchases made with a School District credit card can then be considered tax exempt.

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.

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

Enclosure: Kansas Exemption Certificates

Date Composed: 04/19/2000 Date Modified: 10/11/2001

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