Can a nonprofit with a federal 501(c)(3) exemption obtain a Kansas sales-tax exemption, and how?

Plain-English summary

The treasurer of a nonprofit organization/foundation — a local chapter that holds a federal §501(c)(3) IRS exemption — asked how to obtain a Kansas sales/use tax exemption for the local chapter, and what actions it would need to take. The Department said Kansas law provides no exemption for this organization.

A federal exemption is not a Kansas exemption. The organization noted its §501(c)(3) federal status, but the Department had already advised (and confirmed in writing) that the organization is "not presently exempt in the State of Kansas." Kansas sales-tax exemptions are granted by specific statute, and holding a federal income-tax exemption does not, by itself, exempt an organization from Kansas retailers' sales tax.

The only path is the Legislature. The Department was direct: "Kansas Law does not contain a sales tax exemption for your organization. For your organization to obtain an exemption, it should seek an exempting statute via the Kansas Legislature." In other words, the way to become exempt is to have the Legislature enact an exemption — the Department cannot create one administratively.

Bottom line: a nonprofit's federal 501(c)(3) status does not confer a Kansas sales-tax exemption; unless a Kansas statute specifically exempts the organization, it must pursue a new exempting statute through the Legislature.

What this means for you

Nonprofits and foundations operating in Kansas

Do not assume your federal 501(c)(3) status exempts you from Kansas sales tax. Kansas exemptions are statute-specific. If no Kansas statute lists your type of organization, you are not exempt and must pay sales tax on your purchases like any other buyer.

Check for an existing statutory exemption first

Kansas exempts many specific categories of organizations by statute (e.g., certain hospitals, schools, and enumerated nonprofits). Confirm whether your organization fits one of those existing categories before concluding you have no exemption.

If there's no existing exemption, the fix is legislative

Where no statute covers your organization, the Department cannot grant an exemption — obtaining one requires the Kansas Legislature to enact an exempting statute. Plan accordingly and, in the meantime, budget for sales tax on taxable purchases.

Common questions

Q: Does a federal 501(c)(3) make an organization exempt from Kansas sales tax?
A: No. The Department ruled that a 501(c)(3) IRS exemption does not exempt the organization from Kansas retailers' sales tax; Kansas exemptions are granted by specific statute.

Q: How can the organization become exempt in Kansas?
A: By seeking an exempting statute through the Kansas Legislature. The Department cannot create an exemption administratively.

Q: What should the organization do in the meantime?
A: Unless a Kansas statute specifically exempts it, the organization must pay Kansas sales tax on its taxable purchases.

Citations and references

• The Department did not cite a specific statutory section. Its conclusion is that Kansas law contains no sales-tax exemption for the requesting organization, and that obtaining one requires seeking an exempting statute via the Kansas Legislature — a federal §501(c)(3) exemption does not by itself exempt an organization from Kansas sales tax.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2001-056

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

June 19, 2001

XXXXXXXXXXXXX
XXXXXXXXXXXXXX
XXXXXXXXXXXXXX

Dear XXXXXXXXXXX:

The purpose of this letter is to respond to your letter dated May 25, 2001. In it, you seek an exemption from Kansas retailers’ sales tax for the XXXXXXXXXXXXXXXXXXXXX.

In your letter you stated:

Please be advised that I am the Treasurer XXXXXXXXXXXXXXXXXX. It is our desire to apply for sales/use tax exemption for our local chapter in the State of Kansas.

This office has inquired by telephone concerning sales tax exemption in the State of Kansas for the above-organization/foundation. We have advised you concerning our §501(c)(3) IRS exemption; however, you have advised that this organization is not presently exempt in the State of Kansas. I would appreciate your advising in writing specifically what actions we might take to secure tax-exempt status within Kansas.

Your cooperation and assistance in this matter is appreciated.

Kansas Law does not contain a sales tax exemption for your organization. For your organization to obtain an exemption, it should seek an exempting statute via the Kansas Legislature.

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

Date Composed: 06/25/2001 Date Modified: 10/11/2001

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