Can a community action group buy materials to repair or weatherize low-income housing without paying Kansas sales tax, and is the repair labor taxable?

Plain-English summary

A nonprofit housing organization — a 501(c)(3) that repairs and weatherizes homes for low-income and elderly owners and is applying to become a certified Community Housing Development Organization (CHDO) — asked the Department whether it could buy the materials for that work without paying Kansas sales tax. The group described projects like a volunteer day painting home exteriors for low-income elderly owners at no charge and minor home repairs (fixing screens, weatherizing, cleaning gutters), buying the materials itself when donations were not available. The Department said yes — both the materials and the repair labor are exempt.

Materials are exempt under K.S.A. 79-3606(oo). That statute exempts "all sales of tangible personal property purchased by a community action group or agency for the exclusive purpose of repairing or weatherizing housing occupied by low income individuals." So materials the organization buys to repair or weatherize low-income housing may be purchased free of Kansas sales tax.

The repair labor is exempt too, under 1998 Senate Bill No. 493. Effective July 1, 1998, services to install or apply tangible personal property are exempt from sales tax when the work involves the original construction, reconstruction, restoration, remodeling, renovation, repair or replacement of a residence. Because repairing or weatherizing a home is residential repair/renovation work, the labor rendered at the residence is not taxed.

Bottom line: a qualifying community action group repairing or weatherizing housing occupied by low-income individuals pays no Kansas sales tax on the materials (79-3606(oo)) and no tax on the residential repair labor (1998 SB 493).

What this means for you

Community action groups and nonprofit housing organizations

If your organization qualifies as a community action group or agency and buys materials for the exclusive purpose of repairing or weatherizing housing occupied by low-income individuals, those material purchases are exempt from Kansas sales tax under 79-3606(oo). Note the "exclusive purpose" language — the exemption is tied to that specific use, not to your nonprofit status generally.

The exemption is about the use, not just the organization

This ruling turned on what the materials are for (repairing/weatherizing low-income housing), not merely on being a 501(c)(3). The organization noted it did not yet have a sales-tax exemption number; the exemption here flows from the statutory category, so document that the purchases meet the "repair or weatherize housing occupied by low income individuals" test.

Contractors and volunteers doing residential repair

Labor to repair, renovate, or weatherize a residence is exempt from Kansas sales tax under the 1998 Senate Bill No. 493 changes (effective July 1, 1998). Charges for that residential repair labor should not carry sales tax, though materials remain subject to the rules above.

Common questions

Q: Can a community action group buy repair materials tax-free?
A: Yes. K.S.A. 79-3606(oo) exempts tangible personal property a community action group or agency buys for the exclusive purpose of repairing or weatherizing housing occupied by low-income individuals.

Q: Does the group need a sales-tax exemption number first?
A: The ruling grants the exemption based on the statutory category (79-3606(oo)); the organization here did not have an exemption number. The exemption follows from the qualifying purpose of the purchase.

Q: Is the labor to repair or weatherize the housing taxable?
A: No. Under 1998 Senate Bill No. 493, services to repair, renovate, or weatherize a residence have been exempt from Kansas sales tax since July 1, 1998.

Citations and references

• K.S.A. 79-3606(oo) — exempts "all sales of tangible personal property purchased by a community action group or agency for the exclusive purpose of repairing or weatherizing housing occupied by low income individuals."
• 1998 Senate Bill No. 493 — effective July 1, 1998, exempts services to install or apply tangible personal property when the work is the original construction, reconstruction, restoration, remodeling, renovation, repair or replacement of a residence.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2001-087

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

August 17, 2001

XXXXXXXXXXXXXXX
XXXXXXXXXXXX
XXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXX

Dear XXXXXXXXX:

The purpose of this letter is to respond to your letter dated July 26, 2001.

In your letter you stated:

XXXXXXXXXXXXXXXXXXXXXXXXXXis classified by the Department of Treasury
as a 501(c)3 and its federal number is XXXXXXX, but does not have a sales tax exempt number. The Kansas Department of Revenue (KDOR) agent directed XXXXX to send a letter to the Office of Policy and Research about a private ruling about our activities being applicable under “Items Exempt From Sales Tax” in the KDOR Publication KS-1520 (4/00) on page 8 for “Materials purchased by a community action group to repair or weatherize low-income housing”. The upcoming activities that XXXXX is referring to for a private ruling is:

XXXXXXXXXXXXXXXXXX

A Saturday when XXXXXXXXXXXXX volunteers paint home exteriors for low income elderly owners at no cost.

XXXXXXXXXXXXXXXXX

Provide minor home repair to elder households in need (i.e. fix screens, weatherizing, clean gutters, etc.)

For both, XXXX will purchase materials needed, if donations are not available.

ZZZZ's other planned activities are a homebuyers fair, homebuyer education and training, a community housing training program, and library/resource center. Background information is: ZZZZs mission is "to encourage and facilitate decent, affordable housing opportunities for low and moderate income individuals and families" by:

Enhancing the capacity of individuals, families, neighborhoods, and community to meet basic housing needs;

Sponsoring, developing, financing and owning affordable rental and owner- occupied housing units;

Repairing and rehabilitating homes; and,

Expanding the accessible housing inventory in the Manhattan area.

ZZZZ is currently applying for Community Housing Development Organization (CHDO) certification by the Kansas Department of Commerce and Housing. Certification will enable ZZZZ to access federal funds set aside for CHDO’s and move into partnering with a developer to construct/rehabilitate low income housing in ZZZZZZ.

K.S.A. 79-3606(oo) exempts from sales tax: “all sales of tangible personal property purchased by a community action group or agency for the exclusive purpose of repairing or weatherizing housing occupied by low income individuals. . .”

Therefore, materials purchased by your organization to repair or weatherize housing occupied by low-income individuals may be purchased exempt from sales tax in the state of Kansas.

1998 Senate Bill No. 493 exempts certain construction services that were formerly subject to Kansas sales tax. Effective July 1, 1998, services performed to install or apply tangible personal property are exempt from sales tax when the services involve the original construction, reconstruction, restoration, remodeling, renovation, repair or replacement of a residence.

Services rendered at a residence to repair or weatherize housing occupied by low income individuals, would not be subject to sales tax in the state of Kansas, since the legislation contained in 1998 Senate Bill No. 493, would exempt these services from taxation.

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: 08/17/2001 Date Modified: 10/11/2001

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