Does an organization that sells coupons or discount cards redeemable by third-party merchants have to collect Kansas sales tax?

Plain-English summary

An organization asked about its Kansas sales-tax obligation when it sells coupons or discount cards that customers can redeem at third-party merchants (a common fundraising product). The Department's answer: the selling organization is the retailer and must remit sales tax on what it collects.

The seller is the retailer. The Department quoted the imposition statute, K.S.A. 79-3603(a) (tax on the gross receipts from retail sales of tangible personal property), and stated its policy: "an organization engaged in the retail sale of coupons or discount cards (that are redeemable by third party merchants) is the retailer for purposes of the Kansas retailers' sales tax act." As the retailer, "the selling organization is required to remit sales tax on their gross receipts." So the tax is measured by the money the organization takes in for the cards.

A note about scout fundraising. The Department added that "the fundraising information on sales tax needs to be changed, since individual troops enjoy the same sales tax exempt status as the boy and girl scouts councils." In plain terms, the Department flagged that the requester's fundraising sales-tax guidance should be corrected to reflect that individual troops share the same exempt status as the Boy and Girl Scout councils. The ruling does not elaborate further on how that exempt status interacts with the card-sale obligation, so read that sentence as the Department's own limited clarification.

Bottom line: selling coupon or discount cards redeemable at other merchants makes the selling organization a retailer that must collect and remit Kansas sales tax on its gross receipts from those card sales. Any exempt status the organization holds (like a scout troop's) is a separate matter the Department noted but did not fully resolve in this letter.

What this means for you

Groups running discount-card fundraisers

If your group sells discount cards or coupon books that buyers redeem at third-party businesses, the Department treats your group as the retailer. That means registering, collecting, and remitting sales tax on your gross receipts from the card sales — the redemption happening elsewhere does not move the tax off of you.

Exempt status is a separate question

The Department separately noted that individual scout troops share the councils' exempt status. An organization's own exempt status generally affects its purchases, and does not automatically erase a duty to collect tax on taxable sales it makes. Because this ruling did not spell out that interaction, confirm your specific situation rather than assuming the exempt status cancels the card-sale tax.

Keep fundraising guidance current

The Department pointed out that the requester's fundraising sales-tax information needed updating. If your organization distributes fundraising instructions, make sure the sales-tax guidance matches the Department's current position.

Common questions

Q: Is the sale of discount cards redeemable at third-party merchants taxable in Kansas?
A: Yes. The Department treats the selling organization as the retailer, which must remit sales tax on its gross receipts from the card sales.

Q: Who is responsible for the tax — the seller or the merchants who honor the cards?
A: The selling organization. The Department's policy makes the organization that sells the coupons or discount cards the retailer for Kansas sales-tax purposes.

Q: What did the Department say about scout troops?
A: It noted that individual troops enjoy the same sales-tax-exempt status as the Boy and Girl Scout councils, and that the fundraising sales-tax information needed to be changed to reflect that. It did not further detail how that status affects the card-sale obligation.

Citations and references

• K.S.A. 79-3603(a) — imposes Kansas sales tax on the gross receipts from retail sales of tangible personal property; the Department treats an organization selling coupons or discount cards redeemable by third-party merchants as the retailer that must remit tax on its gross receipts.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2001-108

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

October 4, 2001

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Dear Ms. TTTTTTTTT:

We wish to acknowledge receipt of your letter dated September 13, 2001, regarding the application of Kansas Retailers’ Sales Tax.

K.S.A. 79-3603(a) imposes a sales tax upon: “The gross receipts received from the sale of tangible personal property at retail within this state. . .”

It is the policy of the Kansas Department of Revenue that an organization engaged in the retail sale of coupons or discount cards (that are redeemable by third party merchants) is the retailer for purposes of the Kansas retailers’ sales tax act. Therefore, the selling organization is required to remit sales tax on their gross receipts. The fundraising information on sales tax needs to be changed, since individual troops enjoy the same sales tax exempt status as the boy and girl scouts councils.

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

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