Does a local 501(c)(3) charity that helps cancer patients qualify for a Kansas sales-tax exemption?

Plain-English summary

A local charity that assists cancer patients in its community — recognized by the IRS as a 501(c)(3) nonprofit and run entirely by volunteers — asked to be exempt from Kansas sales tax. The Department's answer is no.

The governing principle. Tax exemptions are narrowly construed: a group claiming exemption "must clearly qualify for exemption within the plain language of the statute." Kansas grants sales-tax exemptions either to entities named in a statute (for example, the American Heart Association, Kansas Affiliate, Inc. and the American Lung Association of Kansas, Inc.) or to entities described by category (non-profit hospitals, political subdivisions, nonprofit zoos). Some exemptions cover only certain purchases; others cover all purchases.

Why it fails. K.S.A. 79-3606 contains more than 60 exemptions. The Department reviewed them and could not find any that encompassed this organization. The requester's frustration that the American Cancer Society in Kansas is exempt does not change the analysis — that exemption exists because the legislature specifically provided it, and a different charity is not covered just because its mission is similar.

Bottom line: the charity must register, collect and remit Kansas sales or compensating tax on all sales it makes in Kansas. Federal 501(c)(3) status and a worthy charitable mission do not, by themselves, create a Kansas sales-tax exemption.

What this means for you

Charitable organizations

Do not assume that 501(c)(3) status or doing charitable work makes you exempt from Kansas sales tax. Exemption requires fitting a specific statutory exemption — being named in a statute or matching a described category in K.S.A. 79-3606. If you can't point to the exact exemption, you are not exempt, and you must register and collect tax on taxable sales you make.

"But a similar charity is exempt"

Some charities (like the American Cancer Society) are exempt because the legislature named them specifically. A similar mission does not extend that exemption to your organization — the Department applies the statute's plain language, not analogy.

Fundraising sales

Because the organization isn't exempt, its sales in Kansas (merchandise, event admissions, and similar) are generally taxable, and it must register to collect and remit the tax.

Common questions

Q: We're a 501(c)(3) charity — are we exempt from Kansas sales tax?
A: Not automatically. The Department found no exemption in K.S.A. 79-3606 that covered this cancer-patient charity, so it must register, collect, and remit tax.

Q: The American Cancer Society is exempt — why aren't we?
A: Because the legislature specifically named that organization. A similar mission does not extend the exemption; exemptions are narrowly construed to the statute's plain language.

Q: What must the organization do now?
A: Register, collect, and remit sales or compensating tax on all sales it makes in the State of Kansas.

Citations and references

• K.S.A. 79-3606 — the section containing the enumerated Kansas sales-tax exemptions (more than 60), some naming specific entities and some describing categories; the Department found none that covered this charity.
• K.A.R. 92-19-59 — the regulation authorizing Kansas private letter rulings.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2002-031

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

March 25, 2002

XXXXXXXXXXXXX
XXXXXXXXXXXX
XXXXXXXXXXXXXXXX
XXXXXXXX

Dear XXXXXXXXXXXXXX:

I have been asked to respond to your letter dated March 21, 2002.

In your letter you stated:

I'm writing you today in hopes of receiving your assistance in this matter of Sales Tax exemption, XXXXXX my representative suggested I write to you and send all information of documentation I can to prove what our organization does in XXX County.

We are requesting exemption from paying sales tax in the state of Kansas. The Internal Revenue Service has already granted us exemption from federal taxes as a Non Profit Organization under section 501 (c)(3) guidelines of the internal Revenue Tax Code and we would Re to be exempt from state taxes also.

We are a local organization that started because we saw a need for assistance with cancer Patients in our community. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.

Since we started this organization the XXXXXXX has sued us twice but could not prove that we infringed on any or there trademarks so they have since left us alone. It really angers me that we have not yet received exemption status, yet the American Cancer Society in Kansas has. Where is the justification in this.

Enclosed you will find copies of the Internal Revenue Service declaration of exemption, our brochure, volunteer cards and a copy of our letter to out vendors in our community support us now and since the beginning. This last year we paid out in financial assistance XXXXXXXX and only raised XXXXXX. No one in our organization receives a salary we are all volunteers.

Tax exemptions are narrowly construed. This means that a group that claims exemption must clearly qualify for exemption within the plain language of the statute. The Kansas sales tax act lists various groups that are exempt from tax. Some statutes identify the exempt entity by name. These include the statute that exempts the American Heart Association, Kansas Affiliate, Inc. and the American Lung Association of Kansas, Inc., among others. Other statutes extend exemption by describing the entity in general terms, such as the exemptions extended to non-profit hospitals, political subdivisions of the state, and nonprofit zoos. Some exemptions are limited to certain purchases while other exemptions extend to all purchases.

K.S.A. 79-3606 contains more than 60 additional exemptions. I have reviewed these exemptions and cannot find any that encompass your organization. Accordingly, your organization must register, collect and remit sales or compensating tax on all sales occurring in the State of Kansas.

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: 03/29/2002 Date Modified: 03/29/2002

Table 1

Table 2