Is a religious organization's direct purchase of hotel accommodations exempt from Kansas sales tax with a proper exemption certificate?

Plain-English summary

An inquirer asked whether the direct purchase of hotel accommodations by a Kansas or other out-of-state religious organization is exempt from Kansas sales tax if a properly completed exemption certificate is used. The Department's answer is yes.

The statutory basis. The exemption for religious organizations is codified at K.S.A. 79-3606(aaa), which exempts:

"all sales of tangible personal property and services purchased by a religious organization which is exempt from federal income taxation pursuant to section 501(c)(3) of the federal internal revenue code, and used exclusively for religious purposes."

So the exemption has two requirements: the organization must (1) be a nonprofit 501(c)(3) organization, and (2) use the item or service purchased "exclusively for religious purposes."

What counts as "exclusively for religious purposes." The Department's Notice 98-05 construes that phrase. Property and services used exclusively for religious purposes include (but are not limited to) those used to facilitate religious worship services or ceremonies, to carry out the religious work of the organization, to construct, furnish, equip, remodel, or maintain a facility used exclusively for religious objectives (a church, church grounds, administration building, church camp, parsonage, rectory, or convent) — purchased directly by the organization, not through a contractor (citing Kansas City Dist. Advisory Bd. v. Board of Johnson County Comm'rs, 5 Kan. App. 2d 538, 542 (1980)) — and to administer, manage, or operate religious facilities or activities.

Bottom line: a direct purchase of hotel accommodations by a qualifying 501(c)(3) religious organization, used exclusively for religious purposes and documented with a proper exemption certificate, is exempt from Kansas sales tax. The rule applies whether the organization is based in Kansas or out of state.

What this means for you

Religious organizations

Your direct purchases — including services like hotel accommodations — can be exempt when (1) you are a 501(c)(3) organization and (2) the purchase is used exclusively for religious purposes. Provide the vendor a properly completed Kansas exemption certificate. Out-of-state religious organizations can qualify too.

The "direct purchase" and "exclusive use" limits matter

The purchase must be made and paid by the organization itself (Notice 98-05 stresses "purchased directly by the religious organization and not through a contractor" for facility work). And the use must be exclusively religious — a mixed or personal use can defeat the exemption.

Hotels and other vendors

When a religious organization is the direct buyer and supplies a valid exemption certificate for a religious-purpose use, you may make the sale exempt and keep the certificate on file.

Common questions

Q: Can a religious organization book hotel rooms tax-free in Kansas?
A: Yes, if it is a 501(c)(3) making a direct purchase used exclusively for religious purposes and it provides a properly completed exemption certificate (K.S.A. 79-3606(aaa)).

Q: Does it matter if the organization is from another state?
A: No. The ruling addresses a "Kansas or other out of state religious organization" and answers yes for a direct purchase with a proper certificate.

Q: What are the two requirements?
A: The organization must be a nonprofit 501(c)(3), and the purchase must be used exclusively for religious purposes, as construed by Notice 98-05.

Q: What does "used exclusively for religious purposes" cover?
A: Uses that facilitate worship or ceremonies, carry out the organization's religious work, directly construct/furnish/equip/remodel/maintain a facility used exclusively for religious objectives, or administer religious facilities and activities.

Citations and references

• K.S.A. 79-3606(aaa) — exempts sales of tangible personal property and services purchased by a 501(c)(3) religious organization and used exclusively for religious purposes.
• Notice 98-05 — Department notice construing "used exclusively for religious purposes," including the requirement that facility-related property be purchased directly by the organization, not through a contractor.
• Kansas City Dist. Advisory Bd. v. Board of Johnson County Comm'rs, 5 Kan. App. 2d 538, 542 (1980) — cited in Notice 98-05 on the direct-purchase requirement.
• IRC § 501(c)(3) — the federal exemption status the organization must hold.
• 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-2002-033

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

April 9, 2002

XXXXXXXXXXXX
XXXXXXXXXXXXXXXX
XXXXXXXXXXXXXX

Dear XXXXXXXXXXX:

I have been asked to respond to your letter dated April 4, 2002. You ask whether the direct purchase of hotel accommodations by a Kansas or other out of state religious organization is exempt from Kansas retailers’ sales tax, with a properly completed exemption certificate.

The answer to your question is yes.

The exemption for religious organizations was enacted last year and is codified at K.S.A. 79-3606(aaa) It exempts:

all sales of tangible personal property and services purchased by a religious organization which is exempt from federal income taxation pursuant to section 501(c)(3) of the federal internal revenue code, and used exclusively for religious purposes.

For exemption, this law requires the religious organization: (1) to qualify as a nonprofit 501(c)(3) organization under the IRC Code, and (2) to use the item or service being purchased “exclusively for religious purposes.”

To implement the new law, the department issued Notice 98-05. Paragraph III construes the term “used exclusively for religious purposes.” It states:

a) Tangible personal property and services that are considered to be used exclusively for religious purposes include, but are not limited to, personal property and services:
· used exclusively in, or to facilitate, religious worship services by a congregation or church membership while meeting together at a single location.

·used exclusively in, or to facilitate, religious ceremonies.

·used exclusively in, or to facilitate, carrying out the religious work of the organization.
·used to construct, furnish, equip, remodel, or maintain a facility used exclusively for religious objectives including, but not limited to, a church, church grounds, a church administration building, a church camp, a parsonage, rectory, or convent. Such property must be purchased directly by the religious organization and not through a contractor. See Kansas City Dist. Advisory Bd. v. Board of Johnson Country Comm’rs, 5 Kan App. 2d 538, 542 (1980).
·used exclusively to administer, manage, or operate religious facilities or to administer religious activities.

This is a private letter ruling pursuant to K.A.R. 92-19-59. It 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 ruling will be revoked by operation of law without further department action if there is a change in the controlling statutes, administrative regulations, revenue rulings or case law that materially effects this determination.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 04/16/2002 Date Modified: 04/16/2002

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