Does the requesting organization qualify as an exempt 'educational institution' under the Kansas Retailers' Sales Tax Act?

Plain-English summary

An organization asked the Department for a ruling on whether it qualifies as an "educational institution" under the Kansas Retailers' Sales Tax Act. The answer: it does not.

The framework. Kansas imposes retailers' sales tax under K.S.A. 79-3603, with exemptions in K.S.A. 79-3606. Subsection (c) exempts:

all sales of tangible personal property or services, including the renting and leasing of tangible personal property, purchased directly by a public or private elementary or secondary school or public or private nonprofit educational institution and used primarily by such school or institution for nonsectarian programs and activities … or in the erection, repair or enlargement of buildings to be used for such purposes.

(That exemption does not reach construction or equipping of buildings used primarily for human habitation.)

The definition. Whether an organization is an "educational institution" turns on K.S.A. 79-3602(r), which defines the term to mean a nonprofit school, college and university that offers education above the twelfth grade and conducts regular classes and courses of study required for accreditation by (or membership in) the North Central Association of Colleges and Schools, the state board of education, or that otherwise qualifies under K.S.A. 74-50,103. The definition also sweeps in certain related entities: (1) a group of educational institutions operating exclusively for an educational purpose; (2) nonprofit endowment associations and foundations; (3) nonprofit entities holding and disbursing intercollegiate athletic receipts; and (4) nonprofit research foundations — each for the support and sole benefit of an educational institution.

The result. After reviewing the materials submitted, the Department concluded the organization does not qualify as an educational institution under the Act. The ruling records the denial but does not detail which specific requirement the organization failed to meet.

What this means for you

Organizations seeking the educational-institution exemption

Meeting the 79-3602(r) definition is the gate to the 79-3606(c) exemption. For the core category, that generally means a nonprofit offering education above grade 12 with accredited regular classes (North Central Association, the state board of education, or 74-50,103). Being "educational" in a general sense is not enough.

Buying directly and for nonsectarian use

Even when an entity qualifies, the exemption is for property/services purchased directly by the school/institution and used primarily for nonsectarian programs — and it does not cover buildings used primarily for human habitation.

If you're denied

A denial doesn't necessarily foreclose a different structure. If your organization is an endowment, athletic-receipts entity, or research foundation for the sole benefit of a qualifying institution, review whether one of the (1)–(4) categories fits.

Common questions

Q: We consider ourselves educational. Does that qualify us for the exemption?
A: Not automatically. You must meet the K.S.A. 79-3602(r) definition — for the core category, a nonprofit offering education above the twelfth grade with accredited regular classes and courses.

Q: What does the 79-3606(c) exemption actually cover?
A: Tangible personal property and services (including leases) purchased directly by a qualifying school or nonprofit educational institution and used primarily for nonsectarian programs and activities, plus qualifying building work — but not buildings used primarily for human habitation.

Q: Why was this organization denied?
A: The ruling states the Department reviewed the submitted materials and concluded the organization does not meet the statutory definition, but it does not specify which requirement was unmet.

Q: Does this ruling apply to my organization?
A: A Kansas private letter ruling addresses only the requesting taxpayer's facts and cannot be relied on as precedent by others, though it shows the Department applies the 79-3602(r) definition strictly.

Citations and references

• K.S.A. 79-3603 — imposes the Kansas retailers' sales tax.
• K.S.A. 79-3606(c) — exempts sales purchased directly by public/private schools and nonprofit educational institutions used primarily for nonsectarian programs (excluding buildings used primarily for human habitation).
• K.S.A. 79-3602(r) — defines "educational institution," including the above-grade-12 accreditation requirement and the related endowment, athletic-receipt, and research-foundation categories.
• K.S.A. 74-50,103 — alternative qualification path referenced in the definition.
• 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-2003-011

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

February 25, 2003

XXXXXXXXXXXX
XXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXX

Dear XXXXXXXXX:

The purpose of this letter is to respond to your letter dated February 14, 2003. In it, you request a private letter ruling on the question of whether or not XXXXXXXXXXXXXXXXXX qualifies as an educational institution as defined in the Kansas Retailers' Sales Tax Act.

The Kansas retailers' sales tax is imposed by K.S.A. 79-3603. Exemptions are found in K.S.A. 79-3606. Subsection (c) of the statute provides an exemption for:

all sales of tangible personal property or services, including the renting and leasing of tangible personal property, purchased directly by a public or private elementary or secondary school or public or private nonprofit educational institution and used primarily by such school or institution for nonsectarian programs and activities provided or sponsored by such school or institution or in the erection, repair or enlargement of buildings to be used for such purposes. The exemption herein provided shall not apply to erection, construction, repair, enlargement or equipment of buildings used primarily for human habitation;

Definitions are found in K.S.A. 79-3602. Subsection (r) defines the term "educational institution" to mean:

(r) "Educational institution" means any nonprofit school, college and university that offers education at a level above the twelfth grade, and conducts regular classes and courses of study required for accreditation by, or membership in, the North Central Association of Colleges and Schools, the state board of education, or that otherwise qualify as an "educational institution," as defined by K.S.A. 74-50,103, and amendments thereto. Such phrase shall include: (1) A group of educational institutions that operates exclusively for an educational purpose; (2) nonprofit endowment associations and foundations organized and operated exclusively to receive, hold, invest and administer moneys and property as a

permanent fund for the support and sole benefit of an educational institution; (3) nonprofit trusts, foundations and other entities organized and operated principally to hold and own receipts from intercollegiate sporting events and to disburse such receipts, as well as grants and gifts, in the interest of collegiate and intercollegiate athletic programs for the support and sole benefit of an educational institution; and (4) nonprofit trusts, foundations and other entities organized and operated for the primary purpose of encouraging, fostering and conducting scholarly investigations and industrial and other types of research for the support and sole benefit of an educational institution.

I have reviewed the materials that you submitted to the Department and I have concluded that XXXXXXXXXXXXXXXXXXXX does not qualify as an educational institution as defined by the Kansas Retailers' Sales Tax Act.

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 in the future by the operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or published revenue ruling, that materially affects this private letter ruling.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 03/05/2003 Date Modified: 03/05/2003

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