Should a Kansas municipality collect state or local sales tax on water utilities purchased directly by a public university for university-owned dormitories and scholarship halls?

Plain-English summary

A municipality should not collect Kansas state or local sales tax when a public university directly buys water for dormitories and residential scholarship halls owned by the university.

The Department applied K.S.A. 79-3606(c). On the stated facts, the university was a public educational institution, it directly purchased the water utilities, and the water was used in university-owned student housing.

Those facts made the utility purchase exempt from both state and local sales tax. The municipality supplying the water was instructed not to collect either tax.

What this means for you

Public universities

The exemption in this ruling depended on the university being the direct purchaser. Keep utility accounts, contracts, and invoices in the exempt institution's name.

Municipal water providers

Verify that the customer is the public educational institution and that the purchase fits the institution's exempt use before removing state and local tax.

Privately owned or indirectly billed housing

This ruling addressed university-owned dormitories and scholarship halls with water purchased directly by the university. Different ownership or billing arrangements require a separate analysis.

Common questions

Q: Were both state and local sales taxes exempt?
A: Yes.

Q: Who had to purchase the water?
A: The public university directly.

Q: What facilities were covered?
A: Dormitories and residential scholarship halls owned by the university.

Q: Did the Department tell the municipality to collect tax?
A: No. It said the municipality should not collect state or local sales tax under these facts.

Citations and references

• K.S.A. 79-3606(c) — public educational institution purchase exemption

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2004-054

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

November 30, 2004

XXXX
XXXX
XXXX

Re: Your Correspondence Dated August 12, 2004

Dear XXXX:

You have asked whether local sales tax should be charged on water utilities furnished to the University XXXX, a public educational institution, for dormitories and residential scholarship halls owned by the University.

If the University is directly purchasing the water utilities for use in its dormitories and residential scholarship halls, then such purchase would be considered exempt from state and local sales tax under K.S.A. 79-3606(c). A municipality furnishing water utilities to the University XXXX under the above circumstances should not collect state or local sales tax on such sales.

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 effects this private letter ruling. If you have additional questions, please contact me.

Very truly yours,

Richard L. Cram

Date Composed: 12/03/2004 Date Modified: 12/03/2004

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