Does an organization qualify for a Kansas sales-tax exemption just because it requests one?

Plain-English summary

An organization formally asked the Department to recognize it as exempt from Kansas retailers' sales and compensating (use) tax. The Department said it does not qualify.

Kansas tax exemptions are narrowly construed — an entity must clearly fall within the plain language of a specific exemption statute. The sales tax act lists exempt groups in different ways: some are named outright (for example, the American Heart Association, Kansas Affiliate, Inc.), and others are described in general terms (nonprofit hospitals, political subdivisions, nonprofit zoos). K.S.A. 79-3606 contains more than 60 such exemptions. The Department reviewed them and found none that covered this organization.

As a result, the organization is subject to sales tax on its purchases and must register to collect and remit Kansas retailers' sales tax on any retail sales it makes.

What this means for you

Nonprofits and other organizations assuming they are exempt

Being a worthy or nonprofit organization is not enough. Unless you fit a specific K.S.A. 79-3606 exemption by its plain terms, you pay tax on purchases and must collect tax on your sales.

Organizations planning purchases or sales

Confirm your exemption in the statute before claiming it. If none applies, register with the Department and build sales tax into your operations.

Common questions

Q: We're a nonprofit — aren't we automatically exempt in Kansas?
A: No. Kansas has no blanket nonprofit exemption; you must match a specific statutory exemption in K.S.A. 79-3606.

Q: What happens if no exemption fits?
A: You pay sales tax on your purchases and must register to collect and remit tax on your retail sales.

Citations and references

• K.S.A. 79-3606 — the sales tax exemption statute containing more than 60 exemptions; the Department "reviewed these exemptions and cannot find any that encompass your organization," so the organization is taxable and must register. Exemptions are narrowly construed, requiring a clear fit within a statute's plain language.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2005-003

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

March 18, 2005

XXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXX
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Dear Mr. XXXXX:

The purpose of this letter is to respond to your letter dated February 18, 2005. In your letter you formally request an exemption from Kansas retailers’ sales and or compensating taxes.

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.

Therefore, your organization is subject to sales tax on purchases and your organization is required to register and collect Kansas retailers’ sales tax when making retail sales. Your organization may register by completing “Application to register a business” available at www.ksrevenue.org.

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: 03/23/2005 Date Modified: 03/23/2005

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