Do nonprofit organizations and associations owe Kansas sales tax on their purchases, and must they collect sales tax when they sell items?

Plain-English summary

The Department explained how Kansas sales tax applies to organizations and associations — a point that surprises many nonprofit groups. The headline: there is no general exemption for public or private nonprofit organizations, associations, or corporations.

Two separate rules were laid out:

• On what a group buys: Unless the organization is specifically exempt under the Sales Tax Act, it must pay sales or compensating tax on all retail purchases of tangible personal property and taxable services bought for its own use or consumption (not for resale).
• On what a group sells: An organization or association — for-profit or not-for-profit — that regularly sells tangible personal property, services, or entertainment to the final user is a "retailer" as defined in K.S.A. 79-3602(d). It must collect and remit sales tax on the total gross receipts from those retail sales.

The notice gave examples of taxable items when sold by a group: calendars, general office supplies, ledger books, daily planners, tapes or films, and logo items such as pins, tie tacks, bumper stickers, and books.

Three things the Department said are immaterial: limiting sales to members only, the organization's principal purpose or activity, and whether the funds go to charitable or benevolent purposes. Even if the group makes no profit, its retail sales are subject to sales tax.

What this means for you

If you run a nonprofit, club, or association in Kansas, being nonprofit does not by itself exempt you. Unless you hold a specific exemption, you pay sales tax on the supplies and equipment you buy, and you must register, collect, and remit sales tax when you sell taxable goods — including things like logo merchandise sold at fundraisers, and even if you sell only to your own members.

Common questions

Q: Are nonprofits automatically exempt from Kansas sales tax?
A: No. The notice states there is no general exemption for public or private nonprofit organizations, associations, or corporations — exemption requires a specific provision of the Sales Tax Act.

Q: Does a group owe tax on things it buys for its own use?
A: Yes, unless specifically exempt, it pays sales or compensating tax on tangible personal property and taxable services bought for its own use or consumption.

Q: We only sell to our members — does that change anything?
A: No. The notice says limiting sales to members only is immaterial; such a group is still a retailer.

Q: What if we make no profit, or use the money for charity?
A: Still taxable. Neither the absence of profit nor the charitable use of the funds is determinative — the retail sales are subject to sales tax.

Citations and references

• K.S.A. 79-3602(d) — defines "retailer" for purposes of the Kansas Sales Tax Act.

Subject

Retail Purchases and Sales by Organizations and Associations

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 87-0901

Original ruling text

Notice
Notice Number: Organizations and Associations
Tax Type: Kansas Retailers' Sales Tax
Brief Description: Retail Purchases and Sales by Organizations and Associations
Keywords:

Body:
REVENUE NOTICE
SALES TAX
RETAIL PURCHASES AND SALES BY
ORGANIZATIONS AND ASSOCIATIONS

Under the Sales Tax Act, all retail purchase of tangible personal property and those services enumerated within the act are subject to
sales tax, unless the transaction is specifically stated by the act as an exempt transaction. The Sales Tax Act does exempt from sales
tax certain direct purchase of tangible personal property and services made by specified organizations and associations. Unless an
organization or association is specifically exempt from sales tax under the Sales Tax Act, that organization or association shall pay
sales or compensating tax on all retail purchases of tangible personal property and taxable services purchased for its use or
consumption and not for resale. Notably, there is no general exemption for public or private nonprofit organizations, associations or
corporations.

Organizations or associations, whether organized for profit or not-for-profit, who regularly engage in the business of selling tangible
personal property at retail or furnishing services or entertainment, and selling only to the user or consumer, and not for resale, or
"retailers" as defined in K.S.A. 79-3602(d). Therefore, such retailers shall collect and remit sales tax on the total gross receipts
received from all retail sales of tangible personal property, taxable services or entertainment. Examples of tangible personal property
which would be taxable when sold by an organization or association are: calendars, general office supplies, ledger books, daily
planners, tapes or films. Books, items containing the logo of the organization or association (pins, tie tacks, bumper stickers, books,
etc.) This is not a complete or exclusive list, but is illustrative of tangible personal property which is subject to sales tax when sold to
the ultimate user or consumer by an organization or association.

The limited scope of retail sales (e.g. limiting sales to members only) is immaterial, and organizations and associations making such
sales are retailers. The principal line of business, activity, intention or function of the organization or association is not determinative
of whether a person is a retailer. In addition, the ultimate use of the funds (i.e. for charitable or benevolent purposes) is not
determinative of whether the gross receipts received from the retail sales of tangible personal property or services are subject to sales
tax. Finally, whether a profit or gain from the sale of the tangible personal property, taxable services or entertainment is realized by
the organization or association or not, all retail sales as described herein are subject to sales tax.

Should you have any questions concerning this notice, please write the Kansas Department of Revenue, Sales and Excise Tax
Bureau, Robert B. Docking State Office Building, Topeka, Kansas 66625-0001, or call (913) 296-2461.

September, 1987

Date Composed: 10/07/1997 Date Modified: 10/10/2001

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