Must a non-profit hospital collect Kansas sales tax on admission charges to a fundraising concert?

Plain-English summary

A non-profit hospital asked whether it must collect sales tax on admission charges to a music concert it is sponsoring, where the profits will benefit the hospital. The Department ruled the hospital should collect sales tax on the admissions if it is, or should be, registered to collect retailers' sales tax on other activities.

Admissions are taxable, and being a non-profit does not exempt sales. "Admission charges to places of entertainment are taxable in Kansas. K.S.A. 79-3603(e)." The Department explained that while "churches, hospitals, schools, universities, and a handful of other organizations are exempt on their purchases," there "are no general exemptions for sales by" those organizations, and "[t]his includes sales at fundraising events where the proceeds are used exclusively for the benefit of the organization." The reason: the legislature "wants non-profit and for-profit organization on the same competitive footing when they sell to final consumers."

Most hospitals are already registered retailers. "When a hospital operates a gift shop, a cafeteria that is open to the public, or sells books, vitamins, non-prescription drugs, or equipment to its employees, the hospital is required to be registered for sales tax purposes." If so, "the hospital is required to collect sales tax on the admission charges to the fundraising event," reported "on the hospital's normal sales tax return."

The isolated-or-occasional-sale exception. If the hospital is not a registered retailer — for example, it "contracts with third parties to operate its gift shop and cafeteria, and make no sales to employees" — it would need to register and collect on the concert "only if it plans to sponsor the event on an annual basis or if it plans to sponsor other similar events this year." Kansas "exempts isolated and occasional sales," meaning a sale "that occurs once per year or less often and is not a planned annual event."

What this means for you

Non-profit hospitals and similar organizations

Your tax-exempt status covers what you buy, not what you sell. Admissions to a fundraising concert are taxable retail sales, and using the money for your mission does not change that.

If you already collect sales tax anywhere

A hospital that runs a gift shop, public cafeteria, or makes taxable employee sales is a registered retailer and must collect and remit tax on the concert admissions on its regular return.

If you make essentially no taxable sales

A genuinely one-time event may qualify for the isolated or occasional sale exemption (a sale once a year or less, not a planned annual event). But if you plan to hold the event every year — or hold other taxable sales the same year — you must register and collect.

Common questions

Q: Does a non-profit hospital charge sales tax on fundraising-concert tickets?
A: Yes, if it is or should be a registered retailer. Admissions to entertainment are taxable under K.S.A. 79-3603(e), and there is no exemption for sales by hospitals even at fundraisers.

Q: Doesn't the hospital's exemption cover this?
A: No. Hospitals are exempt on their purchases, not their sales. Selling admissions puts them on the same footing as for-profit sellers.

Q: When could the concert be tax-free?
A: Only if the hospital is not otherwise a registered retailer and the concert is a true one-time (isolated or occasional) sale — not a planned annual event and not paired with other taxable sales that year.

Citations and references

• K.S.A. 79-3603(e) — imposes Kansas sales tax on admission charges to places of entertainment. The Department applied it to make the hospital's fundraising-concert admissions taxable, subject to the isolated-or-occasional-sale exemption for a non-registered organization's true one-time sale.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: O-2000-023

Original ruling text

Opinion Letter

Body:

Office of Policy & Research

October 5, 2000

XXXX
XXXX
XXXX

RE: Your letter of September 27,2000

Dear XXXX:

I have been asked to answer your letter that we received late last month. In it, you ask if a non-profit hospital is required to collect sales tax on admission charges to a music concert that the hospital is sponsoring. The profits from the concert will be used to benefit the hospital. The answer to your question is that the hospital should collect sales tax on the admission charges if it is or should be registered to collect retailers’ sales tax on other activities.

Admission charges to places of entertainment are taxable in Kansas. K.S.A. 79-3603(e). This means that admission charges to the hospital-sponsored concert are taxable unless there is a specific exemption that applies.

In Kansas, churches, hospitals, schools, universities, and a handful of other organizations are exempt on their purchases. There are no general exemptions for sales by churches, hospitals, schools, universities, or nearly all other organizations that are exempt on their purchases. This includes sales at fundraising events where the proceeds are used exclusively for the benefit of the organization. This suggests that Kansas legislature wants non-profit and for-profit organization on the same competitive footing when they sell to final consumers.

Most Kansas hospitals and schools are registered retailers. When a hospital operates a gift shop, a cafeteria that is open to the public, or sells books, vitamins, non-prescription drugs, or equipment to its employees, the hospital is required to be registered for sales tax purposes and to collect sales tax on these taxable sales. This suggests that in your situation, the hospital that is sponsoring the concert is already a registered retailer (or should be registered). If this is the case, the hospital is required to collect sales tax on the admission charges to the fundraising event. The admission charges and taxes would be reported on the hospital’s normal sales tax return.

The hospital may not be registered for sales tax purposes. This would be appropriate if, for example, the hospital contracts with third parties to operate its gift shop and cafeteria, and make no sales to employees. In this case, the hospital would be required to register and report the tax on admission to the concert only if it plans to sponsor the event on an annual basis or if it plans to sponsor other similar events this year. Kansas, like most other states, exempts isolated and occasional sales. Kansas considers an isolated or occasional sale as one that occurs once per year or less often and is not a planned annual event.

I hope that this adequately answers your questions. If you have any addition questions, please call me.

Sincerely,

Thomas E. Hatten
Attorney/Policy & Research

Date Composed: 10/09/2000 Date Modified: 10/10/2001

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