Does an American Red Cross chapter owe Kansas sales tax on books it includes in the fee for its first-aid classes?

Plain-English summary

An American Red Cross chapter asked whether it must remit Kansas sales tax on books provided as part of its classes. The chapter teaches first-aid and life-saving classes for a lump-sum "fee" that "includes instruction and class materials such as books," and in the past it had collected and remitted sales tax on various books sold to the public.

The Red Cross is treated as a federal instrumentality. The Department explained that it "has historically deemed the American Red Cross and it[]s chapters ('ARC') to be instrumentalit[ies] of the Federal Government exempt from Kansas retailers' sales tax."

Direct purchases, including books, are exempt. "Direct purchases, including books[,] by the ARC are exempt from Kansas retailers' sales tax."

Books bundled into class materials are not taxed. "When the ARC includes books or other materials as a part of class materials, said books would not be subject to Kansas retailers' sales tax."

Bottom line: because the Kansas Department of Revenue treats the American Red Cross and its chapters as tax-exempt federal instrumentalities, the chapter does not owe Kansas sales tax on books it folds into the materials for its first-aid and life-saving classes.

What this means for you

Federal-instrumentality status drives the exemption

The exemption here does not come from a specific nonprofit carve-out but from the Department's long-standing treatment of the American Red Cross and its chapters as instrumentalities of the federal government, which the state cannot tax on their direct purchases.

Both purchases and bundled class materials are covered

The chapter's direct purchases of books are exempt, and providing those books as part of a bundled class fee does not create a taxable sale of the books.

This ruling is specific to the American Red Cross

The rationale rests on the ARC's particular status. Other nonprofits generally need to fit a specific Kansas exemption; they cannot assume the same federal-instrumentality treatment applies to them.

Historical sales tax collection was not required for these materials

The chapter noted it had been collecting and remitting tax on books; the ruling clarifies that books included in the ARC's class materials are not subject to Kansas sales tax.

Common questions

Is the American Red Cross exempt from Kansas sales tax?
Yes. The Department has historically treated the American Red Cross and its chapters as instrumentalities of the federal government that are exempt from Kansas retailers' sales tax.

Does the chapter owe tax on books included in its class fee?
No. When the ARC includes books or other materials as part of its class materials, those books are not subject to Kansas sales tax.

Are the chapter's direct purchases of books taxable?
No. Direct purchases by the ARC, including books, are exempt from Kansas retailers' sales tax.

Does this exemption apply to other nonprofits teaching classes?
Not automatically. It is based on the American Red Cross's status as a federal instrumentality; other organizations must identify their own applicable Kansas exemption.

Citations and references

• The exemption rests on the Department's historical treatment of the American Red Cross and its chapters as instrumentalities of the federal government exempt from Kansas retailers' sales tax; the ruling does not cite a numbered statute for this conclusion.
• K.A.R. 92-19-59 — authorizes Kansas private letter rulings; this ruling binds the Department only as to the requesting taxpayer and the facts presented.
• Issued September 11, 1998 by Mark D. Ciardullo, Tax Specialist, Kansas Department of Revenue.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1998-122

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

September 11, 1998

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Dear XXXXXXXXXXXXX:

The purpose of this letter is to respond to your letter dated July 30, 1998. This is a private letter ruling pursuant to Kansas Administrative Regulation 92-19-59.

In your letter you generally stated that the XXXXXXXXXXXXXXXXXXXXXXXX is seeking advice on the following transactions. In the past you have collected and remitted sales tax on various books sold to the public. Your Chapter teaches classes in first aid and life saving. Persons participating in these classes are charged a lump sum fee (“fee”). The fee includes instruction and class materials such as books. You are seeking advice as to whether not you should be remitting sales tax on books that are included as a part of class materials.

The Kansas Department of Revenue has historically deemed the American Red Cross and it’s chapters (“ARC”) to be instrumentality’s of the Federal Government exempt from Kansas retailers’ sales tax. Direct purchases, including books by the ARC are exempt from Kansas retailers’ sales tax. When the ARC includes books or other materials as a part of class materials, said books would not be subject to Kansas retailers’ sales tax.

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 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 effects this private letter ruling.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 09/11/1998 Date Modified: 10/10/2001

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