When did the Kansas religious-organization exemption take effect, and are a church's utilities exempt?

Plain-English summary

A church asked when the Kansas sales tax exemption for religious organizations took effect and whether its utility purchases qualify.

The exemption began July 1, 1998 — and is not retroactive. The Department explained that "1998 Senate Bill No. 493 extends a new sales tax exemption to religious organizations," and that "[t]he new law became effective on July 1, 1998." Before that date, "all religious organizations, including churches, were obligated to pay the appropriate Kansas sales/use tax(es) on purchases of tangible personal property and taxable services," and "any taxable purchases made prior to July 1, 1998, are not entitled to refund of Kansas sales/use tax(es)."

The exemption and utilities. Quoting K.S.A. 79-3606(aaa) — which exempts property and services purchased by a 501(c)(3) religious organization "and used exclusively for religious purposes" — the Department advised that "if the utilities that you purchase are used exclusively for religious purposes, the purchase could be made by the church without having to pay Kansas sales tax."

Mixed-use utilities need an allocation. If a utility "is purchased exclusively for religious purposes," no worksheet is needed. "However ... if the utility is purchased for both a taxable and a non-taxable use, then a determination would need to be made as to how much of the purchase is exempt from sales tax." The church should give its utility company a copy of the exemption certificate (BT/ST-28B). The Department enclosed Notice 98-5, "Sales Taxation of Purchases by Religious Organizations," and a Question and Answer document from the Policy Information Library.

Bottom line: the religious-organization exemption applies only from July 1, 1998 forward (no refund for earlier tax); after that date, church utilities used exclusively for religious purposes are exempt, and utilities with mixed use must be apportioned.

What this means for you

The exemption is prospective from July 1, 1998

The religious-organization exemption did not exist before July 1, 1998. Sales/use tax that churches paid on purchases before that date stands and cannot be refunded.

Utilities used exclusively for religious purposes are exempt

Because K.S.A. 79-3606(aaa) exempts property and services used exclusively for religious purposes, a church's utilities meeting that test can be purchased without Kansas sales tax.

Mixed-use utilities must be apportioned

If a utility serves both taxable and non-taxable uses, the church must determine how much of the purchase is exempt. Only the exclusively-religious portion is free of tax.

Give the utility company an exemption certificate

To claim the exemption on utilities, the church supplies its utility provider a copy of the exemption certificate (form BT/ST-28B). Notice 98-5 explains how the exemption works.

Common questions

Q: When did the Kansas religious-organization sales tax exemption take effect?
A: July 1, 1998, under 1998 Senate Bill No. 493 (K.S.A. 79-3606(aaa)).

Q: Can a church get a refund of sales tax it paid before that date?
A: No. Taxable purchases made before July 1, 1998 are not entitled to a refund.

Q: Are a church's utilities exempt?
A: Yes, if used exclusively for religious purposes. The church supplies its utility company an exemption certificate (BT/ST-28B).

Q: What if a utility is used for both taxable and exempt purposes?
A: The church must determine how much of the purchase is exempt; only the exclusively-religious portion qualifies.

Citations and references

• K.S.A. 79-3606(aaa) (added by 1998 Senate Bill No. 493, effective July 1, 1998) — exempts sales of tangible personal property and services purchased by a 501(c)(3) religious organization and used exclusively for religious purposes; applies only to purchases on or after July 1, 1998, with no refund for earlier purchases.
• Notice 98-5, "Sales Taxation of Purchases by Religious Organizations" — Department guidance, enclosed with the ruling, on the religious-organization exemption, including the use of exemption certificate BT/ST-28B for utilities.
• K.A.R. 92-19-59 — the regulation authorizing private letter rulings; this ruling was issued under it and binds the Department only as to the requesting taxpayer.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1998-206

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

November 18, 1998

TTTTTTTTTT
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Dear Mr. TTTTT:

We wish to acknowledge receipt of your letter which was received by this office on November 13, 1998, regarding the application of Kansas Retailers’ Sales tax.

1998 Senate Bill No. 493 extends a new sales tax exemption to religious organizations. The new law became effective on July 1, 1998. It should be noted that all religious organizations, including churches, were obligated to pay the appropriate Kansas sales/use tax(es) on purchases of tangible personal property and taxable services, prior to July 1, 1998. Additionally, any taxable purchases made prior to July 1, 1998, are not entitled to refund of Kansas sales/use tax(es).

K.S.A. 79-3606(aaa) exempts from sales tax: “all sales of tangible personal property and services purchased by a religious organization which is exempt from federal income taxation pursuant to section 501(c)(3) of the federal internal revenue code, and used exclusively for religious purposes.”

Therefore, if the utilities that you purchase are used exclusively for religious purposes, the purchase could be made by the church without having to pay Kansas sales tax.

If the utility is purchased exclusively for religious purposes, you will not need to fill out worksheets to determine how much of the utilities qualify for exemption. However, on the other hand, if the utility is purchased for both a taxable and a non-taxable use, then a determination would need to be made as to how much of the purchase is exempt from sales tax. You should supply your utility company with a copy of the exemption certificate (BT/st-28B).

Please be advised that I have enclosed a Question and Answer format, which is also available in the Policy Information Library, which is maintained on the department’s web site. I trust that this will answer the questions that you have raised. Additionally, I have enclosed a copy of revenue Notice 98-5, entitled, “Sales Taxation of Purchases by Religious Organizations”.

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 I may be of further assistance, please contact me at your earliest convenience at (785) 296-7776.

Sincerely yours,

Thomas P. Browne, Jr.
Tax Specialist

TPB

Enc

Date Composed: 12/14/1998 Date Modified: 10/10/2001

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