Which purchases by a nonprofit youth development program are exempt, and which are taxable as property used for human habitation?

Plain-English summary

A nonprofit organization that runs a youth development program asked which of its expense categories qualify for the sales tax exemption available to such programs.

The exemption and its built-in limit. The Department quoted K.S.A. 79-3606(ii), which exempts "all sales of tangible personal property purchased directly by a non-profit organization for nonsectarian comprehensive multidiscipline youth development programs and activities provided or sponsored by such organization, and all sales of tangible personal property by or on behalf of any such organization," but adds: "This exemption shall not apply to tangible personal property customarily used for human habitation purposes. . ."

What "human habitation" covers. The Department explained that no exemption is provided for property "customarily used for human habitation purposes," which it limited to "residential structures and the furnishing of said structures." Illustrative taxable items include "furniture, appliances, beds, chairs, room humidifiers and dehumidifiers, telephones and telephone equipment, bed and bath linens," and "[m]aterials or property purchased for use in the construction, repair, maintenance, or remodeling of residential structures." The organization's "RESIDENTIAL HOUSES" expense category, and any other category relating to residential structures, is subject to tax.

What remains exempt. Purchases for the following categories are exempt: "Administration, Training, Clinical Services, Human Resources, Maintenance (except maintenance of residential structures), Activities, Educational Services, Act Teams and Development."

Bottom line: the youth-program exemption is real but does not reach anything tied to residential living space; property for residential structures and their furnishings is taxable, while the program's administrative, clinical, training, educational, and activity purchases are exempt.

What this means for you

The exemption applies to direct program purchases

K.S.A. 79-3606(ii) exempts tangible personal property a qualifying nonprofit buys directly for its nonsectarian comprehensive multidiscipline youth development program and activities, and property sold by or on behalf of the organization.

Human-habitation property is carved out

Anything customarily used for human habitation — residential structures and their furnishings — is outside the exemption. That includes furniture, appliances, beds, linens, telephones, and construction, repair, maintenance, or remodeling materials for residences.

Sort purchases by function, not by the organization's status

Being an exempt youth organization is not enough on its own; each purchase is tested against the habitation carve-out. A cost booked to a residential category is taxable even though the same organization's program purchases are exempt.

Maintenance splits both ways

The Department expressly exempted "Maintenance" but excluded "maintenance of residential structures." Track maintenance spending so residential-structure maintenance is taxed while other maintenance stays exempt.

Common questions

Q: Is a nonprofit youth development program exempt on all its purchases?
A: No. Direct purchases for the youth development program are exempt under K.S.A. 79-3606(ii), but property customarily used for human habitation is excluded and remains taxable.

Q: What kinds of items are taxable under the human-habitation exclusion?
A: Residential structures and their furnishings — for example furniture, appliances, beds, chairs, humidifiers, telephones and equipment, and bed and bath linens — plus materials to construct, repair, maintain, or remodel residences.

Q: Which expense categories were treated as exempt?
A: Administration, Training, Clinical Services, Human Resources, Maintenance (except of residential structures), Activities, Educational Services, Act Teams, and Development.

Q: Is the list of taxable items exhaustive?
A: No. The Department said its list is illustrative, not complete or exclusive, of items customarily used for human habitation that do not qualify.

Citations and references

• K.S.A. 79-3606(ii) — exempts tangible personal property purchased directly by a nonprofit organization for nonsectarian comprehensive multidiscipline youth development programs and activities, and property sold by or on behalf of the organization, but not property customarily used for human habitation purposes.
• 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-1998-219

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

December 18, 1998

XXXXXXXXX
XXXXXXXXX
XXXXXXXXX

Re: XXXXXXX

Dear XXXXXX:

The purpose of this letter is to respond to your letter dated December 11, 1998.

K.S.A. 79-3606(ii) exempts from sales tax: “all sales of tangible personal property purchased directly by a non-profit organization for nonsectarian comprehensive multidiscipline youth development programs and activities provided or sponsored by such organization, and all sales of tangible personal property by or on behalf of any such organization. This exemption shall not apply to tangible personal property customarily used for human habitation purposes. . .”

No exemption from sales tax is provided for purchases of tangible personal property which is customarily used for human habitation purposes. Human habitation purposes would be limited to residential structures and the furnishing of said structures.

Purchases of tangible personal property or taxable services that are for residential structures are of such items as: furniture, appliances, beds, chairs, room humidifiers and dehumidifiers, telephones and telephone equipment, bed and bath linens are subject to sales tax. This is not a complete or exclusive list, but is illustrative of items which are customarily used for human habitation purposes which do not qualify for exemption from sales tax.

Materials or property purchased for use in the construction, repair, maintenance, or remodeling of residential structures are subject to sales tax.

Your expense category (5. RESIDENTIAL HOUSES), would be subject to sales tax. So would any other expense category that relates to residential structures.

Purchases for the following categories would be exempt from Kansas retailers’ sales tax: Administration, Training, Clinical Services, Human Resources, Maintenance (except maintenance of residential structures), Activities, Educational Services, Act Teams and Development

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: 12/23/1998 Date Modified: 10/10/2001

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