Are purchases a public school club pays for out of its activity fund exempt from Kansas sales tax, even when students supplied the money?

Plain-English summary

A public school asked whether purchases made through a school club's activity fund are exempt from Kansas sales tax. The Department ruled they are exempt — as long as the purchase is genuinely the public school's — but the school still has to charge tax on what it sells.

The purchase-side exemption. "Kansas law exempts direct purchases by a public schools. K.S.A. 79-3606(b)." That exemption turns on the transaction being a direct sale to the school.

The two questions. The requester asked about two situations. First, a club sponsor (cheerleaders or drama club) collects money from students to buy items such as T-shirts, deposits the money in the activity fund, and writes a check to the vendor. Second, a club has a pizza party, the sponsor collects the money, deposits it in the activity fund, and writes a check to Pizza Hut. In both cases the Department answered: "Assuming the activity fund is a fund of the public school and the transaction is a direct sale to the school, the purchase would be exempt." That holds "no matter who the ultimate user of the product is."

The sales-side limit. The exemption runs only one direction. "Kansas law does not relieve a public school from the obligation of collecting and remitting sales tax on sales of tangible personal property or taxable services to students or the general public."

What this means for you

Public schools and their clubs

Purchases paid from a genuine school activity fund, by school check, as a direct sale to the school, are exempt under K.S.A. 79-3606(b) — even when students contributed the money and are the end users. The key is that the school, not the individual student, is the buyer of record.

The activity fund must actually be the school's

The Department twice conditioned its answer on the activity fund being "a fund of the public school" and the deal being "a direct sale to the school." A fund the school does not own or control, or a purchase billed to and paid by an individual, would not get the exemption.

You still collect tax on what you sell

Buying tax-free does not make your fund-raising sales tax-free. If the school (or its club) sells tangible personal property or taxable services to students or the public, it must collect and remit Kansas sales tax on those sales.

Common questions

Q: Can a school club buy T-shirts tax-free using money students paid in?
A: Yes, if the money is deposited in a school activity fund and the school pays the vendor by check as a direct sale to the school. The Department said the exemption applies regardless of who ultimately uses the item.

Q: Does a club pizza party paid from the activity fund qualify?
A: Yes, on the same conditions — the activity fund must be a fund of the public school and the purchase must be a direct sale to the school.

Q: Does buying tax-free mean our fund-raising sales are also tax-free?
A: No. The school must still collect and remit sales tax on sales of tangible personal property or taxable services it makes to students or the general public.

Citations and references

• K.S.A. 79-3606(b) — exempts direct purchases by a public school. The Department applied it to hold that purchases paid from a school activity fund, as a direct sale to the school, are exempt even when students supplied the money.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1999-08

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

January 22, 1999

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Dear XXXXXXXXXXXXX:

The purpose of this letter is to respond to your letter dated November 21, 1998.

Kansas law exempts direct purchases by a public schools. K.S.A. 79-3606(b). Kansas law does not relieve a public school from the obligation of collecting and remitting sales tax on sales of tangible personal property or taxable services to students or the general public.

Your questions are:

“ If a school club or organization sponsor, such as cheerleaders or drama club collects money from students to purchase items such as T-shirts, deposits the money in the activity fund, and writes a check to the vendor, then this purchase would be tax exempt (no matter who the ultimate user of the product is).”

Answer: Assuming the activity fund is a fund of the public school and the transaction is a direct sale to the school, the purchase would be exempt.

“ Also, if a club or organization, such as cheerleaders or drama club, has a pizza party, if the sponsor collects the money from the students, deposits the money in the activity fund, and writes a check to Pizza Hut, this purchase would also be tax exempt.”

Answer: Assuming the activity fund is a fund of the public school and the transaction is a direct sale to the school, the purchase would be exempt.

This is a private letter ruling pursuant to Kansas Administrative Regulation 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 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 ruling.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 01/25/1999 Date Modified: 10/11/2001

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