Does a 501(c)(3) religious organization qualify for a Kansas sales tax exemption, and how must it make exempt purchases?

Plain-English summary

A religious organization asked whether it qualifies for a Kansas sales tax exemption. The Department said yes, and explained the rule and how to use it.

The exemption. K.S.A. 79-3606(aaa) exempts "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."

Who counts as a "religious organization." The statute defines it as a group that gathers in common membership for mutual support and edification — in piety, worship, and religious observance — at an established place of worship it maintains for regularly scheduled religious services, and whose net earnings do not benefit any private shareholder or member. An umbrella organization made up of religious organizations can derive the exemption from its members if all members are themselves exempt religious organizations and it exists exclusively to help them carry out their religious purpose.

The result. The Department concluded the organization meets the criteria set out in Notice 98-05 and is extended the religious-organization exemption, because it is carrying out the ministry of the church.

How to buy exempt. A qualifying purchase must be made directly by the organization: each bill, invoice, contract, or other evidence of the transaction must be in the organization's name, and payment must be made with the exempt entity's own check, warrant, or voucher. The Department enclosed Notice 98-05, "Sales Taxation of Purchases by Religious Organizations."

What this means for you

If you run a church or religious organization in Kansas, the exemption is real but has strict mechanics.

• You must be a 501(c)(3) religious organization. The exemption keys off federal 501(c)(3) status plus the statutory definition of a religious organization, and the purchase must be used exclusively for religious purposes.
• Buy in the organization's name. To keep a purchase exempt, put the bill, invoice, and contract in the organization's name — not an individual member's or a pastor's.
• Pay from the organization's account. Payment must come on the exempt entity's own check, warrant, or voucher. A member paying personally and seeking reimbursement can break the exemption.
• Follow Notice 98-05. The Department applied the criteria in Notice 98-05, "Sales Taxation of Purchases by Religious Organizations" — use it as your compliance guide.

Common questions

Is a 501(c)(3) religious organization exempt from Kansas sales tax?
Yes, under K.S.A. 79-3606(aaa), for purchases of tangible personal property and services used exclusively for religious purposes.

What makes a group a "religious organization" for this exemption?
A group that gathers in common membership for worship and religious observance at an established place of worship it maintains for regularly scheduled services, whose net earnings don't benefit any private member. An umbrella body of such organizations can qualify derivatively.

How must exempt purchases be made?
Directly by the organization. Each bill, invoice, contract, or other evidence of the transaction must be in the organization's name, and payment must be made with the organization's own check, warrant, or voucher.

Can a member buy something personally and still get the exemption?
No. The purchase must be made directly by the exempt entity, documented in its name and paid from its own funds — a personal purchase does not qualify.

Citations and references

• K.S.A. 79-3606(aaa) — exempts sales of tangible personal property and services purchased by a 501(c)(3) religious organization and used exclusively for religious purposes; defines "religious organization" and allows an umbrella body of exempt religious organizations to derive the exemption.
• Kansas Department of Revenue Notice 98-05, "Sales Taxation of Purchases by Religious Organizations" — sets out the criteria the Department applied in finding the organization qualified, and the direct-purchase documentation and payment requirements.

Source

• Original ruling (DOCX): https://www.ksrevenue.gov/pildocs/rulings/P-1999-22.docx
• Kansas Policy Information Library: https://www.ksrevenue.gov/prpil.html

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

February 10, 1999

TTTTTTTTTTT
TTTTTTTTTTT
TTTTTTTTTTT
TTTTTTTTTTT

Dear Ms. TTTTT:

We wish to acknowledge receipt of your letter dated February 2, 1999, regarding the application of Kansas Retailers’ Sales tax.

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.”

For purposes of the Kansas retailers’ sales tax act, “religious organization” shall mean any organization, church, body of communicants, or other group that gathers in common membership for mutual support and edification, in piety, worship, and religious observance, at an established place of worship which the organization maintains for the purpose of conducting regularly scheduled religious services or meetings, and of which no part of the net earnings of such organization inures to the benefit of any private shareholder or individual member. Further, an organization that is composed of religious organizations may derive exemption from its members if all of its members are themselves exempt religious organizations and the derivative organization is organized and operated exclusively to assist its member organizations in carrying out their religious purpose.

Please be advised, that it is the opinion of this office, that TTTTTTTTTTTTTTTTTTTTT. does meet the established criteria, as set out in Notice 98-05, to be extended a sales tax exemption as a religious organization, since the organization is carrying out the ministry of the church.

It should be noted that in order for a qualified purchase to be made exempt from Kansas sales/use tax, the respective purchase needs to be made directly by TTTTTTTTTTTTTTT. Therefore, each bill, invoice, contract or other evidence of the transaction shall be made out in the name of TTTTTTTTTTTTTTTTTTTTT, and payment shall be made on a check, warrant or voucher of the exempt entity.

For your convenience, I have enclosed Notice 98-05 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: 02/23/1999 Date Modified: 10/11/2001

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