Are membership dues and recreational activity fees charged by a nonprofit community service organization exempt from Kansas sales tax?

Plain-English summary

A nonprofit community service organization asked whether the membership dues and recreational activity fees it charges are subject to Kansas sales tax. The answer turned on a specific property-tax test the organization did not meet.

The exemption and its condition. The Department explained that "[t]he 1998 legislature exempted membership dues and recreational activity fees that are paid to certain nonprofit community service organizations." But there is a catch: "[f]or this exemption to apply, the organization must qualify for exemption from property tax under the Ninth paragraph of K.S.A. 79-201." The Department listed examples of organizations that may qualify — "the American Red Cross, Big Brothers & Big Sisters, Boy Scouts, Girl Scouts, YMCA, YWCA, community health centers, local community organizations, and social services organizations" — citing K.S.A. 79-3603(m). A separate provision, K.S.A. 79-3603(n), exempts membership dues paid to military veterans organizations such as the VFW and the American Legion and their auxiliaries (dues that had previously been taxed when they let members use the organization's facilities for recreation or entertainment).

Why this organization was taxable. Because the requesting organization "is not exempt from property tax under the Ninth paragraph of K.S.A. 79-201," its "membership dues and recreational fees . . . would be subject to the appropriate Kansas sales tax(es), on the gross receipts received thereon."

Bottom line: the dues/fees exemption is not automatic for nonprofits. It is keyed to a specific property-tax status under K.S.A. 79-201. Without that status, a nonprofit's membership dues and recreational activity fees are taxable.

What this means for you

Nonprofit clubs and community service organizations

Do not assume your membership dues and recreational fees are exempt just because you are a nonprofit. The exemption under K.S.A. 79-3603(m) requires that you qualify for property tax exemption under the Ninth paragraph of K.S.A. 79-201. Confirm your property-tax status before treating dues or activity fees as exempt.

Veterans organizations

Dues paid to military veterans organizations and their auxiliaries (such as the VFW and American Legion) are exempt under K.S.A. 79-3603(n), even though such dues were once taxed when tied to use of recreation or entertainment facilities.

Members and event participants

If the organization does not hold the qualifying property-tax exemption, expect Kansas sales tax to apply to your dues and recreational activity fees.

Common questions

Q: Are all nonprofit membership dues exempt from Kansas sales tax?
A: No. The exemption for membership dues and recreational activity fees under K.S.A. 79-3603(m) applies only if the organization qualifies for property tax exemption under the Ninth paragraph of K.S.A. 79-201.

Q: What kinds of groups typically qualify?
A: The Department listed examples such as the American Red Cross, Big Brothers & Big Sisters, the Boy and Girl Scouts, the YMCA and YWCA, community health centers, and social services organizations.

Q: What about veterans organizations?
A: Membership dues paid to military veterans organizations such as the VFW and American Legion, and their auxiliaries, are exempt under K.S.A. 79-3603(n).

Citations and references

• K.S.A. 79-3603(m) — exempts membership dues and recreational activity fees paid to nonprofit community service organizations that qualify for property tax exemption under the Ninth paragraph of K.S.A. 79-201; the basis for the conditional exemption.
• K.S.A. 79-3603(n) — exempts membership dues paid to military veterans organizations and their auxiliaries.
• K.S.A. 79-201 — the property tax exemption statute; its Ninth paragraph is the qualifying test an organization must meet for the dues/fees exemption to apply. This organization did not meet it, so its dues and fees were taxable.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1999-233

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

October 11, 1999

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RE: TTTTTTTTTTTTTTTTTTTTTTTTTTTTT

Dear Mr. TTTTTTTT:

We wish to acknowledge receipt of your letter dated August 30, 1999, regarding the application of Kansas Retailers’ Sales tax.

The 1998 legislature exempted membership dues and recreational activity fees that are paid to certain nonprofit community service organizations. For this exemption to apply, the organization must qualify for exemption from property tax under the Ninth paragraph of K.S.A. 79-201. Examples of Organizations that may qualify are the American Red Cross, Big Brothers & Big Sisters, Boy Scouts, Girl Scouts, YMCA, YWCA, community health centers, local community organizations, and social services organizations. K.S.A. 79-3603(m).

Also exempted are the membership dues paid to military veterans organizations, such as the Veterans of Foreign Wars and the American Legion, and their auxiliaries. These dues were previously taxed when payment allowed members to use the organization’s facilities for recreation or entertainment. K.S.A. 79-3603(n).

Please be advised that since the TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT, is not exempt from property tax under the Ninth paragraph of K.S.A. 79-201, the membership dues and recreational fees charged by said organization would be subject to the appropriate Kansas sales tax(es), on the gross receipts received thereon.

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

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

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