Does a ministry keep its Kansas religious-organization sales tax exemption after it stops holding worship services?

Plain-English summary

A ministry had earlier obtained the Kansas religious-organization sales tax exemption. By a private letter ruling dated November 5, 1998, the Department (through Mr. Thomas Hatten) "recognized the Ministry's qualification for the exemption" under K.S.A. 79-3606(aaa) and sent along a copy of Notice 98-05 explaining the law. Then circumstances changed: the ministry wrote that "As of August 1, 1999, we have ceased to provide worship of any kind," and asked whether it remained tax exempt.

The holding. It does not. The Department was "of the opinion the Ministry lost its tax exempt status under the provisions of K.S.A. 79-3606(aaa) as of August 1, 1999, when it ceased to provide worship services." As a result, the ministry is "no longer 'exempt from paying Kansas sales tax on purchases made for charitable donations or for use as part of the Ministry's charitable works.'"

A door left open. The Department added that "some activities of the Ministry may qualify for exemption on another basis." Losing the religious-organization exemption does not necessarily foreclose every exemption — but the ministry would have to fit a different statute.

Bottom line: the religious-organization exemption depends on actually functioning as a religious organization. When worship services stopped, the qualifying activity that supported the exemption ended, and the exemption ended with it — as of the date worship ceased.

What this means for you

Religious organizations holding the exemption

Your K.S.A. 79-3606(aaa) exemption is tied to operating as a religious organization. If you stop conducting worship services, you can lose the exemption as of the date the qualifying activity ends — and then owe sales tax on your purchases going forward.

Organizations whose mission or activities are changing

Treat a material change in what you do (such as ceasing worship) as a potential loss of exempt status. Reassess your exemption when your activities change, and stop using the exemption certificate once the qualifying activity has stopped.

Vendors selling to religious organizations

An exemption certificate reflects status at a point in time. If a buyer's qualifying activity has ended, its exemption may no longer be valid; be alert to changes that could affect whether an exemption still applies.

Common questions

Q: Can a religious organization lose its Kansas sales tax exemption?
A: Yes. The Department ruled the ministry lost its K.S.A. 79-3606(aaa) exemption as of the date it ceased to provide worship services.

Q: When did the exemption end?
A: On August 1, 1999 — the date the ministry stated it "ceased to provide worship of any kind." The loss was effective as of that date, not later.

Q: Could the ministry still be exempt on anything?
A: Possibly. The Department noted that "some activities of the Ministry may qualify for exemption on another basis," but not under the religious-organization exemption.

Citations and references

• K.S.A. 79-3606(aaa) — the Kansas sales tax exemption for religious organizations; the ministry qualified under it while it conducted worship, and lost that exempt status when it ceased worship services.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1999-236

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

October 22, 1999

XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX

Re: Kansas Sales Tax

Dear XXXXX:

Your correspondence of September 30, 1999, has been referred to me for response. Thank you for your inquiry.

Your letter notes that by letter dated September 17, 1998, the XXXX XXXXX XXXX XXXXX XX XXXXX (the Ministry) sought exemption from sales tax under the provisions of K.S.A. 79-3606(aaa) as a religious organization. On November 5, 1998, Mr. Thomas Hatten of our office issued a private letter ruling to you which recognized the Ministry’s qualification for the exemption. Along with his letter Mr. Hatten sent the Ministry a copy of our Notice 98-05 which explained the law in this area.

In your letter of September 30, 1999, you note that, “As of August 1, 1999, we have ceased to provide worship of any kind.” You note it has been brought to your attention the Ministry may not qualify for tax-exempt status any longer because of this change of status. By your letter you ask us to review the Ministry’s status and advise you whether you remain tax exempt.

In response to your request, please be advised we are of the opinion the Ministry lost its tax exempt status under the provisions of K.S.A. 79-3606(aaa) as of August 1, 1999, when it ceased to provide worship services. Accordingly, the Ministry is no longer “exempt from paying Kansas sales tax on purchases made for charitable donations or for use as part of the Ministry’s charitable works.” [See Thomas Hatten letter of November 5, 1998.] As suggested in your letter of September 17, 1998, some activities of the Ministry may qualify for exemption on another basis.

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.

I trust this information is of assistance. If I can be of further service, please feel free to contact me.

Sincerely,

Jim Weisgerber
Attorney
Tax Specialist

JW:jw

Date Composed: 10/27/1999 Date Modified: 10/11/2001

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