Is a nonprofit youth-development organization exempt from Kansas sales tax on its purchases and sales of tangible personal property?

Plain-English summary

A youth-development organization — described in the ruling as a "Pack" (a scouting unit) — asked how Kansas sales tax applies to its purchases and sales. The Department gave it broad relief on tangible goods:

Goods, both directions, are exempt. "The Pack may purchase tangible personal property for their own use and for resale without the payment of sales tax. The Pack may engage as a retailer of tangible personal property without any sales tax collection duties."

The statute. K.S.A. 79-3606(ii) exempts "all sales of tangible personal property purchased directly by a nonprofit 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." Qualifying nonprofits may therefore buy tangible personal property free of sales or compensating tax and sell tangible personal property with no duty to register, collect, and remit.

The limit — services are different. The Department was explicit: "this exemption does not exempt the nonprofit organization from sales tax when purchasing of a taxable service; nor the duty to register, collect and remit sales tax on the gross receipts from the providing of a taxable service." So the organization still pays tax on taxable services it buys, and must collect tax on taxable services it sells.

Who qualifies. The exemption "extends to" the requesting Pack and similar organizations, which are "deemed to be a 'nonprofit organization' for purposes of K.S.A. 79-3606(ii)."

Bottom line: a qualifying youth-development nonprofit is exempt on tangible personal property — both buying and selling — but the exemption stops at taxable services and at property used for human habitation.

What this means for you

Qualifying youth-development nonprofits

Under K.S.A. 79-3606(ii), you can buy tangible personal property (for your own use or for resale) without paying sales tax, and sell tangible personal property without registering or collecting tax. This covers the goods side of your program activities.

Services are not covered — watch both sides

The exemption is limited to tangible personal property. You still owe tax when you purchase a taxable service, and if you provide a taxable service you must register, collect, and remit tax on those receipts. Separate your taxable-service activity from your exempt goods activity.

Housing-type property is excluded

The exemption expressly does not apply to tangible personal property customarily used for human habitation purposes. Don't extend the exemption to that category.

Common questions

Q: Can a nonprofit youth-development group buy and sell goods tax-free in Kansas?
A: Yes, if it qualifies under K.S.A. 79-3606(ii). It may purchase tangible personal property for use or resale without paying tax and sell tangible personal property with no collection duty.

Q: Does the exemption cover services?
A: No. The organization still pays tax on taxable services it buys and must collect and remit tax on taxable services it provides.

Q: Are there other limits?
A: Yes. The exemption does not apply to tangible personal property customarily used for human habitation purposes.

Citations and references

• K.S.A. 79-3606(ii) — exempts tangible personal property purchased by, and sold by or on behalf of, a nonprofit organization for nonsectarian comprehensive multidiscipline youth-development programs (excluding property used for human habitation); the basis for exempting the Pack's purchases and sales of goods while leaving taxable services outside the exemption.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1999-257

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

December 8, 1999

XXXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXX

RE: XXXXXXXXXXXXXXXXXXXXXXX

Dear XXXXXXXXXXXX:

I have been asked to respond to your letter received by this office on October 18, 1999. In it, you ask for guidance on the application of Kansas retailers’ sales tax on purchases and sales by XXXXXXXXXXXXXXXXXXXXXX.

The Pack may purchase tangible personal property for their own use and for resale without the payment of sales tax. The Pack may engage as a retailer of tangible personal property without any sales tax collection duties.

Allow me to explain our rationale:

K.S.A. 79-3606(ii) exempts from Kansas retailers’ sales tax, “all sales of tangible personal property purchased directly by a nonprofit 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;”

This means that all nonprofit organizations that qualify for this exemption may purchase tangible personal property exempt from sales or compensating tax; and sell tangible personal property with no duty to register, collect and remit sales tax. Please note that this exemption does not exempt the nonprofit organization from sales tax when purchasing of a taxable service; nor the duty to register, collect and remit sales tax on the gross receipts from the providing of a taxable service.

The exemption contained in K.S.A. 79-3606(ii) extends to XXXXXXXXXand other organizations such as a XXXXXXXXXXXXXXX. These entities are deemed to be a “nonprofit organization” for purposes of K.S.A. 79-3606(ii).

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: mdc

Date Composed: 12/16/1999 Date Modified: 10/11/2001

Table 1

Table 2