Must a 501(c)(3) nonprofit collect Kansas sales tax on sales it makes to raise funds?

Plain-English summary

A non-profit organization — a 501(c)(3) that provides shelter and assistance to victims of domestic violence and sexual assault — asked whether it must collect and remit Kansas sales tax on sales it makes to raise funds.

The Department said yes. Kansas law broadly taxes the sale of tangible personal property and enumerated services, subject to specific exemptions and exceptions. But the law contains no exemption or exception for this organization's fund-raising sales. The organization must collect and remit sales tax on all of its taxable sales, including the gross receipts from fund raising.

The key point: worthwhile charitable work and 501(c)(3) status do not, by themselves, exempt a group's retail sales from Kansas sales tax. (Compare P-1999-37, reaching the same conclusion for a not-for-profit's carnival and bake-sale fund-raisers, and P-1999-28, explaining that not every non-profit enjoys a Kansas sales-tax exemption.)

What this means for you

If your nonprofit sells goods to raise money in Kansas, plan to charge tax on those sales.

• 501(c)(3) is a federal income-tax status, not a Kansas sales-tax exemption. Being a recognized charity does not exempt your retail sales from state sales tax.
• Fund-raiser receipts are taxable sales. Collect and remit sales tax on the gross receipts from fund-raising sales, just as any retailer would.
• Only a specific statutory exemption helps. Unless the Legislature has written an exemption that covers your organization, your taxable sales stay taxable regardless of the cause.
• Register as a retailer. To collect and remit the tax, obtain a Kansas retailers' sales tax registration number.

Common questions

Does a 501(c)(3) have to charge sales tax on fund-raiser sales in Kansas?
Yes. Kansas law has no exemption for the organization's fund-raising sales, so it must collect and remit sales tax on those gross receipts.

Does it matter that the group serves domestic violence and sexual assault victims?
No. The Department recognized the value of the work but found no statutory exemption for the organization's sales; the charitable mission does not change the taxability of its retail sales.

Are all of the organization's sales taxable?
All of its taxable sales are — the ruling says the group must collect and remit sales tax on all taxable sales, including fund-raising receipts. Whether a particular item or service is taxable still depends on Kansas law.

How could a nonprofit's sales become exempt?
Only through a specific statutory exemption. As P-1999-28 notes, exemptions for particular kinds of organizations come from the Legislature; a group not covered would need a change in the statutes.

Citations and references

• Kansas Retailers' Sales Tax Act (general imposition) — Kansas broadly taxes sales of tangible personal property and enumerated services; the Department found no exemption or exception covering the organization's fund-raising sales, so it must collect and remit tax on those gross receipts.

Source

• Original ruling (DOCX): https://www.ksrevenue.gov/pildocs/rulings/P-1999-34.docx
• Kansas Policy Information Library: https://www.ksrevenue.gov/prpil.html

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

February 19, 1999

XXXXXXXX
XXXXXXXX
XXXXXXXX
XXXXXXXX

Dear XXXXX:

I have been asked to respond to your letter of February 3, 1999. In it you ask if your organization is required to collect and remit sales tax on sales for the purpose raising funds for your organization.

In your letter you stated that XXXXXXXXXXXXX., is a non-profit organization rated with the Internal Revenue Service as a 501 (c)(3) status. You provide shelter and assistance to victims of domestic violence and sexual assault.

Kansas law broadly imposes tax on the sale of tangible personal property and enumerated services. The law also contains exemptions and exceptions from the imposition of sales tax.

It is the opinion of the Kansas Department of Revenue that the law does not contain an exemption or exception for your organization fund raising sales. Your organization must collect and remit sales tax on all taxable sales including the gross receipts from fund raising.

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

Date Composed: 03/02/1999 Date Modified: 10/11/2001

Table 1

Table 2