Must a nonprofit collect Kansas sales tax on its fund-raising sales, such as carnivals and bake sales?

Plain-English summary

A not-for-profit organization asked how Kansas sales tax applies to its fund-raising activities. The Department explained that being a nonprofit does not, by itself, keep you out of the sales tax system.

Any not-for-profit entity (unless specifically exempted by statute) that is engaged in the business of selling tangible personal property at retail — or furnishing services or entertainment — to the final consumer is a "retailer" as defined in K.S.A. 79-3602(d). So if the organization holds fund-raisers such as carnivals or bake sales, it must collect and remit sales tax on the gross receipts from all taxable retail transactions. Crucially, the ultimate use of the funds is not determinative — the fact that the money supports a charitable cause does not make the sales exempt.

There is a flip side that helps: the sales tax falls only on retail sales (sales to the final user or consumer). Items the organization buys in order to resell them at the fund-raiser are purchases for resale and can be bought without paying sales tax. To do that, the organization must hold a valid Kansas retailers' sales tax registration number and give its supplier a valid resale exemption certificate.

The ruling attached the text of K.A.R. 92-19-67, the regulation on sales by not-for-profit organizations, which also carves out non-recurring sales by a religious organization (no more than one sale in a twelve-month period) as not subject to tax.

What this means for you

If your nonprofit runs fund-raisers in Kansas, plan to register, collect tax on your sales, and use resale certificates on what you buy to resell.

• You are a retailer. Regularly selling goods, services, or entertainment to consumers makes a nonprofit a retailer under 79-3602(d), the same as any business.
• Charitable purpose doesn't exempt the sale. Sales tax is due on fund-raiser gross receipts regardless of how the proceeds are used.
• Buy for resale tax-free. Goods you acquire to sell at the event are purchases for resale — provide your supplier a resale exemption certificate and don't pay tax on them (you'll collect tax when you sell).
• Register first. You need a valid Kansas retailers' sales tax registration number both to collect tax and to issue resale certificates.
• Narrow religious-organization break. Under K.A.R. 92-19-67, a religious organization's non-recurring sale — no more than one within twelve months — is not taxed, even if the items were bought for resale.

Common questions

Does a nonprofit have to charge sales tax at a fund-raiser?
Yes. A not-for-profit that regularly sells tangible personal property or taxable services to consumers is a retailer under K.S.A. 79-3602(d) and must collect and remit sales tax on its fund-raiser gross receipts.

Does it matter that the money goes to a good cause?
No. The ultimate use of the funds is not determinative of whether the gross receipts are subject to sales tax.

Can the group buy fund-raiser merchandise without paying tax?
Yes. Items purchased to resell at the event are purchases for resale. The organization must hold a valid Kansas retailers' sales tax registration number and give its supplier a valid resale exemption certificate.

Is there any exception for churches or religious groups?
Yes, a narrow one. Under K.A.R. 92-19-67, a religious organization's non-recurring sale — not more than one sale of property or taxable services within a twelve-month period — is not subject to tax, whether or not the property was acquired for resale.

Citations and references

• K.S.A. 79-3602(d) — defines "retailer"; any not-for-profit entity (unless specially exempted) regularly engaged in selling tangible personal property at retail or furnishing services or entertainment to the consumer is a retailer that must collect and remit sales tax.
• K.A.R. 92-19-67 — sales by not-for-profit corporations, businesses, organizations, and associations; the principal line of business and the ultimate use of funds are not determinative, and non-recurring sales by a religious organization (no more than one within twelve months) are not subject to tax.

Source

• Original ruling (DOCX): https://www.ksrevenue.gov/pildocs/rulings/P-1999-37.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

XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX

Dear Sirs:

The purpose of this letter is to respond to your letter dated November 12, 1998.

Any Not-for-Profit entity (unless specially exempt by statute) engaged in the business of selling tangible personal property at retail or furnishing services or entertainment to the ultimate user or consumer, and not for resale, shall be a retailer as defined in K.S.A. 79-3602(d).

If your organization engages in fund raising activities, such as carnivals, bake sales, etc., it is required to collect and remit sales tax on the gross receipts from all retail transactions subject to tax under the Retailers' Sales Tax Act. The ultimate use of the funds is not determinative of whether the gross receipts from such sales are subject to sales tax. See K.A.R. 92-19-67 in attached Appendix. The sales tax is imposed only on retail sales (sales to the final user or consumer) items that are purchased for a fund raising event are purchases for resale and may be purchased by the retailer exempt from sales tax. To purchase these items without sales tax, the retailer must hold a valid Kansas retailers' sales tax registration number and must provide the retailer with a valid resale exemption certificate.

This is a private letter ruling pursuant to Kansas Administrative Regulation 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 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 ruling.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Appendix

92-19-67 Sales by corporations, businesses, organizations and associations organized not-for-profit. (a) Each not-for-profit corporation, business, organization or association regularly engaged in the business of selling tangible personal property at retail or furnishing services or entertainment to the ultimate user or consumer, and not for resale, shall be a retailer as defined in K.S.A. 1986 Supp. 79-3602(d). Each retailer shall collect and remit sales tax on the total gross receipts received from all taxable retail sales of tangible personal property, services or entertainment.
(b) The principal line of business, activity, intention or function of the corporation, business, organization or association is not determinative of whether a person is a retailer. The ultimate use of funds is not determinative of whether the gross receipts received from retail sales of tangible personal property or services are subject to sales tax.
(c) Regularly engaged in the business'' means the periodic, habitual or recurring sale of tangible personal property or a taxable service at retail. A person is a retailer under the act if the person sells tangible personal property at retail or provides a taxable service in the normal course of its business operations, notwithstanding the fact that the sales may be few or infrequent, or that retail sales may comprise a small portion of the total gross income. When a person acquires tangible personal property for the purpose of resale, the person is a retailer and shall collect sales tax on the retail sale of the property, regardless of whether the person's principal line of business, function or intention involves retail sales of tangible personal property. (d) Non-recurring retail sales of tangible personal property or taxable services by a religious organization are not subject to sales tax, whether or not any property sold was acquired for resale purposes.Nonrecurring'' means there must not be more than one sale of tangible personal property or taxable services within a twelve month period. ``Religious organization'' means a structured, nonprofit, collective association or society of individuals relating to or manifesting devotion to an acknowledged ultimate deity. (Authorized by K.S.A. 79-3618, implementing K.S.A. 1986 Supp. 79-3602; effective May 1, 1988.)

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

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