Does an organization qualify for the Kansas religious-organization sales-tax exemption if it lacks an established place of worship with regularly scheduled services?

Plain-English summary

An organization sought recognition as a religious organization exempt from Kansas sales tax. K.S.A. 79-3606(aaa) exempts sales of tangible personal property and services purchased by a religious organization that is exempt under IRC section 501(c)(3) and used exclusively for religious purposes.

The Department set out the statutory definition of "religious organization" for the Kansas sales tax act: any organization, church, body of communicants, or other group that gathers in common membership for mutual support and edification — in piety, worship, and religious observance — at an established place of worship that the organization maintains for conducting regularly scheduled religious services or meetings, and of which no part of the net earnings inures to any private shareholder or individual member. An organization composed of religious organizations may derive exemption from its members if all its members are themselves exempt religious organizations and the umbrella group is organized and operated exclusively to assist its members in carrying out their religious purpose.

Applying that definition and the criteria in Notice 98-05, the Department concluded that the requesting organization does not meet the criteria to be extended a sales tax exemption as a religious organization. The opinion was based solely on the information provided, and the Department invited the organization to submit information that would support an exemption.

What this means for you

Kansas's religious-organization exemption has specific structural requirements — a faith-based mission alone is not enough.

• You need an established place of worship that the organization maintains for regularly scheduled religious services or meetings.
• No private inurement. No part of the net earnings can benefit a private shareholder or individual member.
• Umbrella groups can derive exemption only if all their members are themselves exempt religious organizations and the group exists solely to help members carry out their religious purpose.
• Denials can be revisited. The Department decided on the information provided and invited the organization to submit additional facts supporting an exemption. See Notice 98-05 for the criteria.

Common questions

What makes an organization a "religious organization" for this exemption?
A group that gathers for worship at an established place of worship it maintains for regularly scheduled services, with no net earnings inuring to any private member.

Why was this organization denied?
The Department found it did not meet the criteria in Notice 98-05 to qualify as a religious organization, based on the information provided.

Can an umbrella organization qualify?
Yes, but only if all of its members are themselves exempt religious organizations and it exists solely to assist its members in carrying out their religious purpose.

Is the denial final?
The Department based its opinion on the facts provided and invited the organization to submit additional supporting information.

Citations and references

• K.S.A. 79-3606(aaa) — exempts a 501(c)(3) religious organization's purchases used exclusively for religious purposes, and (as quoted in the ruling) defines "religious organization" including the derivative/umbrella-organization test.
• Notice 98-05, "Sales Taxation of Purchases by Religious Organizations" — the criteria the Department applied in denying the exemption.

Source

• Original ruling (DOCX): https://www.ksrevenue.gov/pildocs/rulings/P-1999-84.docx
• Kansas Policy Information Library: https://www.ksrevenue.gov/prpil.html

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

March 17, 1999

TTTTTTTTTTT
TTTTTTTTTTT
TTTTTTTTTTT
TTTTTTTTTTT
TTTTTTTTTTT

RE: TTTTTTTT

Dear Mr. TTTTTTT:

We wish to acknowledge receipt of your letter dated February 24, 1999, regarding the application of Kansas Retailers’ Sales tax.

This is a private letter ruling pursuant to K.A.R. 92-19-59.

K.S.A. 79-3606(aaa) exempts from sales tax: “all sales of tangible personal property and services purchased by a religious organization which is exempt from federal income taxation pursuant to section 501(c)(3) of the federal internal revenue code, and used exclusively for religious purposes.”

For purposes of the Kansas retailers’ sales tax act, “religious organization” shall mean any organization, church, body of communicants, or other group that gathers in common membership for mutual support and edification, in piety, worship, and religious observance, at an established place of worship which the organization maintains for the purpose of conducting regularly scheduled religious services or meetings, and of which no part of the net earnings of such organization inures to the benefit of any private shareholder or individual member. Further, an organization that is composed of religious organizations may derive exemption from its members if all of its members are themselves exempt religious organizations and the derivative organization is organized and operated exclusively to assist its member organizations in carrying out their religious purpose.

Please be advised, that it is the opinion of this office, that TTTTTTTTTTTTTTT does not meet the established criteria, as set out in Notice 98-05, to be extended a sales tax exemption as a religious organization. This opinion is based solely upon the information that you have provided this department. If you have information that would support a sales tax exemption, please submit said information to this office.

For your convenience, I have enclosed Notice 98-05 entitled, “Sales Taxation of Purchases by Religious Organizations”.

This response 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 an accurate determination by the department, this ruling is null and void. This private letter 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

Enc

Date Composed: 04/02/1999 Date Modified: 10/11/2001

Table 1

Table 2