What counts as property and services 'used exclusively for religious purposes' for the Kansas 79-3606(aaa) exemption?

Plain-English summary

A religious organization asked what "exclusive use for religious purposes" means for the exemption in K.S.A. 79-3606(aaa), which 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 gave a detailed answer:

• Used exclusively for religious purposes (examples, not limited to): property/services used in or to facilitate religious worship services (a congregation meeting at a single location); religious ceremonies; carrying out the organization's religious work; constructing, furnishing, equipping, remodeling, or maintaining a facility used exclusively for religious objectives (church, church grounds, administration building, church camp, parsonage, rectory, convent) — which must be purchased directly by the religious organization, not through a contractor; and administering, managing, or operating religious facilities or activities.
• "Used exclusively" standard: an item is treated as used exclusively for a religious purpose as long as any other use is minimal in scope, insubstantial in nature, and incidental to the exempt purpose.
• Not exempt: purchases for business activities (even if the profits are used exclusively for religious purposes); and personal-use items for ministers, priests, and other employees — food, clothing, personal items, meals, drinks, motor vehicles, admission charges, and membership dues.
• Utilities: utility services for an employee's residence (parish, rectory, convent, parsonage, minister's house) are not exempt, even if paid by church check or voucher. If a utility is purchased exclusively for religious purposes, no worksheet is needed; if for both taxable and non-taxable use, the exempt portion must be determined. Supply the utility company with a copy of the exemption certificate (BT/ST-28B).

The Department enclosed Revenue Notice 98-05 ("Sales Taxation of Purchases by Religious Organizations") and a Q&A.

What this means for you

For a Kansas religious organization, the 79-3606(aaa) exemption is about how the item is actually used, not just who buys it.

• Worship, ceremonies, religious work, and religious-facility construction/maintenance qualify — but facility work must be purchased directly by the organization, not through a contractor.
• Incidental other use is tolerated. A minimal, insubstantial, incidental non-religious use doesn't destroy the exemption.
• Business and personal uses don't qualify. Purchases for revenue-generating business activities, or personal items for clergy/employees, are taxable.
• Residential utilities are taxable even when paid by the church; mixed-use utilities are apportioned. Give your utility provider the BT/ST-28B exemption certificate.

Common questions

What does "used exclusively for religious purposes" mean?
Property/services used in worship, ceremonies, the organization's religious work, or the construction/maintenance of religious facilities — with any other use being minimal, insubstantial, and incidental.

Are church business-venture purchases exempt if profits fund religion?
No. Purchases for business activities are not exempt even if the profits are used for religious purposes.

Are utilities for a parsonage or rectory exempt?
No. Utility services for an employee's residence are not exempt, even if paid by church check; mixed-use utilities are apportioned.

How does a religious organization claim the utility exemption?
By supplying the utility company a copy of the exemption certificate (BT/ST-28B); see also Revenue Notice 98-05.

Citations and references

• K.S.A. 79-3606(aaa) — exempts sales of tangible personal property and services purchased by a 501(c)(3) religious organization and used exclusively for religious purposes.
• Revenue Notice 98-05, "Sales Taxation of Purchases by Religious Organizations," and exemption certificate BT/ST-28B — referenced by the Department as the guidance and mechanism for claiming the exemption.

Source

• Original ruling (DOCX): https://www.ksrevenue.gov/pildocs/rulings/P-1999-90.docx
• Kansas Policy Information Library: https://www.ksrevenue.gov/prpil.html

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

March 19, 1999

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Dear Ms. TTTTTTTTTT:

We wish to acknowledge receipt of your letter dated March 11, 1999, regarding the application of Kansas Retailers’ Sales tax.

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.”

In your letter you have raised the question: “What constitutes exclusive use for religious purposes?”

A) Tangible personal property and services that are considered to be used exclusively for religious purposes, but are not limited to, personal property and services:

1) used exclusively in, or to facilitate, religious worship services by a congregation or church membership while meeting together at a single location.
2) used exclusively in, or to facilitate, religious ceremonies.
3) used exclusively in, or to facilitate, carrying out the religious work of the organization.
4) used to construct, furnish, equip, remodel, or maintain a facility used exclusively for religious objectives including, but not limited to, a church, church grounds, a church administration building, a church camp, a parsonage, rectory, or convent. Such property must be purchased directly by the religious organization and not through a contractor.
5) used exclusively to administer, manage, or operate religious facilities or to administer religious activities.

B) Tangible personal property and services will be considered to be “used exclusively” for a religious purpose as long as any other use of the item or service is minimal in scope, insubstantial in nature, and incidental to the exempt purpose.

C) Tangible personal property or services that are not exempt include:

1) personal property and services that are purchased by a religious organization for use in undertaking business activities, even though the profits from such enterprises may be used exclusively for religious purposes.
2) personal property and services, such as food clothing, personal items, meals, drinks, motor vehicles, admission charges, and membership dues, that are for the personal use of ministers, priests, and other employees, rather than a use that is exclusively for a religious purpose.

Sales of utility services are not exempt for use in an employees residence including a parish, rectory, convent, parsonage, or minister’s house. This rule applies even if the utility services are paid for on a church check or voucher.

If the utility is purchased exclusively for religious purposes, you will not need to fill out worksheets to determine how much of the utilities qualify for exemption. However, on the other hand, if the utility is purchased for both a taxable and a non-taxable use, then a determination would need to be made as to how much of the purchase is exempt from sales tax. You should supply your utility company with a copy of the exemption certificate (BT/st-28B).

For your convenience, I have enclosed a copy of Revenue Notice 98-05, “Sales Taxation of Purchases by Religious organizations”. Additionally, I have enclosed a Question and Answer format which covers questions that are commonly asked by religious organizations

The enclosed letter was sent to the TTTTT County Appraiser’s Office on your behalf.

This is a private letter ruling pursuant to K.A.R. 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 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 affects 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

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