If a training company includes books in a single tuition charge for a class, are those books subject to Kansas sales tax?

Plain-English summary

A company that offers training classes in Kansas asked whether the books it hands out as part of a class are subject to sales tax. The Department ruled they are not — because in this arrangement the true object of the sale is the class, not the books.

The facts. When the company enrolls a person or group into a class, it charges a single set tuition fee that covers all the costs of presenting the course, including three books read during the course and a "participation manual" (a notebook with the course outline, assignments, examples, and space for the student to write). The company does not sell the books separately; they are only available as part of the course. If someone called and just wanted to buy the books, the company would send them to a local bookstore.

The general rule. As the Department noted, "all sales of tangible personal property, such as books, are subject to sales tax pursuant to K.S.A. 79-3603(a)." So a bookstore selling these same books would charge sales tax.

Why these books are different — the "true object" test. "In the case you describe, however, the true object of the sale is the . . . training class, not the books that are provided as part of the tuition." Because the books "are only provided as part of the course, and are not sold separately, they are not subject to sales tax." The customer is paying for instruction; the books are an incidental part of that service, folded into one tuition price rather than sold as goods.

Bottom line: when course materials are bundled into a single tuition charge for a class and are not offered for separate sale, the true object is the class, and the materials ride along untaxed with the (non-taxable) instruction.

What this means for you

Training providers and continuing-education companies

If you charge one tuition fee that covers instruction plus the books and materials used in the class, and you do not sell those materials separately, the Department treated the whole charge as payment for the class rather than a taxable sale of books. Keep the materials genuinely bundled — part of the course, not a stand-alone product.

Selling the same books separately would be taxable

The ruling turns on the fact that the books are not sold on their own. If you offered the same books for separate purchase, that separate sale of tangible personal property would be taxable under K.S.A. 79-3603(a) — which is exactly why the company referred stand-alone buyers to a bookstore.

The principle is "true object," not "there's a book involved"

The presence of tangible items in a transaction does not automatically make it taxable. Kansas looks at what the buyer is really paying for. When goods are incidental to a service the customer is buying, the transaction is characterized by that true object.

Common questions

Q: Are the books handed out in a training class taxable in Kansas?
A: Not when they are included in a single tuition fee and not sold separately. The Department ruled the true object of the sale is the class itself, so the books are not separately taxed.

Q: What is the "true object" test?
A: It asks what the buyer is really purchasing. Here the buyer is paying for a training class; the books are provided as part of that course, so the transaction is treated as the (non-taxable) class rather than a taxable sale of books.

Q: Would the answer change if the company sold the books on their own?
A: Yes. A separate sale of the books would be a taxable sale of tangible personal property under K.S.A. 79-3603(a). The exemption here depends on the books being available only as part of the course.

Citations and references

• K.S.A. 79-3603(a) — imposes Kansas retailers' sales tax on sales of tangible personal property, including books. The Department cited it for the general rule that book sales are taxable, then held it did not reach these books because the true object of the transaction was the training class and the books were not sold separately.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2000-047

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

September 25, 2000

XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX

Re: Kansas Sales Tax

Dear XXXXX:

Your correspondence of September 19, 2000 has been referred to me for response. Thank you for your inquiry.

By your letter you ask whether books included in the tuition cost of a class are subject to sales tax. The answer is no. Our rational is set forth below.

Your letter indicates your company offers XXXXXXXX training in Kansas where your office is located. When you enroll a person or group into a class your tuition is a set fee that covers all the costs involved in presenting the course, including three books that are read during the course, as well as a “participation manual”. The participation manual is a notebook that gives the course outline, further explains assignments and gives examples, as well as areas for the student to write.

Your letter goes on to note you do not “sell” the books to anyone. They are only available as part of the course, and if someone called your office and wanted to purchase them you would refer them to a local bookstore. By your letter you ask whether the books are subject to sales tax.

As a general rule, all sales of tangible personal property, such as books, are subject to sales tax pursuant to K.S.A. 79-3603(a). In the case you describe, however, the true object of the sale is the XXXXXXXXXX training class, not the books that are provided as part of the tuition. Therefore, because the books in question are only provided as part of the course, and are not sold separately, they are not subject to sales tax.

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.

I trust this information is of assistance. If I can be of further service, please feel free to contact me.

Sincerely,

Jim Weisgerber
Attorney
Tax Specialist

JW:jw

Date Composed: 09/25/2000 Date Modified: 10/11/2001

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