Which of a sailing association's charges — membership fees, boat slip fees, and boat/trailer storage — are subject to Kansas sales tax?

Plain-English summary

A sailing association that leases state land at a reservoir asked which of its charges are taxable. It collects an annual membership fee, and it charges some members slip fees and fees for parking their trailers and boats in a storage area. The Department gave a charge-by-charge answer.

Membership fees are taxable. The Department explained that "Kansas taxes membership dues and fees when payment allows the member use of the facilities for recreation or entertainment." Because the association's dues buy members recreational use of the club's facilities, "the membership fees charged by the association are taxable."

Separately stated slip and storage fees are not taxable. Kansas sales tax also applies to certain enumerated services, but the Department found that "none of the listed services can be construed as including slip fees or rental of space to store a boat and trailer." So "separately stated charges to members for boat slips or for a parking area for boat and trailer storage are not subject to sales tax."

But lumping changes the result. The Department warned that "if these charges are lumped together as part of the membership fee, they would be subject to sale tax," and likewise if they are "lumped together as part of a charge for repairing or servicing a boat, the total charge would be taxable."

The association pays tax on its own purchases. Finally, the Department stated that the association "is required to pay sales tax on all of its purchases," and that being organized as a not-for-profit does not exempt any of its purchases from sales tax.

Bottom line: dues for recreational facility use are taxable; standalone slip and storage rentals are not — but how you invoice matters. Bundle a nontaxable charge into a taxable one and the whole bill becomes taxable.

What this means for you

Clubs, marinas, and recreation associations

Charges that give members use of your facilities for recreation or entertainment — including annual dues — are taxable. Standalone rentals of space (a boat slip, a spot to park a boat and trailer) are not among Kansas's enumerated taxable services, so on their own they are not taxable.

Separately state your nontaxable charges

This ruling is a clean example of the bundling trap. A slip fee or storage fee that would be nontaxable on its own becomes fully taxable if you roll it into the membership fee or into a taxable boat-repair charge. Itemize nontaxable charges as distinct line items to keep them nontaxable.

Nonprofit status does not exempt your purchases

The association must pay sales tax on everything it buys. Being a not-for-profit, by itself, is not a Kansas sales-tax exemption — a recurring theme in Kansas rulings.

Common questions

Q: Are sailing or boat club membership dues taxable in Kansas?
A: Yes, when the dues let members use the facilities for recreation or entertainment, the Department treats them as taxable.

Q: Are boat slip fees and boat/trailer storage fees taxable?
A: Not when separately stated — the Department found they are not among Kansas's enumerated taxable services.

Q: What if we combine the slip or storage fee with the membership fee?
A: Then the entire charge is taxable. The same is true if the fee is lumped into a charge for repairing or servicing a boat.

Q: Does the club owe tax on its own purchases?
A: Yes. The association must pay sales tax on all of its purchases; its not-for-profit status does not exempt them.

Citations and references

• Taxation of membership dues — Kansas taxes membership dues and fees when payment allows the member use of the facilities for recreation or entertainment (the ruling states this rule without citing a specific subsection).
• Enumerated services — Kansas sales tax reaches only specifically listed services; the Department found boat slip rental and boat/trailer storage are not among them, so separately stated charges for them are not taxable.
• K.A.R. 92-19-59 — the regulation authorizing Kansas private letter rulings.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2002-007

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

January 16, 2002

XXXX
XXXX
XXXX

RE: Your recent e-mail

Dear XXXX:

Thank you for your follow-up e-mail on taxation of your sailing association. The association leases real property from the State of Kansas that is located on the XXXX Reservoir near XXXX. It charges members an annual membership fee. It charges some members slip fees and fees for parking their trailers and boats in a storage area. You ask what charges are taxable.

Charges to members: Kansas taxes membership dues and fees when payment allows the member use of the facilities for recreation or entertainment. Accordingly, the membership fees charged by the association are taxable. Kansas sales tax is also imposed on certain enumerated services. None of the listed services can be construed as including slip fees or rental of space to store a boat and trailer. Accordingly, separately stated charges to members for boat slips or for a parking area for boat and trailer storage are not subject to sales tax. If these charges are lumped together as part of the membership fee, they would be subject to sale tax. Similarly, if they are lumped together as part of a charge for repairing or servicing a boat, the total charge would be taxable.

Payment of sales taxes. The association is required to pay sales tax on all of its purchases. The fact that it is organized as a not-for-profit does not exempt any of its purchases from sales tax.

I hope that I have adequately answered all of your questions. If not, please call me at 785-296-3081. This is private letter ruling. It 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 ruling.

Sincerely,

Thomas E. Hatten

Attorney/Policy & Research

Date Composed: 01/22/2002 Date Modified: 01/22/2002

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