Does a 501(c)(3) charity that grants wishes to seriously ill children qualify for a Kansas sales-tax exemption?

Plain-English summary

A local chapter of a wish-granting charity — dedicated to granting wishes to Kansas children with life-threatening illnesses or medical conditions — asked to be exempt from Kansas sales tax. It has 501(c)(3) status, a Charitable Solicitation License, and a Sales Tax Registration License. The Department's answer is no.

The governing principle. Tax exemptions are narrowly construed: a group claiming exemption "must clearly qualify for exemption within the plain language of the statute." Kansas grants exemptions either to entities named in a statute (for example, the American Heart Association, Kansas Affiliate, Inc. and the American Lung Association of Kansas, Inc.) or to entities described by category (non-profit hospitals, political subdivisions, nonprofit zoos). Some exemptions cover only certain purchases; others cover all.

Why it fails. K.S.A. 79-3606 contains more than 60 exemptions. The Department reviewed them and could not find any that encompassed this organization. A compelling mission and full federal nonprofit status do not substitute for fitting a specific statutory exemption.

Bottom line: the charity must register, collect and remit Kansas sales or compensating tax on all sales it makes in Kansas. 501(c)(3) status alone does not create a Kansas sales-tax exemption.

What this means for you

Charitable organizations

Federal 501(c)(3) status, a charitable-solicitation license, and even an existing sales-tax registration do not make your purchases or sales exempt in Kansas. Exemption exists only if a specific statute names or describes your entity in K.S.A. 79-3606.

Registration is not exemption

Holding a Sales Tax Registration License is the opposite of being exempt — it's the mechanism for collecting and remitting tax. This charity had one and still had to collect tax on its sales.

Fundraising sales

Because the organization isn't exempt, its sales in Kansas (merchandise, event admissions, and similar) are generally taxable, and it must collect and remit the tax.

Common questions

Q: We grant wishes to sick kids and we're a 501(c)(3) — are we exempt in Kansas?
A: Not automatically. The Department found no exemption in K.S.A. 79-3606 that covered this wish-granting charity, so it must register, collect, and remit tax.

Q: We already have a sales-tax registration — doesn't that help?
A: No. A registration license is for collecting and remitting tax, not an exemption. The charity must collect tax on its taxable sales.

Q: What must the organization do now?
A: Register, collect, and remit sales or compensating tax on all sales it makes in the State of Kansas.

Citations and references

• K.S.A. 79-3606 — the section containing the enumerated Kansas sales-tax exemptions (more than 60), some naming specific entities and some describing categories; the Department found none that covered this charity.
• 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-2002-030

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

March 25, 2002

XXXXXXXXXXXX
XXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXX

Dear XXXXXXXX:

I have been asked to respond to your letter dated March 21, 2002.

In your letter you stated:

Please consider this a formal letter of request for a private letter ruling determining the Kansas sales tax exempt status of the XXXXXXXXXXXXXXX.

The XXXXXXXXXXXXX is the local chapter of the XXXXXXXXXXXXX, our first wish granted was to a I 0-year old Hiawatha girl who wanted to ride her horse in an annual parade in Scottsdale, AZ with a former neighbor. We are dedicated to granting the XXXXXXXXXXXXX Kansas children throughout the state between the ages of 2 1/2and 18 who have life- threatening illnesses or medical conditions. We strive to provide the wish child and family with some special memories of joy and laughter in the midst of a world filled with hospitals, doctors, and treatment programs. A "XX" offers a welcome respite-a time of normalcy and just plain fun! A child can be referred to XXXXXXX by anyone ... family, friends, medical personnel, teachers or clergy. After the referral, the child's physician determines whether or not the child qualifies for a XX. If the child is eligible, a XXX team meets with the family to determine the child's XXXXXX. All wish expenses are fully covered, regardless of the category of XXXXXXX (travel, occupation, celebrity, or gift). The average XXXX cost is $5,000. 100% of all monies raised stays in Kansas to help fund these XXXX, and 86% goes directly towards wish-granting. We have been given 501(c)(3) status by the IRS.

Enclosed you will find information about the XXXXXXXXXXXXXXXX. as well as copies of our IRS status letter, Charitable Solicitation License, and Sales Tax Registration License.

Tax exemptions are narrowly construed. This means that a group that claims exemption must clearly qualify for exemption within the plain language of the statute. The Kansas sales tax act lists various groups that are exempt from tax. Some statutes identify the exempt entity by name. These include the statute that exempts the American Heart Association, Kansas Affiliate, Inc. and the American Lung Association of Kansas, Inc., among others. Other statutes extend exemption by describing the entity in general terms, such as the exemptions extended to non-profit hospitals, political subdivisions of the state, and nonprofit zoos. Some exemptions are limited to certain purchases while other exemptions extend to all purchases.

K.S.A. 79-3606 contains more than 60 additional exemptions. I have reviewed these exemptions and cannot find any that encompass your organization. Accordingly, your organization must register, collect and remit sales or compensating tax on all sales occurring in the State of Kansas.

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.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 03/29/2002 Date Modified: 03/29/2002

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