Does being a not-for-profit organization by itself make an organization's purchases exempt from Kansas sales tax?

Plain-English summary

A not-for-profit organization asked whether it qualifies for exemption from Kansas sales tax on its purchases. The Department's answer is no — nonprofit status alone is not enough.

The governing principle. Tax exemptions are narrowly construed, meaning a group claiming exemption "must clearly qualify for exemption within the plain language of the statute." Kansas grants sales-tax exemptions to specific entities in two ways:

• By name — for example, the statutes exempting the American Heart Association, Kansas Affiliate, Inc. and the American Lung Association of Kansas, Inc.; and
• By general description — for example, non-profit hospitals, political subdivisions of the state, and nonprofit zoos.

Some of these exemptions cover only certain purchases; others cover all purchases. K.S.A. 79-3606 contains more than 60 exemptions. The Department reviewed them and could not find any that encompassed this organization.

Bottom line: because no statutory exemption fit the organization, it is required to pay state and local sales tax on its purchases. Being organized as a nonprofit does not, by itself, confer a Kansas sales-tax exemption.

What this means for you

Nonprofits generally

Do not assume that 501(c)(3) or not-for-profit status makes your purchases tax-exempt in Kansas. Exemption exists only if a specific statute names or describes your type of entity. If you can't point to the exact exemption you fit, expect to pay sales tax on purchases.

How to check whether you qualify

Look for your entity in K.S.A. 79-3606 — either named explicitly (like the specific charities listed) or described by category (non-profit hospital, political subdivision, nonprofit zoo, religious organization, educational institution, and so on). The Department construes these narrowly, so a close-but-not-exact fit generally will not qualify.

Vendors selling to nonprofits

Don't accept an exemption claim just because the buyer is a nonprofit. A valid exemption requires the buyer to fit a specific statutory exemption and provide the proper certificate.

Common questions

Q: We're a registered nonprofit — are our purchases tax-exempt in Kansas?
A: Not automatically. The Department advised that nonprofit status alone does not exempt purchases; you must fit a specific statutory exemption in K.S.A. 79-3606.

Q: Why couldn't the Department just grant the exemption?
A: Because exemptions are narrowly construed to the plain language of the statute, and none of the 60-plus exemptions in K.S.A. 79-3606 covered this organization.

Q: What kinds of nonprofits do qualify?
A: Ones the legislature has specifically exempted — for example, non-profit hospitals, political subdivisions, nonprofit zoos, and specifically named charities. Qualification depends on matching a particular exemption.

Citations and references

• K.S.A. 79-3606 — the section of the Kansas sales tax act containing the enumerated exemptions (more than 60), some naming specific entities and some describing categories; the Department found none that covered this organization.
• 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-2002-041

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

May 9, 2002

XXXXXXXXXXXX
XXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXX

Dear XXXXXXXXXXXXXX:

I have been asked to respond to your letter dated May 3, 2002.

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 is required to pay state and local sale tax on purchases.

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: 05/13/2002 Date Modified: 05/13/2002

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