Does a religious organization carrying out a church's ministry qualify for the Kansas sales tax exemption, and how must exempt purchases be made?

Plain-English summary

A religious organization that carries out the ministry of a church asked whether it qualifies for the Kansas sales tax exemption for religious organizations. The Department concluded that it does qualify.

The exemption comes from K.S.A. 79-3606(aaa), which exempts "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."

For Kansas sales tax, a "religious organization" is a group that gathers in common membership for mutual support and edification — in piety, worship, and religious observance — at an established place of worship it maintains for regularly scheduled services, with no private inurement of its net earnings. The definition also allows an organization composed of religious organizations to derive the exemption from its members if all its members are exempt religious organizations and it operates exclusively to help them carry out their religious purpose.

The Department found this organization meets the criteria in Notice 99-14, because it is carrying out the ministry of the church, and may be extended the exemption.

Important condition — buy directly. To make a purchase exempt, the exempt entity must be the direct purchaser: each bill, invoice, contract, or other evidence of the transaction must be in the organization's name, and payment must be made from the exempt entity's own check, warrant, or voucher.

What this means for you

Qualifying religious organizations

If you are 501(c)(3) exempt and function as a religious organization carrying out a church's ministry, your purchases of property and services used exclusively for religious purposes can be exempt from Kansas sales and use tax.

Make the purchase in the organization's name

The exemption is lost if an individual (a pastor, staffer, or member) buys in their own name and is reimbursed. Put the invoice/contract in the organization's name and pay from the organization's own funds (check, warrant, or voucher).

Keep the paperwork clean

Retain the exemption documentation (and Notice 99-14 guidance) and ensure vendors bill the exempt entity directly. Purchases outside "exclusively religious purposes," or made by someone other than the entity, may be taxable.

Common questions

Q: Does our church-ministry organization qualify for the Kansas religious-organization exemption?
A: Yes, if it is 501(c)(3) exempt and meets the Notice 99-14 criteria. The Department found this organization qualifies because it carries out the ministry of the church.

Q: What does the exemption cover?
A: Sales of tangible personal property and services purchased by the exempt religious organization and used exclusively for religious purposes (K.S.A. 79-3606(aaa)).

Q: Can a staff member buy items and get reimbursed tax-free?
A: No. The purchase must be made directly by the exempt entity — invoiced in its name and paid from its own check, warrant, or voucher.

Q: Does this ruling apply to my organization?
A: A Kansas private letter ruling addresses only the requesting taxpayer's facts and cannot be relied on as precedent by others, though it shows how the Department applies the religious-organization exemption and its direct-purchase requirement.

Citations and references

• K.S.A. 79-3606(aaa) — exempts sales of tangible personal property and services purchased by a religious organization that is exempt under I.R.C. §501(c)(3) and used exclusively for religious purposes. The Department applied it to an organization carrying out a church's ministry.
• Notice 99-14, "Sales Taxation of Purchases by Religious Organizations" — the Department's guidance setting the criteria the organization was found to meet.
• Direct-purchase requirement — to be exempt, each bill/invoice/contract must be in the exempt entity's name and paid from its own check, warrant, or voucher.
• 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-2003-026

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

May 6, 2003

TTTTTTTTTTT
TTTTTTTTTTT
TTTTTTTTTTT
TTTTTTTTTTT

Dear Mr. TTTTTT:

We wish to acknowledge receipt of your letter dated April 28, 2003, 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."

For purposes of the Kansas retailers' sales tax act, "religious organization" shall mean any organization, church, body of communicants, or other group that gathers in common membership for mutual support and edification, in piety, worship, and religious observance, at an established place of worship which the organization maintains for the purpose of conducting regularly scheduled religious services or meetings, and of which no part of the net earnings of such organization inures to the benefit of any private shareholder or individual member. Further, an organization that is composed of religious organizations may derive exemption from its members if all of its members are themselves exempt religious organizations and the derivative organization is organized and operated exclusively to assist its member organizations in carrying out their religious purpose.

Please be advised, that it is the opinion of this office, that the TTTTTTTTT TTTTTTTTT, does meet the established criteria, as set out in Notice 99-14, to be extended a sales tax exemption as a religious organization, since the organization is carrying out the ministry of the church.

It should be noted that in order for a qualified purchase to be made exempt from Kansas sales/use tax, the respective purchase needs to be made directly by the TTTTT TTTTTTTTTTTTTTTTTTT. Therefore, each bill, invoice, contract or other evidence of the transaction shall be made out in the name of the TTTTTTTTTTTTTTTTTTT and payment shall be made on a check, warrant or voucher of the exempt entity.

For your convenience, I have enclosed Notice 99-14 entitled, "Sales Taxation of Purchases by Religious Organizations".

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 effects 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

Date Composed: 05/07/2003 Date Modified: 05/07/2003

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