Private Letter Ruling

Ruling Number:P-2004-003
Tax Type:Kansas Retailers' Sales Tax
Brief Description:Collection of sales tax on membership wellness fees.
Approval Date:03/24/2004

Office of Policy & Research

March 24, 2004


I have been asked to answer to your recent letter. In it, you ask if the not-for-profit entity that you represent is required to collect sales tax on its membership wellness fees. Attached to your letter is an order issued by the Kansas Board of Tax Appeals. The Board's order concludes that part of XXXX's facility qualifies for ad valorem exemption under K.S.A.79-201a Second (a), and amendments thereto. See paragraph 10. Paragraphs 7 and 8 of the order states:

7. The applicant XXXX uses the subject property as a health and recreation facility. The applicant provides health seminars, CPR classes, swimming, yoga, aerobics, and other fitness activities. The applicant charges fees for membership, but provides discounted memberships to several groups of people and reduced fees based on income levels. XXXX'sesidents' fees are included in their residency fees. The applicant first used the property for this purpose March 1, 2000. Construction commenced in September of 1998.
Certain membership dues are taxed at K.S.A. 2003 Supp. 79-3603(n). This section also contains two exceptions from sales tax. Taxed are:

The exceptions in K.S.A. 2003 Supp. 3603(n) do extend to XXXX. While entities that are exempt from property tax pursuant to Eighth and Ninth of K.S.A. 79-201 are also exempt from sales tax, the Board of Tax Appeals determined that XXXX is exempt from ad valorem taxes pursuant to K.S.A. 79-201a. This is a different statute. This property tax exemption applies because XXXX does not own the property in question. As Paragraph 9 explains:

K.S.A. 79-201 and K.S.A. 79-201a are different exemption provisions. Since XXXX does not qualify for exemption from property tax "under paragraphs Eighth and Ninth of K.S.A. 79-201, and amendments thereto," as required for sales tax exemption by K.S.A. 2003 Supp. 79-3603(n), it must continue to collect tax on the membership dues that it charges. Please note too, that XXXX should be paying sales tax on its purchases of gas, electricity, and water. It does not qualify for exemption under K.S.A. 2003 Supp. 79-3606(w) even though it has an order from BOTA that that exempts it under K.S.A. 79-201.

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. Attorney/Policy & Research

Date Composed: 03/26/2004 Date Modified: 03/26/2004