Private Letter Ruling

Ruling Number:P-2003-059
Tax Type:Kansas Retailers' Sales Tax
Brief Description:501(c)(3) organizations.
Keywords:
Approval Date:12/12/2003



Body:
Office of Policy & Research


December 12, 2003

XXXX
XXXX
XXXX Dear XXXX:

Thank you for your recent letter. You represent YYYY ("YYY"), a non-profit corporation located in Arkansas City. You ask if YYY qualifies for exemption from Kansas sales tax on its purchases. In support of your inquiry, you have submitted: 1) a copy of your bylaws; 2) a statement of your 501(c)3 status; and 3) a narrative that describes the purpose and objectives of the organization. The material states:

1. We provide free pregnancy testing and discuss alternatives to abortion.
2. We operate an adoption agency licensed by the State of Kansas.
3. We offer a program called "Work of Art" that provides guidance for women who have had a pregnancy loss of any kind.
4. We offer long-term guidance to help marriages and individuals in crisis.
5. The women served are provided clothes, diapers, formula, and baby equipment as they continue in an integrated program of life skills.
6. We offer a long-term program for drug and alcohol problems called "The Most Excellent Way" which focuses on biblical truths.
7. We have instituted "The Right Finish" which operates as a Christian Finishing School to help young women make healthy-life style choices.
8. We are an integrated resource center for life, health and sexual issues available to the entire community, providing public speaking, videos and the latest curriculum available.
Your description of the organization establishes that it does not qualify for exemption from paying Kansas retailers sales tax on its purchases.

Unlike some states, Kansas does not have a broad-based sales tax exemption for 501(c)(3) organizations. A number of 501(c)(3) organizations have petitioned the Kansas legislature and been granted an exempt status. These include the following groups.

As this shows, the Kansas legislature typically grants sales tax exemptions only to specific organizations. Your organization is not one of those listed.

There are two broad-based exemptions that might apply to YYY. Because many of YYY programs appear to be spiritually based, one is the exemption for "religious organizations." K.S.A. 79-3606(aaa). The other broad based exemption is for "education institutions." This conceivably could apply to YYY because it offers education programs. A review of Kansas law show that YYY does not qualify for either of these exemptions.

The term "religious organization" has been used in Kansas statutes since the nineteenth century. The court cases that have construe the term provide a fairly clear meaning of the term for tax purposes. These cases allowed the term to be defined for sales tax purposes. This definition is set forth in Notice 99-14:

Nothing in the by-laws of YYY suggest that the 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 which the organization maintains for the purpose of conducting regularly scheduled religious services or meetings. . . ." Accordingly, YYY does not qualify for exemption from Kansas sales tax as a religious organization.

The second broad-based exemption that might apply is for educational institutions. The Kansas legislature defined the term “educational institution” for purposes of K.S.A. 79-3606(b) and K.S.A. 79-3606(c). This definition provides:

This definition shows that the term “educational institutions” includes accredited colleges and universities, certain other schools above the twelfth grade, and certain corporations and foundations that serve as adjuncts to colleges and universities. YYY does not fit into any of these categories. Accordingly, YYY does not qualify for exemption from sales tax. YYY must pay Kansas sales tax on all of its purchases in Kansas.

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.


Date Composed: 12/19/2003 Date Modified: 12/19/2003