Private Letter Ruling

Ruling Number:P-2005-028
Tax Type:Kansas Retailers' Sales Tax
Brief Description:Sales of restaurant equipment to American Legion and VFW posts.
Keywords:
Approval Date:10/31/2005



Body:
Office of Policy & Research


October 31, 2005

XXXX
XXXX
XXXX Dear XXXX:

Thank you for your recent letter. You operate a restaurant supply service. Recently, a number of American Legion and VFW commanders have been insisting that their organizations are exempt from paying sales tax when they buy restaurant equipment from you. You spoke with one of our auditors recently. She informed you that your sales to the American Legion and VFW are taxable. You ask for something in writing to confirm that these sales are taxable. Please be advised that your sales to these organizations are taxable under the Kansas retailers' sales tax act. You must collect sales tax on your sales to them.

The confusion that your experiencing with these two groups apparently stems from the 1998 exemption of membership dues paid to the American Legion and VFW. This exemption exempts members of the American Legion and VFW from paying sales tax on their membership dues. It does not exempt the American Legion or VFW from paying sales tax on their purchases.

Apparently, the post commanders believe that the 1998 exemption of membership dues exempted the American Legion and VFW from paying sales tax on their purchases. It does not. The 1998 exemption extends only to membership dues. The Kansas legislature has not exempted the American Legion or VFW from paying sales tax on their purchases since 1970.

Of course, posts that sell food and non-alcoholic drinks and are entitled to claim a resale exemption when they buy the food and drink to resale. Kansas does not tax purchases that are for resale by registered retailers. Posts that sell meals and drinks may not claim exemption on their restaurant supplies, such as pots and pans, knives, appliances, and other kitchen hardware. A post uses this equipment rather than reselling it. Please note that a post must be registered for sales tax purposes and must have secured a retailer's sales tax registration certificate from the department. If a post is not a registered retailer, vendors must charge sales tax to the post on all of their sales, including sales of food or drink.

Notice 98-01 was issued in 1998 to explain how the new exemption for membership dues would apply:

The exemption for dues is also discussed in an administrative regulation: The Kansas retailers' sales tax act contains nothing that exempts sales to the American Legion or VFW. If a post commander wishes to discuss this issue, the commander can call the Office of Policy and Research at 785-296-3081, and ask to speak with a tax specialist. Please note that the commanders of these posts are required to pay the sales taxes that you and every other business charges to them for taxable sales. If a commander refuses, he or she is subject to fines for each time the tax is struck from your lawful billings. K.S.A. 79-3651(g) provides:

I hope that letter helps resolve the tax collection problems that you're experiencing. 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.
cc: Judy Laflin, Audit Services Bureau


Date Composed: 11/02/2005 Date Modified: 11/02/2005