Pub. KS 1560 Business Taxes for Schools and Educational Institutions Rev. 1 18


1 B usiness axes T S and for chools E ducational nstitutions I This publication is designed to assist schools, educational institutions, student organizations, PTAs, booster clubs and retailers in understanding how Kansas taxes apply to the varied activities of an elementary or secondary school, college, technical school or university. It uses common school situations to illustrate the sales and purchases by schools that are taxable and how to properly claim the exemptions available. Also included is information about how to report and pay the taxes. By law, businesses are required mit their Sales, Compensating Use, and to sub Withholding Tax returns electronically. Kansas offers several electronic file and pay solutions – see page 21. Use this guide as a supplement to the basic sales tax publications, KS-1510 , Kansas Sales and Compensating Use Tax and KS-1520 , Kansas Exemption Certificates. Pub KS-1560 (Rev. 1-18)

2 TABLE OF CONTENTS School Clubs and Organizations ... 3 INTRODUCTION TO KANSAS SALES TAX Seminars What Sales are Taxable? Textbooks Sales Tax Structure Utilities Retailer and Consumer Responsibilities Vehicles/Equipment How to Register Vending Machine Sales Vocational Technical Schools & Training SALES TAX EXEMPTIONS FOR EDUCATIONAL Listing of Taxable Sales by Schools and Educational INSTITUTIONS ... 3 Institutions Definitions Schools that are NOT Exempt ... 7 REPORTING AND PAYING SALES TAX 1 Purchases are Exempt Registration and Tax Numbers Claiming your Exemption Retailer Responsibilities Record keeping .. CONSTRUCTION, REMODEL OR REPAIR PROJECTS 6 rtificates Exemption Ce General Rules Original Construction OTHER KANSAS TAXES 20 ... Project Exemption Certificates (PECs) Compensating Use Tax Taxable Projects Withholding Tax TAXATION OF SCHOOL ACTIVITIES ... 9 ... 20 YOUR FILE AND PAY OPTIONS General Rules Activity Fees ... 22 ADDITIONAL INFORMATION Activity Funds Tax Assistance Admissions and Ticket Sales Website – Auctions Policy Information Library (PIL) Booster Clubs Key Statutes and Regulations Cafeterias, Lunch Rooms and Food Service Fund-raising ... 23 EXEMPTION CERTIFICATES Golf Courses ID Cards Parent-Teacher Associations (PR-78PT) Isolated or Occasional Sales Project Exemption Request (PR-76) Labor Services Project Completion Certification (PR-77) Leases and Rentals Sample – Agent Issued PEC (PR-74a) PTAs/PTOs Resale Exemption (ST -28A) Photocopying, Printing and Duplicating School or Educational Institution (PR-78ED) Raffles State of Kansas or Political Subdivision (PR-78KS) Restaurants, Meals ASSISTANCE BACK COVER ... School Buses/Fuels f there is a conflict between the law and information found in this publication, the law remains the final authority. Under no circumstances I should the contents of this publication be used to set or sustain a technical legal position. A library of current policy information is also available on the Kansas Department of Revenue’s website at: 2

3 takes delivery of the merchandise or first makes use of the taxable service. This is called destination based sourcing. On INTRODUCTION TO over-the-counter sales, it will generally be the rate of tax at the KANSAS SALES TAX location of the retailer; on delivered sales, it will be the rate of - ship tax at the customer’s (or customer’s designee) location ( to address). For taxable labor services, it will be the rate in This publication was designed to assist those engaged in effect at the job site where the labor services are performed. educating students of all ages in understanding how Kansas To assist retailers in collecting the correct sales tax rate sales and use taxes apply to their dual roles as an exempt for the destination or source of the sale, the Department entity and as a retailer. Throughout this publication we will cite of Revenue publishes a complete list of state and local tax or refer to the statute (K.S.A.) or regulation (K.A.R.) applicable Pub. KS-1700 , Sales and Use Tax jurisdictions and rates. to that section. The laws and regulations are found in Key Jurisdiction Code Booklet, and its quarterly updates are Statutes and Regulations, herein. available on our website. WHAT SALES ARE TAXABLE? RETAILER AND CONSUMER RESPONSIBILITIES Kansas sales tax applies to three general types of retailers Kansas are required by law to collect the full transactions. tax due on each sale to the final user or amount of sales • The retail sale , re ntal or lease of tangible personal consumer, and remit it on a regular basis to the Department of property; Revenue. When added to the purchase price of taxable goods • The fees for to install, apply, repair, labor services or services, the sales tax is a debt from the consumer to the personal property; and service, alter or maintain tangible retailer. As such, the sales tax is recoverable by the retailer to places providing amusement, admissions • The sale of from the customer in the same manner as any other debt. entertainment or recreation. Kansas consumers are likew the full pay ise obligated to is a sale to the final consumer or user. Tangible A retail sale amount of sales or use tax due on all taxable purchases. If is any item to which you can attach a personal property the purchase is from a Kansas retailer, the Kansas retailers’ monetary value, has a physical presence and can be moved. sales tax must be paid to the retailer. When tangible personal Tangible personal property is different from intangible property property is purchased from a retailer in another state, a Kansas (stocks and bonds) or real property (land and buildings). compensating use tax may be due. See Compensating Use Examples of tangible personal property purchased or sold by , herein. Taxes schools are books, candy, pictures, storage sheds, t-shirts, For every sale of merchandise or taxable services, a and yearbooks. Kansas retailer must either collect the total amount of sales The labor services that are taxable in Kansas are only tax due or obtain documentation as to why a particular sale those services enumerated in the law and listed above. is exempt. A consumer who is entitled to an exemption from or car Examples of taxable labor services include appliance sales or use tax is obligated to provide this documentation repair, car washes, parking lot painting, and the repair or and should not demand that a retailer exempt a sale without remodel work of a commercial building. it. The following instruction explains how to properly claim Examples of admissions subject to tax include tickets to sales tax exemptions. a concert, dance, fun night, play or sporting event. As a general rule, schools and educational institutions are exempt on their direct purchases of tangible personal property SALES TAX EXEMPTIONS FOR purposes. However, or taxable labor services for school EDUCATIONAL INSTITUTIONS schools, educational institutions and organizations that support them also make retail sales of products, taxable services or admissions. In this capacity, the school or organization is a DEFINITIONS retailer and must register with the Department of Revenue to Reporting and Paying collect sales tax from customers. See For the purpose of qualifying for a Kansas sales or use tax Sales Tax, herein. exemption, the following definitions apply. chool . A S school is a nonprofit, public or private, SALES TAX STRUCTURE elementary or secondary instructional institution for pupils. means an institution offering education at grade levels chool S The Kansas sales tax rate is a combination of the state kindergarten through twelfth grade (commonly referred to as by a city and/ rate of 6.5%, plus any local sales tax imposed K-12 education), including but not limited to: or county. Local sales (and use) tax rates vary by locality • public primary or elementary schools, junior high or (jurisdiction), and may change quarterly. The law requires • middle schools, and high schools; these local taxes be administered by the Department of • nonprof it schools educating a specific segment of Revenue. Local sales tax generally applies whenever the students (such as a school for the blind); and state sales tax applies. private schools affiliated with a particular • nonprofit The combined tax rate collected on a retail sale of goods religious organization or educational philosophy. or taxable services is the rate in effect where the customer 3

4 Schools from other states as well as Kansas schools are Endowment associations are chartered to own, control, or included in the definition and are therefore also exempt on otherwise administer funds that are bequeathed, donated, or their Kansas purchases. Out-of-state schools and educational held in trust for the benefit of a college or university. Nearly all institutions that have not been issued an exemption by the nonprofit endowment associations and foundations that qualify Kansas Department of Revenue may use the Designated or for this exemption will have the word endowment in their title Generic Exemption Certificate ( ) to claim exemption ST-28 along with the name of the college or university. from Kansas sales tax. Some state universities have established separately School School District. generally means an individual incorporated nonprofit foundations to administer their learning center, while a is the administrative school district programs. The law exempts purchases intercollegiate sports body for one or more schools. While enjoying much the same by such a foundation and places them on the same footing treatment for sales tax purposes, a Kansas public school as intercollegiate sports programs that continue to be run as district is exempt from paying sales tax on most purchases part of the university. Ticket sales and other sales by such a political subdivision because it is a of Kansas (able to levy foundation remain subject to state and local sales tax. See ad valorem taxes). It will use the Tax-Exempt Entity Exemption Admissions and Ticket Sales , herein. Certificate (PR-78KS) to claim an exemption on district Some state universities have incorporated nonprofit purchases, including those for a daycare or after school care foundations that engage in research and development for the program, preschool, Head Start, or other pre-kindergarten benefit of the university. The new law exempts purchases by program operated by a Kansas school district. such separately incorporated foundations. Kansas public school districts should also obtain from : The definition of nonprofit endowment CAUTION a copy of , Kansas Sales and Pub. KS-1527 our website associations and foundations is limited to those Use Tax for Political Subdivisions, and use it as a guide to entities discussed here. Groups such as engineering understanding how Kansas taxes apply to them. societies, nursing groups, medical, law, or honorary Kansas school districts are IMPORTANT : Only fraternities, associations of professors, or other college or exempt; school districts from other states must pay university associations not primarily organized to engage in sales tax on their Kansas purchases. This is in contrast to the research and development for the financial benefit of a exemption for schools and educational institutions which is educational institution . university are not considered to be an also available to schools located outside Kansas. NOTE : Unless otherwise stated, the terms school and . Educational Institution K.S.A. 79-3602(l) defines an will be used interchangeably within this educational institution guide, meaning a nonprofit public or private educational entity educational institution as a nonprofit school, college, or that meets the qualifications in this section. university that offers educational courses at a level above the 12th grade and meets certain requirements fixed by the statute. Included are public community colleges, universities, SCHOOLS THAT ARE NOT EXEMPT vocational or area vocational-technical schools, and state educational institution educational institutions. This term There are two types of schools that do not meet the completes the continuum of exemption from elementary school definition of a school or educational institution in sales tax through colleges and universities. Both in-state and out-of- law, and therefore do not qualify for the sales tax exemptions: state nonprofit institutions are covered by this exemption. . and for-profit schools home schools Nonprofit Endowment Associations and Foundations . for- A school or educational institution that operates as a types of ancillary nonprofit entities operating for Four distinct entity is not covered by the exemption granted at K.S.A. profit the benefit of an educational institution or for an educational 79-3606(c) and cited below. Only nonprofit institutions are purpose are included in the definition of an educational exempt. For-profit schools must pay sales tax on all of their institution. These are: purchases of taxable goods or services. • Nonprofit endowment associations and foundations Home school is just that, a school in the home. The fact rganized and operated exclusively to receive, hold, o that educational activities are conducted in a residence does invest and administer moneys and property as a not make the residence a school for purposes of the sales tax permanent fund for the support and sole benefit of an exemption. Therefore, persons operating a home school may educational institution; not claim exemption from sales tax as a school and must pay foundations and other entities organized • Nonprofit trusts, sales tax on their taxable purchases. and operated principally to hold and own receipts from Any organization that questions whether it qualifies as a intercollegiate sporting events and to disburse such school, educationa l organization, or an endowment association receipts, as well as grants and gifts, in the interest of Policy Information Library under the law should consult the collegiate and intercollegiate athletic programs for the (PIL) on our website, or request a private letter ruling from the support and sole benefit of an educational institution; Department of Revenue (see , herein). Include Written Rulings foundations and other entities organized Nonprofit trusts, • in your request copies of the by-laws, corporate charter, and and operated for the primary purpose of encouraging, other documentation to show that the entity is nonprofit and fostering and conducting scholarly investigations and meets the criteria of a school or an educational institution. industrial and other types of research for the support and Endowment associations must also include documentation sole benefit of an educational institution; and that it is organized to manage trust funds owned by or held • A group of educational institutions that operates university. for the benefit of a college or exclusively for educational purposes, such as the NCAA. 4

5 or sponsored by the school, OR for school buildings (except PURCHASES THAT ARE EXEMPT dormitories and the like). A school must pay sales tax on its direct purchases not for general school programs or activities such as those in the following list. The Kansas sales tax law that exempts schools and educational institutions from paying sales tax is found at 79- • An appliance or other equipment for use in the school by 3606(c). Exempt are: a faculty member, student or outside organization. • Faculty fund purchases (such as soda for the faculty ...“all sales of tangible personal property or services, lounge). including the renting and leasing of tangible personal • Hotel /motel rooms and restaurant meals - unless property, purchased directly by a public or private purchased directly by the school. elementary or secondary school or public or private materials, furniture and fixtures for dormitories, Building • nonprofit educational institution and used primarily by residence halls, etc. such school or institution for nonsectarian programs and activities provided or sponsored by such school or A college’s maintenance department buys materials institution or in the erection, repair or enlargement of and electrical supplies using a university-issued credit buildings to be used for such purposes. The exemption card. A portion of these materials are later incorporated herein provided shall not apply to erection, construction, into a residence hall. These materials are taxable, and the repair, enlargement or equipment of buildings used school must accrue and pay sales tax on their cost. primarily for human habitation;” Schools are responsible for paying the sales tax on items This language exempts most, but not all, purchases by a e not direct purchases or do not meet the taxable usage that ar school or educational institution. To be exempt, the purchase test, including taxable items or services purchased by an must meet certain conditions, which can be summarized by employee with the exempt entity’s credit card. two tests— and usage . It must be a direct direct purchase : The exemptions discussed here apply only within the NOTE purchase and used primarily for nonsectarian programs and state of Kansas. When traveling and making purchases in activities sponsored by the school or used for the building, another state, that state’s law(s) will apply. Furthermore, an repair, or enlargement of the school’s buildings and not used exemption from sales tax does not automatically translate to for housing projects (dormitories). an exemption from other taxes that are due on a transaction, such as transient guest tax or tire excise tax. See Other Kansas as a direct purchase, the . To qualify Direct Purchase Test Taxes, herein. invoice must be made out to the school and payment must either of these conditions is not be made with school funds. If met, the purchase is taxable. CLAIMING YOUR EXEMPTION A university is buying lab equipment for its chemistry Although exempt by law on most purchases, a school, department. If the equipment is invoiced to the educational institution, or Kansas school district must still university and paid for with university funds, the provide each of its vendors with documentation indicating the purchase is exempt. transaction is not taxable. This documentation is a specific may also be in the form of a rental or A direct purchase exemption certificate issued to each educational institution by lease of property. For example, instead of buying a copier the Kansas Department of Revenue, a sample of which can be or fax machine, the school decides to lease it. If the lease Exemption Certificates found in the section of this publication. agreement is between the school and the business machine An educational institution should photocopy its Tax-Exempt company and payment of each lease payment is with school Entity Exemption Certificate and furnish it to the seller as its funds, the transaction is exempt. Direct purchases also do not legal authority as to why the Kansas sales tax is not due. include project materials or subcontractor services furnished Contained in the certificate is the statutory authority, for by a contractor. Only the labor of the general contractor is your exemption, K.S.A. 79-3606(c). Each Kansas school Construction, Remodel exempt as a direct purchase. See the been issued an entity specific exemption certificate, district has , herein. or Repair Projects similar to those issued to educational institutions, a sample Some schools issue credit cards to their teachers and other section Exemption Certificates of which can be found in the t card may have the authorized employees. Although the credi of this publication. Furthermore, the Department of Revenue employee’s name on it, purchases are billed by the credit card has issued exemption certificates to each Parent-Teacher company directly to the school and are paid for with school Association (PTA) located in the state of Kansas, a sample funds. These purchases are therefore exempt from sales tax of which is located in this publication. as a direct purchase. IMPORTANT : Neither of the certificates described A professor travels to another city in Kansas on official above may be used to claim exemption on materials business and pays for lodging, gas, and meals with furnished by a contractor or labor and materials furnished by a credit card issued by a college. Charges to this card a subcontractor on a real property contact. See Construction, are exempt from sales tax as a direct purchase because they , herein. Remodel and Repair Projects are billed directly to the college, and paid for with their funds. If you make repeated exempt purchases of the same . Most d sage Test U irect purchases by a school or type from the same vendor, it is not necessary to furnish an educational institution will be exempt because they will be used exemption certificate for each transaction. Instead use one primarily for nonsectarian programs and activities provided exemption certificate to cover future exempt purchases. 5

6 definition of a direct purchase. Their contract cost to you will CAUTION : You must segregate the purchases that include the sales tax paid or accrued by the contractor(s), are taxable from those that are exempt. You agree unless a PEC has been issued for that project by the to do this when you sign an exemption certificate. Department of Revenue or by you as it’s authorized agent. Certificates contain this statement above the buyer’s signature: Materials are taxable because Kansas law considers ... “The undersigned purchaser understands and agrees and repairmen to be the final contractors, subcontractors, other than as that if the property or services are used user or consumer of their materials. Contractors must pay stated above or for any other purpose that is not exempt the sales tax on materials purchased from their suppliers or from sales or compensating tax, the undersigned removed from their inventory for a project. This rule applies purchaser becomes liable for the tax.” even when the real property project is for a sales tax exempt ABC Elementary School in Kansas has its Department entity, such as a school or educational institution. of Revenue-issued exemption certificate on file at the When an electrician, plumber, or carpenter agrees to furnish local office supply store. While in the store to pick up and install materials for a school, he must pay or accrue sales supplies, the school’s principal also purchases paper and ink tax on those materials and will pass this cost on to the school cartridges for his home computer. Since the paper and ink unless a PEC has been obtained. The contractor remains are subject to sales tax, the principal should segregate these responsible for the sales tax on his materials even when the personal purchases and pay the sales tax on them. exempt entity unlawfully refuses to pay this additional cost by striking the tax (or perceived tax) from the bill. use exemption certificates not only as an exempt Schools entity, but also in their role as a retailer. For additional A junior college contracts with a plumber to furnish information about exemption certificates and their uses, see and install a water heater in its student union. The herein. Reporting and Paying Sales Tax, project’s cost to the junior college will include the sales tax paid or accrued by the plumber on the water heater unless the college has obtained and furnished a PEC to the plumber. CONSTRUCTION, REMODEL Schools can avoid the additional cost of paying sales tax OR REPAIR PROJECTS buying the materials on materials without obtaining a PEC by directly from a supplier. In the previous example, had the junior college purchased the water heater directly from a supplier GENERAL RULES (to be installed by its employees or by a plumbing contractor), the water heater would be exempt as a direct purchase. The There are two components to any construction, remodel installation services of a plumbing contractor would also be . The general sales or repair project— materials and labor exempt as a direct purchase of labor services. The college tax rules for real property projects owned by a school or would furnish the each vendor with its Department of Revenue- educational institution are as follows. te. issued tax exempt entity exemption certifica . Exempt when directly purchased by the school, Materials eRsonal R epaiR of angible T RopeRTy p p unless purchased for human habitation. Taxable when furnished by a contractor or sub-contractor unless a Project When a Kansas school contracts for the maintenance, Exemption Certificate (PEC) has been obtained (see Project repair, alteration or servicing of an item of tangible personal Exemption Certificates (PECs) , herein). property and labor) , the entire repair service (materials, parts is considered to be a direct purchase by the school. Examples Labor . Exempt w hen directly purchased by the school. of tangible personal property owned and repaired by schools Labor for human habitation is exempt from sales tax as include: furniture, office equipment, maintenance equipment, “residential” labor (see Taxable Projects , herein). Taxable sports equipment, and vehicles. Since the total repair bill is a PEC has been unless when furnished by a subcontractor a direct purchase by the school, use your Department of obtained; or the project qualifies as “original construction” (as Revenue-issued tax exempt entity exemption certificate. defined herein). The rules for building projects are complicated in part A school has its lawn mower serviced. Parts are $25 the operation of two aspects of sales tax law – the because of and labor $75. The repairman accepts the Department taxation of contractors, and the exemption for schools and of Revenue-issued tax exempt entity exemption educational institutions. Schools are exempt only on their certificate in lieu of charging sales tax on the total bill of $100. direct purchases of tangible personal property or services. CAUTION : The repair or maintenance of tangible You may use the Tax-Exempt Entity Exemption Certificate personal property owned by another but used by a issued to you by the Department of Revenue, to make a direct school or educational institution is not exempt, unless of either the materials or the labor for purchase without tax the repair is a direct purchase of the school. a building project. However, when you enter into a contract with a contractor or repairman to furnish the materials for a ORIGINAL CONSTRUCTION is a direct purchase, and labor real property project, only the from sales tax using the Department of therefore exempt Revenue-issued Tax-Exempt Entity Exemption Certificate. services of installing or applying tangible The labor original construction personal property in connection with the in Items purchased directly through the contractor, such as of a building or facility are not subject to sales tax. Original materials, any leased or rented equipment, and the materials is defined as the: construction and labor services of the subcontractors do not meet the 6

7 first or original construction of a new building or facility • ; PROJECT EXEMPTION CERTIFICATES (PECS) • addition of an entire room or floor to an existing building or facility; of a building, • restoration, reconstruction, or replacement As illustrated in the previous examples, schools and facility or utility structure damaged or destroyed by fire, educational institutions should obtain a PEC in order to extend flood, tornado, lightning, explosion, windstorm (80 mph their sales tax exemption to all parts of a real property project. or more), ice loading and attendant winds, terrorism, or Kansas sales tax law provides the mechanism that is to be means transmission and earthquake. Utility structure followed to do this at K.S.A. 79-3606(d): distribution lines owned by an independent transmission “...When any... public or private elementary or secondary company or cooperative, the Kansas electric transmission school or public or private nonprofit educational authority or natural gas or electric public utility; institution shall contract for the purpose of constructing, • complet ion of any unfinished portion of an existing equipping, reconstructing, maintaining, repairing, building or facility; enlarging, furnishing or remodeling facilities, it shall • construction, reconstruction, restoration, replacement or obtain from the state and furnish to the contractor an repair of a bridge or highway; and exemption certificate for the project involved, and the • remodel, restoration or repair of a . residence contractor may purchase materials for incorporation in such project.” The labor to remodel, restore, or repair commercial real property is subject to Kansas retailers’ sales tax at the rate A PEC is a numbered document issued only by the of tax in effect where the work is performed. Kansas Department of Revenue or its authorized agent. A PEC exempts the entire project –materials and labor – from building is only those enclosures within which individuals A sales tax. are employed, or which are customarily used to customarily house machinery, equipment or other property, including the A project exemption cannot be used as a blanket land improvements immediately surrounding the building. exemption. It applies ONLY to a specific project and EXPIRES upon completion of that project. To avoid the additional cost facility is a mill; plant; refinery; gas, oil or water well; A of sales tax on project materials and on the materials and feedlot, and transmission and distribution lines owned by labor services furnished by subcontractors, you should obtain REAs and municipalities. a PEC for each building project that qualifies to receive one. is an enclosure where individuals customarily residence A live, including homes, apartments and dormitories. Special IMPORTANT : Not all projects undertaken by a school rules apply to dormitory and other school housing. Taxable qualify to receive a project exemption. See , herein. Projects A university is rebuilding one of its buildings on campus that was damaged by fire. The labor services o RojecT xempTion p e bTaining a performed by contractors and subcontractors to Online–Agent Status . Because schools and school reconstruct the building are exempt from sales tax as original districts are eligible for Agent Status, they should apply for construction, since the damage was caused by fire. In order PECs online through the Department of Revenue website. for the materials to be exempt from sales tax, the university With this process, political subdivisions can print the PEC must either purchase the materials directly, or furnish a PEC immediately after making the application. Just follow these to its contractors who are buying them. four steps: A university is remodeling its basketball arena by and click on 1 ) Visit ksrevenue. org/pecwelcome.html enlarging it and updating the interior of the entire . Log into the KDOR Customer Submit PEC Requests structure. The labor services on some parts of the job Service Center. are exempt as original construction, such as the addition of a 2) The first time a political subdivision applies for a PEC new wing for athletic department offices and locker rooms. online, they will Agent Status Exemption want to indicate The remainder of the labor services for this project, such as Certificate and then complete the PEC application. the resurfacing of the basketball court, installation of new seating and painting and remodeling of the arena’s public rest PEC requests ) Once approved for Agent Status, all 3 rooms, are taxable as commercial remodel work. submitte d online will be automatically approved and a PEC may be printed immediately. has presented its contractors with So unless the university No record keeping by the school is required. In the past, 4) components of the arena remodel are a PEC, the following schools with Agent Status had to complete and submit subject to sales tax: to the Department of Revenue a spreadsheet recording • All project materials furnished by the contractors and issued PECs. This has been eliminated by the online subcontractors. procedures. Political subdivisions will want to keep a copy • Rental of any construction equipment by the contractors of all PECs in their records for at least five years. and subcontractors. • Subcontractor labor on the commercial remodel portion Paper Method . If you prefer to obtain an exemption through of the project). he paper process, complete a Request for Project Exemption t Certificate (PR-76). Try to apply at least 2 weeks in advance of Without a PEC, the only components of a project exempt the project so you receive the certificate prior to the purchase are the direct purchases by the school of materials or of the of any project materials or labor. general contractor’s labor services. 7

8 . Therefore schools must pay the sales tax on all materials, live PECs are dated and are not retroactive. CAUTION : supplies, fixtures and furniture used to construct, repair, All materials and taxable labor services purchased enlarge and equip its dormitories and residence halls, but or performed by contractors prior to the effective date residential on the labor services areas of these buildings of the PEC are taxable. However, if you fail to secure a PEC are not taxed. in time for your contractor(s) to use the exemption for all or To determine the tax treatment of an item or service for part of their project purchases, you may apply to the a dormitory or residence hall, the Department of Revenue Department of Revenue for permission to seek a refund of n outlined in Attorney General Opinion follows the interpretatio the sales taxes paid to your contractors’ suppliers that would 85-179 in addition to the exempting statute, K.S.A. 79-3603(c). have been exempt had a project exemption been in effect. This refund process is outlined in K.A.R. 92-19-66e(n)(1). Generally, capital items purchased for a dormitory are taxable , and maintenance purchases are exempt. Submit such requests for refunds to the Department of Furthermore, labor services on the portion of a dormitory (available on our website). ST-21PEC Revenue on Form where students live are not taxed due to the residential Teps s xempTion e RojecT p . component of original construction These steps illustrate how a project exemption is used by capital dormitory purchases include materials Taxable all affected parties. for construction, remodeling or repair due to damage; and furnishings, such as beds, bathroom fixtures, blinds, desks, ) Political subdivision applies for a PEC online or completes 1 furniture, and lamps. Materials used in dormitory projects are Form PR-76, Request for Project Exemption. always taxable, whether purchased directly by the university 2) The Department of Revenue receives and approves or or by its contractors. Sales tax must also be paid on the denies the request. taxable labor services performed in the dorm areas that are 3) If approved, the Department of Revenue issues a in nature. not residential numbered PEC to the political subdivision. Nontaxable dormitory maintenance includes repairs 4) The political subdivision furnishes the numbered certificate due to normal wear and tear, and elevator or pest control to the contractors and subcontractors for the job. maintenance contracts. Also not taxed are the labor services 5) Contractors and subcontractors furnish the numbered performed in the residential areas of the building. Residential certificate to their suppliers. areas include the dorm room, bathroom(s) or shower facilities. Common areas such as hallways, laundry, exercise and 6) Suppliers use the certificate number on all project invoices dining rooms are not exclusively residential in nature, and are to verify the sale of materials and/or labor is exempt. therefore taxable unless the labor is a direct purchase by the 7) When the project is complete, contractor(s) furnish educational institution. a Project Completion Certification to the political Over the summer months you are having a dormitory subdivision with a copy to the Department of Revenue. remodeled. In addition to rooms and bath facilities for 8) five years Contractor(s) keep all project invoices for students, this residence hall houses a dining room * Contractors must accrue (pay) sales tax on any materials purchased with open to students only, TV & game room, computer/study area a PEC that are not incorporated into the project or returned to the supplier for credit. - f aTeRials m and laundry facilities. . You must axable T ully pay sales tax on all the materials purchased for this building : A school with agent status may only issue CAUTION - p aboR s eRvices remodel. . Since the axable l aRTially T PECs for wholly-owned projects. It cannot issue a in nature, not all dormitory has areas that are not residential project exemption for a joint project with another of the labor services performed for the project qualify for entity. When a project involves two or more entities, such as exemption as residential construction. Therefore the charges a joint project between a city and a university, a separate for labor services of the general contractor and subcontractors application for project exemption must be filed with the must be apportioned between the residential labor (not Department of Revenue. taxable) and the nonresidential labor (taxable). F a general rule, raternity and Sorority Houses . As TAXABLE PROJECTS fraternity and sorority houses are owned or rented by the individual organizations and are not owned by the school. If These two kinds do not qualify of school building projects students live at the house, the exemption for residential labor dormitory/school housing to receive a project exemption: services would apply, but all materials would be taxable. There turnkey projects and . projects is no other exemption available to fraternities or sororities for Dormitories And Residence Halls . The sales tax materials and labor to build or maintain a house. s an exception for the property exemption for schools contain nkey projects are those projects Turnkey Projects . Tur and services used to erect, construct, repair, enlarge or equip where the school or educational institution merely enters into buildings used primarily for human habitation. In other words, a contractual agreement to buy completed real property from on property not exempt an educational institution is generally the contractor. Turnkey projects are not exempt. or services purchased for its dormitories or other types of student or faculty housing. A college agrees to purchase duplexes adjacent to its campus from the contractor who is currently However, residential labor services are not taxed; school renovating them. The college plans to use them as residential dormitories and residence halls are considered student housing. Although the college has input into the on- since they enclosures within which individuals customarily are 8

9 going remodel work as the buyer under contract for the to the public. The student’s fee is not taxable because it is not property, the contractor’s renovation and remodel work on the separately stated and there is no sales tax to faculty and staff not qualify for a project exemption. Sales tax home does since there is no admission sold. (residential applies on the materials but not on the labor labor is not subject to sales tax). ACTIVITY FUNDS Once the duplex remodel is complete and the college takes title to the property, the tax treatment of future labor Many schools use an activity or a building fund to pay for and materials purchased for the student housing will follow school, school club or organization. purchases used by the the same rules as discussed earlier for other college-owned If the activity fund is a fund of the public school and the dormitories and residence halls. Furnishings are taxable; transaction is a direct purchase by the school (or its PTA - see maintenance and residential labor services are not taxed. PTA/PTO, herein), then purchases made with activity fund monies are exempt. However, if your school merely organizes a trip to an art museum, amusement part, skating rink, etc. TAXATION OF and students pay their own way, the students will pay sales SCHOOL ACTIVITIES tax on their admission and food purchases. The high school drama club collects money from students for a theater trip and pizza party. The money GENERAL RULES is deposited into the school’s activity fund and the school writes checks to the theater and pizza restaurant. Although public or private schools and educational These purchases with activity fund monies are exempt from paying sales tax on their institutions are exempt from sales tax as a direct purchase by the school. direct purchases of goods or services, they are not exempt from collecting sales tax when making retail sales to the Your school is selling T-shirts to promote school spirit. final consumer. Kansas sales tax law traditionally requires Orders are taken from students, parents, etc., and the governmental units, nonprofits, and other organizations T-shirts are purchased with school funds (no tax). The to collect sales tax when they are competing with private school must charge sales tax on the shirts. However, if the enterprise by making retail sales, regardless of how the shirts are sold by the PTA, the sale is not subject to sales tax. proceeds of the retail sales are used. When a school or : Whether the school is reimbursed or not, CAUTION educational institution, school club, or organization (except a direct purchase of goods or services by the school a PTA/PTO) is selling tangible personal property at retail or for school purposes is an exempt purchase - the furnishing any of the taxable services enumerated in the law, or school is the final consumer. This is in contrast to the retail is providing entertainment to the ultimate user or consumer, it sale of goods or services by a school; the school must charge must collect and remit the applicable state and local sales tax tax to its final consumers – its students or the general public. from its customers. Within this publication is a representative, but not exclusive, list of taxable sales by schools. building fund into which are Some schools have a This section explains in greater detail the proper tax deposited the proceeds of fund raising sales by students, treatment of typical school situations and school-related teachers, and other building sponsors. If funds raised are activities. Much of the discussion is taken from written the by the school or its PTA/PTO directly, purchases expended Department of Revenue advice in notices and private letter with the funds would not be taxed. This written advice is also available in the Policy rulings. However, if the teachers and others raising the funds are ) PIL Information Library ( on our website. If you are in doubt also spending them, the items purchased with these funds about how Kansas sales tax applies to a specific school to be subject to sales tax. To avoid sales tax, most are going situation, contact the Department of Revenue for advice. individuals and organizations raising money for a school will donate the funds raised to the exempt entity (school or PTA) to purchase the equipment, such as computers. This practice ACTIVITY FEES allows the school to claim exemption from sales tax that the organization or teacher does not have. for sporting, cultural, Activity fees separately enumerated musical, historical, etc. events are taxable. The separately- stated activity fee constitutes an admission to school activities, ADMISSIONS AND TICKET SALES whether only specific types or all-inclusive. Fees for use of an athletic, recreational or entertainment facility are also The retail sale of an admission to any place that provides taxable. Activity fees that are assessed to each student upon entertainment or recreation is generally subject to amusement, enrollment for which the student does not receive any specific sales tax in Kansas. (The admissions that have been granted material benefit are not taxed. an exemption by the legislature are listed in Pub. KS-1510 ; they do not usually have a school application.) A university has a fitness center and access is included in the general activity fee paid by students Kansas schools, educational institutions, booster clubs, as part of their tuition and is not separately stated. PTAs and PTOs must collect sales tax when selling admissions or tickets to concert s, dances, dinners, fun nights, Use of the center is free to faculty and staff showing a plays and sporting events. A PTA/PTO is only exempt from university ID. It is also open to the public upon payment of a collecting sales tax on articles of tangible personal property. usage fee. The university will charge sales tax on fees charged 9

10 sales tax return. The winner receives the prize for free so does T ickeT s ales Raffles , herein. not pay any sales tax on it. See also The sale of tickets that can be exchanged for food or AUCTION ITEMS: Sales tax is due on the total price paid by the beverages at a fun night; or allow the holder to play carnival and live auction of items of tangible personal guests on t he silent games, participate in a cakewalk, or use a moonwalk, are property, whether bought, donated or sold on consignment . Tickets that can be exchanged for prizes, awards, taxable by the association. The auction is taxable because the items etc. are also taxable. Meal tickets at school cafeterias are being sold were acquired with the intent of reselling them (see discussed herein. Isolated or Occasional Sales, herein). The association should not pay sales tax on any auction item purchased, but would An elementary school is having a chili supper and fun factor out the sales tax that was included in the amount paid by night. Tickets for the supper are $4 in advance and the guest for the item. If using labor auctions as a fund-raising $5 at the door. Additional tickets can also be tool, where volunteers offer to do work for whoever is the high purchased for 50 cents each that allow the holder to play bidder for that respective service, these sales are not taxable. games. All tickets sold are subject to sales tax. VEHICLES: If the alumni association purchases a vehicle as a winner of a drawing or raffle, the direct purchase is prize to the T ickeTs ax on ollecTing a dmissions and T c taxable. The subsequent transfer of the vehicle to the winner of The sale of admissions or tickets is one of several types of the drawing or raffle is considered to be a gift and not subject to retail sales where the sales tax is included in the price rather sales tax. However, if the alumni association does not purchase than added separately. However, just because the tax is the vehicle, but rather title is transferred from a dealer directly to the winner of a drawing or raffle, the winner is liable for the included in the price does not mean that the tax is borne by sales tax on its fair market value directly to the vehicle dealer. When the school. Sales tax is to be paid by the consumer. Whenever the sales tax has not been paid by either the vehicle sales tax is included in the price charged, make sure you factor donor or vehicle winner to this state or another state, the in the tax amount so that you are sure of recovering costs. winner will pay sales or use tax to the country treasurer when The tax rate in your area is 7.9%. To make a profit on registering it. [K.A.R. 92-19-30] a fund-raising activity you need to charge at least $9 per person. Since the tax on $9 is 71 cents, consider BOOSTER CLUBS charging $10 for the ticket so your profit margin is not decreased by the sales tax due and payable by your customers. Booster clubs are organized and operated to benefit a IMPORTANT : To accurately report the sales tax on specific school program such as sports, music or drama. sales made in this manner, follow the procedure in Booster clubs must register and collect sales tax on all retail the vending machine example on page 16. sales of property, taxable services or admissions, even though all proceeds from their activities are used to support a school program. Booster clubs must also pay sales tax on AUCTIONS all of their purchases of goods (except resale inventory) and taxable services. Many schools, alumni groups and endowment associations Booster clubs and similar organizations that operate in raise funds by holding a charity auction. All parts of this event support of a particular program or activity usually do not qualify are subject to sales tax. for exemption as a PTA or PTO. They do not encompass the Your alumni association is holding its annual auction broad objectives of a PTA/PTO, and do not qualify as a PTA party to benefit the university. Tickets cost $50, $25 or PTO, even though they may be composed of parents, of which is a tax-deductible donation. A meal and teachers, students, businesses and others interested in the beverages are served; alcoholic drinks are sold separately. school or in a particular facet of the educational process. During the evening guests bid on silent auction items, followed by a live auction. Auction items are donated, purchased by CAFETERIAS, LUNCH ROOMS AND FOOD SERVICE the association at cost, or sold on consignment. The sales tax treatment of each component of this event is as follows: GENERAL RULE: IF A SCHOOL’S EATING FACILITY IS TICKETS: Included or factored into the $50 ticket price is the OPEN TO THE PUBLIC, THE FOOD AND DRINKS SOLD state and local sales tax. The ticket is an admission and is ARE SUBJECT TO SALES TAX. IF NOT OPEN TO THE taxable, whether the buyer attends the function or not. See PUBLIC, ITS SALES ARE EXEMPT. Admissions and Ticket Sales. This rule reflects the goal of Kansas sales tax—not to MEALS AND BEVERAGES: The association should buy these create an unfair tax advantage. If the lunch room, cafeteria, or items without tax from its vendors, using a Resale Exemption dining room is operated by the school solely for the purpose of the food and beverages are being resold as Certificate. Since providing meals for its students, teachers and staff, the school part of the $50 ticket price, sales tax is being collected on the is not considered to be engaged in the business of regularly cost to the consumer. selling meals or drinks to the public, and is not required to ALCOHOLIC BEVERAGES: Included in the retail sale of collect or remit tax on these sales. [K.A.R. 92-19-21] alcoholic drinks is the 10% retail liquor drink tax. A special license is required. A middle school operates a cafeteria that is open only DOOR PRIZES: A door prize is either purchased or donated to students, teachers, staff of the middle school and and given to the winner of a drawing. The alumni association an adjacent high school, and other school must pay sales tax on items purchased. The tax due on new administrators and staff visiting the premises. The cafeteria items donated by a local business will be paid by that business would not collect sales tax on the meals sold. as Merchandise consumed and purchased without tax on its 10

11 When an educational institution’s cafeteria, lunch room, the student instead of cash for all types of campus purchases. or dining room is open to the general public, the school is This is really a “charge card” and included in the price paid or charged for any item will be the applicable sales tax on considered to be in the restaurant business and just like any other restaurant, must collect and remit sales tax on all of its the sale of the item. The sale of the card itself is not taxable. sales. Therefore, cafeteria and other food sales are considered As a convenience to students for campus transactions, to the public. Signs as to closed taxable unless the cafeteria is you offer a rechargeable in several university card admission to the room will not be accepted unless the school monetary denominations. It is designed to be used can show that they visibly and actively police exclusion of by the student instead of cash for purchases at the bookstore, non-school personnel. Snack bar sales are taxable. snack bar, cafeterias, etc. The student does not pay sales tax Meals, snacks or beverages sold to off-campus groups or on the card itself, but included in the total price paid for items student organizations are taxable. Sales of these items to the purchased with the card will be any applicable sales tax. school directly are not taxable. Your college cafeteria charges $50 to provide cookies FUND-RAISING and coffee for a workshop held in your student union, but sponsored by an outside organization. The Fund-raising activities are an integral part of funding for cafeteria must charge sales tax on this sale unless the outside ional institutions. A common misconception schools and educat organization is exempt, such as a city or school district. is that the sales tax does not apply if the proceeds of a fund- raising activity are for the exclusive use of the exempt school ood s f eRvices c onTRacTed or educational institution for school purposes. This is not A caterer or concessionaire operating a cafeteria, lunch the case. Although exempt on its purchases, a school or an or dining room on the premises of any public or private sales tax collecting educational institution is not exempt from elementary or secondary school or public or private nonprofit on its taxable fund-raising activities, such as the retail sale of educational institution shall collect and remit sales tax on its admissions, goods or services listed earlier in this publication. sales to the public. isolated or Only a sale that meets the qualifications of an A university contracts with XYZ Corp. for food service sale as defined herein is not taxed. occasional on campus. This includes a restaurant and snack bar Booster clubs and most student organizations must also in the student union and any food served on-campus collect sales tax on taxable fund-raising events. Only PTAs/ for meetings, seminars and other events. As the food service organizations are PTOs and certain nonsectarian youth vendor, XYZ Corp. must be registered to collect sales tax on exempt from collecting tax on retail sales of merchandise, all of its food sales to the public and off-campus organizations. but must still collect tax on sales of admissions and services. Direct sales to the university is exempt with a completed For more information about the tax treatment of a particular exemption the university will pay sales certificate. However group or fund-raising activity, consult the topics in this guide tax on its indirect sales of food or beverages provided as part ( Auctions, PTAs/PTOs, ), Student Clubs and Organizations of an event/seminar for which a fee is charged. on our website. Policy Information Library and/or use the The School of Eduction at a university is conducting Raising iTems foR Resale uying fund b - a continuing education seminar for teachers. Included Another common misconception about fund-raising sales in the $50 seminar/registration fee is a $15 charge for is that if an organization, school or individual pays the sales lunch provided by its food service contractor, XYZ Corp. The tax when it buys its inventory, it does not have to collect sales $15 lunch charge is taxable. tax on its retail sale of that item. This is also not true. eal aRds oR m T ickeTs c Sales tax is designed to be paid only - by the final once consumer or user. A school or student organization (except Semester meal cards used at a cafeteria closed to the a PTA/PTO) making retail sales (to the final consumer) is public are not subject to sales tax. required to obtain a tax registration and collect sales tax on For $700 a semester a dorm resident may eat at any its sales. Therefore it is not the final consumer of the fund- of the university’s students-only dining halls (closed pay the sales tax on them. Paying not raising items and should to the public). This meal card is not taxable. However, sales tax on resale inventory merely increases the cost of a meal card that entitles the holder to eat at a cafeteria open goods sold. to the public is subject to sales tax. When buying your resale inventory you should provide the You offer a monthly meal card to students, faculty and vendor with a Resale Exemption Certificate (ST-28A). By using staff. For $200 the holder may dine in cafeterias open this certificate you have documented to the seller that you are to dorm residents only and the student union facility a registered retailer and that the items being purchased will open to the public. The sale of this type of meal card is taxable be resold and are not for personal or other non-exempt use. as it entitles the person to eat anywhere on campus. GOLF COURSES The sale of other types of cards may or may not be taxed. of a munchies card entitling the student to obtain The sale pop and snacks is taxable. Some educational institutions sell Several state universities operate golf courses. These a convenience card to students. It comes in various monetary courses are used not only to train golf teams and/or students , and is designed to be used by recharged amounts, may be in the management and design of golf courses, but are 11

12 3) Any sale by a bank, savings and loan institution, credit also open to the public. Fees charged to teach or instruct union or any finance company licensed under the students in the game are not taxable as long as a taxable item (golf course admission, clubs or other tangible personal provisions of the Kansas uniform consumer credit code, property) is not included in the fee. The university must collect of tangible personal property which has been repossessed sales tax on all of its retail sales of admissions and goods, by any such entity. including but not limited to driving range fees; golf cart or club Sale of business assets in conjunction with the sale or 4) rentals; greens fees and golf memberships*; pro shop sales termination of a business (other than the sale of the (equipment, sportswear, etc.); restaurant and snack bar sales; business’s inventory, motor vehicles or trailers) if the sale is and, spectator fees. made in a complete and bona fide liquidation of a business (city, school district, etc.) political subdivision * Only the fees charged by a of the seller. for participation in sports and other recreational activities are exempt from The term “business” shall mean a separate place of a. sales tax at K.S.A. 79-3603(m). business subject to registration under the Kansas retailers’ sales tax act. ID CARDS b. The term “a complete and bona fide liquidation” shall all assets of the business conducted mean the sale of Most secondary schools and educational institutions issue over a period of not more than 30 days beginning on some type of student identification card to their students. If the date of the first sale of assets, or as approved by there is no admission granted or tangible personal property the director of taxation. transferred, the fee charged to issue an ID card or reissue Auctions. 5) a lost or stolen card is not subject to sales tax. In these . a Take place at a location OTHER THAN one that is instances, the card remains the property of the school or regularly used to conduct auctions. educational institution. . b The goods being auctioned shall not have been However, if the card has another use in addition to purchased for resale. as use of school gym facilities, food identification (such c The goods being auctioned shall not have been . purchases), the student ID card fee will be taxable. In this consigned in addition for sale by more than one party situation, a fee to issue or replace a lost or stolen card is also at the auction. to the principal seller subject to sales tax. If some of the goods being auctioned satisfy the above d. Students are required to carry a photo ID card issued requirements but others goods do not, the sale of every item at the auction shall be subject to sales tax. by the school. You take the digital photo and print/ laminate the card for a fee of $5, and charge $5 to replace the card. This card is for ID purposes only. The $5 LABOR SERVICES charge for the card is not subject to sales tax. sale of admissions and tickets, the sale or providing Like the You issue a student activity card to all students. The of taxable labor services for a fee by a school, educational card is a photo-ID, and also entitles the student to institution, alumni group, PTA or PTO is subject to sales tax. admission to games and other school events based Examples of taxable labor services often provided or offered on the level and amount of student activity fees paid. The fees by school and school organizations are car washes and to obtain or replace this type of card are taxable. vehicle repair. onTaxable f ees and s eRvices n ISOLATED OR OCCASIONAL SALES Some fees and services are not subject to sales tax Sales tax is NOT collected when tangible personal property because they do not involve the installation, application, repair, or taxable services are sold at an “isolated or occasional” sale. service or maintenance of tangible personal property. Fees Isolated or occasional sales are as follows. or services that are not subject to sales tax include, but are not limited to, the following: 1 ) Infrequent sales of a nonrecurring nature made by a person not engaged in the business of selling tangible personal • Building/room rental property. To qualify, the seller shall not; • Child care hold more than two selling events of a day’s duration in a. • Consulting services a 12 month period; Fee for the first copy of a transcript or school record • b. conduct a planned annual selling event; or • Fees for seminars, training and workshops c. hold itself out as being engaged in the business of selling • Hair & nail care for people property or services of the type being sold. • Mowing/Tree trimming • Library fines and fees for lost or stolen books Sales that usually meet this criteria are estate sales, farm • Locker rentals sales, garage sales, and some auctions: • Medical or dental services 2 ) Any religious organization making one nonrecurring sale of • Parking fees and permits property in a twelve month period. The tangible personal • Photo sitting fees (if the fee is for the sitting only; the religious organization may acquire (purchase) tangible student does not receive a photograph) personal property for the purpose of selling at the fund • Reimbursement for lost or damaged school equipment raising event without paying sales tax on its purchase or or property collect sale sales tax when sold at the nonrecurring one Research and testing services • day event. 12

13 • Snow & ice removal services qualified o rganization will use the Tax-Exempt Entity Exemption • Trash service Certificate ( PR-78PT ) to claim its exemption. However, unlike • Tuition sales tax a school, a PTA/PTO is also exempt from collecting • Veterinary services on its sales of tangible personal property. Also exempted are sales of tangible personal property by others on behalf of a When in doubt about the sales tax treatment of a fee or PTA/PTO. This exemption from collecting sales tax on sales service not listed here, contact the Department of Revenue of goods or merchandise makes a PTA’s exemption broader Additional Information , herein. for advice. See than the exemption for the school for which it is working. LEASES AND RENTALS : Booster clubs and similar organizations CAUTION comprised of students, parents and teachers do not Kans as sales tax applies whether the item of tangible qualify to claim exemption as a PTA or PTO. See personal property is being sold at retail, rented or leased. , and , herein. School Clubs and Organizations Booster Clubs Schools must collect sales tax on the lease or rental of all items tax is not due when birdhouses, concessions, Sales except nonsectarian textbooks. The rental of nonsectarian flowers, T-shirts, and other types of tangible fireworks, textbooks is specifically exempted at K.S.A. 79-3606(h). See personal property are sold by a PTA, or by a school or other also herein. Textbooks, organization on behalf of its PTA. However, when a school is Schools that rent musical instruments, padlocks, sports selling tangible personal property on its own behalf, it must must collect sales tax on each rental or lease equipment, etc., collect sales tax. payment. While the school itself may rent or lease equipment and musical instruments without tax, when the school rents IMPORTANT : Note that the exemption cited in K.S.A. these items to its students, the lease/rental is taxable. 79-3606(yy) applies only to sales of tangible personal property by a PTA or by others on behalf of a PTA. PTA/PTO IMPORTANT : The rental or lease of real property is organizations must still register to collect and remit sales tax not subject to sales tax. The fees charged by a school when they are providing taxable services (car washes) or for use of its building, auditorium, sports field, etc. are not selling admissions (tickets to concerts/fun nights, etc.). taxable. However, if the building rental is included in a fee charged for a taxable event or service, and is not separately stated, it is subject to sales tax as part of the . gross receipts PHOTOCOPYING, PRINTING AND DUPLICATING ng, printing and duplicating services are subject Photocopyi PTAs/PTOs to sales tax. Print shops operated by schools and educational institutions must charge sales tax on all print jobs billed to efined d s pTo s and pTa student groups, outside entities and the general public. Sales For purposes of the exemption, Parent-Teacher Association to an educational institution or to another exempt entity are (PTA) means a nonprofit PTA chartered by the National PTA Exception: The fee charged for the first copy of not taxable. means or Kansas PTA. Parent-Teacher Organization (PTO) a student’s transcript or other document is not subject to sales a nonprofit PTO that is functionally equivalent to a PTA. tax. This is considered to be the purchase of information, which PTAs or PTOs are authorized to operate within a public or of a transcript subsequent copies is not taxable. However, private school by the governing authority of the school. For or other document are considered to be the sale of copying the purpose of the PTA exemption, a school is defined as an services and are therefore subject to sales tax. institution that meets the compulsory attendance provisions of K.S.A. 72-1111. To be exempt, a PTA/PTO must: The university print shop charges $50 to print a • operate for the benefit and support of an individual school; program for an alumni group. This charge is subject • ha ve a defined organizational structure, purpose, and to sales tax. Playbills and programs ordered by the goals; and, university’s drama department are exempt as a direct be recognized by the school as a PTA or PTO. • purchase. A PTA/PTO provides programs within a school that promote The library has several copying machines available the education, health and safety of children. Generally, there to students. The copier vends copies at 10 cents each. is only one PTA/PTO within a school and it would have long- These copies are taxable - included in the 10 cents term goals and objectives and numerous programs operating per copy is the applicable sales tax due. If the copier is owned within the school. by the library or university, it must report and pay the sales pTa s and pTo s T ax xempTion e tax; if owned by another entity, that business will report and pay the tax on the copy sales. Parent-teacher associations or organizations (PTA or PTO) are granted a sales tax exemption under K.S.A. 79-3606(yy). A former student requests six copies of his official A PTA/PTO is exempt on: transcript mailed to him. You charge $3.00 for each copy, postage included. The tax rate at the former sales of tangible personal property and services ...“all student’s Kansas address is 7.3%. Your bill for the transcripts purchased by a parent-teacher association or organization, and all sales of tangible personal property will be (5 X $3.00 X .073) + $3.00 (first copy not taxed) = by or on behalf of such association or organization;” $15.00 + 1.10 tax + $3.00 = $19.10. If the former student resides in another state, no Kansas tax is due. See also Out- Like the school it supports, a PTA/PTO is exempt from of-State Sales, herein. paying sales tax when buying goods or taxable services. A 13

14 the motor fuel tax, having been granted an exemption under K.S.A. 79-3453. Unless eligible to purchase dyed diesel fuel, RAFFLES the motor fuel tax is included in the price paid for gasoline, diesel and other special fuels at the pump by all consumers. A raffle is a fund-raising event in which a number of people chool bus operators (school districts and others leasing S buy tickets or chances to win a prize. The winner is usually buses to schools) may apply to the Department of Revenue selected by a drawing. Sales tax is due on the purchase of for a refund of the motor fuel tax paid on fuels for use in school goods or merchandise to be raffled; sales tax is not due on herein. buses. See Motor Fuel Tax, any prize that is not taxable, such as a cruise or cleaning service. The subsequent transfer of the item to the winner is m efund of R ax T uel f oToR from the organization to the winner, and gift considered to be a Any motor vehicle that meets the definition of a school bus therefore is also not subject to sales tax, except certain motor will be eligible for a refund of motor fuel tax paid on motor- vehicle transactions discussed herein. The sale of tickets or vehicle fuels or special fuels used for the transportation of chances for a raffle is not subject to sales tax. pupils, students or school personnel to or from school, or to or buyer from school-related functions or activities. The of the fuel RESTAURANTS, MEALS must obtain a Motor Fuel Refund Permit. Requirements under the motor fuel refund provisions will apply to the permit holder. As previously discussed, the exemption for schools and To apply for a Motor Fuel Refund Permit, complete Form ions does not extend to their individual educational institut and pay the $6 fee. Once processed, a refund permit MF-51 employees. Purchases of restaurant meals made by claim card to request your refunds will be sent. Refund and employees with their personal funds are not exempt. This is permits are valid for three years; renewal applications are true even when the employee is on official business for the automatically sent when the permit is about to expire. school, such as a luncheon for school administrators, or when on gasoline or clear Refund claims for motor fuel tax paid the meal is a school activity, such as an awards dinner. uel that you purchase for use in your school buses may diesel f Like hotel and motel charges, rental car fees, etc. the be submitted at any time. However, each refund request must purchase of restaurant meals for school employees are of the date of the one year be over $25, and submitted within exempt only when purchased on their behalf directly by the receipts or pre-approved statements fuel purchase. Original school or educational institution, using the definition of a direct (such as credit card statements from the gas station) must purchase. If the employee is in possession of a credit card for be submitted with the claim card. A new claim card is mailed the school, the card should not be used for restaurant meals with each refund payment. except as authorized by the issuing school authority. CAUTION : The Department of Revenue will cancel the refund permit of any claimant making a false SCHOOL BUSES / FUELS statement on the application for a permit or on a claim for refund. Permits will also be cancelled if it is found that the to A school bus is defined as any motor vehicle designed permit holder is using the fuel for which a refund is claimed carry more than ten passengers and used for the transportation of persons, and which is privately owned and contracted for, a school bus. [K.S.A. 79-3455] in any motor vehicle except leased or hired by a school district or nonpublic school for the f iesel d yed d uel transportation of pupils, students or school personnel to or Dyed diesel fuel is only for non-highway and non-tagged from school or to or from school-related functions or activities vehicles. School buses owned and operated by a school, or owned and operated by a school district or nonpublic school school district or private school are not required to be tagged which is registered under the provisions of K.S.A. 8-126 et name of the municipality, school district or nonpublic if the seq., and amendments thereto, used for the transportation of school is plainly painted thereon [K.S.A. 8-1280]. Therefore, pupils, students or school personnel to or from school or to or if a non-tagged school bus uses diesel fuel, the school may from school-related functions or activities. [K.S.A. 72-8301(g) purchase dyed diesel for it. Since there is no state or federal (1), K.S.A 8-1406, and K.S.A. 79-3401] tax on dyed fuels used in non-highway and non-tagged CAUTION : Not all vehicles used by a school to (registered) vehicles, no refund is applicable. school buses transport students are . For example, a If you do not have access to dyed products for your non- SUV, van or other vehicle not designed to carry more only have storage for clear diesel, you may tagged buses or school bus even when it is owned than ten passengers is not a apply for a refund of the motor fuel tax on the clear diesel used and operated by a school district to transport its students. in your school buses. A school district or private operator buying , the motor fuel school bus Since this type of vehicle is not a fuel for any school bus (tagged or not) that uses gasoline or tax paid on the fuel is not eligible for refund. clear diesel fuel must apply for a refund of motor fuel tax that is automatically included in the price paid at the pump. e s xempTion b us T chool ax g uels f pecial ax on s asoline and s ales T Generally speaking, the direct purchase, lease or rental of a school bus is exempt when purchased, leased or rented by The fuels on which a motor fuel tax refund is received are tax-exempt entity like a school or school district. A nonprofit unless automatically subject to Kansas sales tax you can claim school or a school district is also exempt from paying sales a valid sales tax exemption. Schools are exempt from paying tax on its direct purchases of parts and repair or maintenance sales tax on their fuels; private companies generally are not. services for a school bus. The state and local sales tax due on these fuels is based on the location of the seller and the price paid for each gallon on els used in school buses (whether the bus is owned by a Fu which the motor fuel tax was refunded. school, school district or is privately owned) are not subject to 14

15 the funds raised are used to buy curriculum materials and private school applies for a refund of the A nonprofit equipment for a school is not a factor. As registered retailers, motor fuel tax paid on 1,000 gallons of gasoline they will use a Resale Exemption Certificate (ST-28A) to buy costing $1,420, and receives a motor fuel tax refund their resale inventory without tax. of $230. This school is exempt from paying sales tax, and will provide this information on the back of its Motor Fuel Tax Certain nonprofit, multidiscipline youth development Refund Claim ( MF-35 ). under K.S.A. 79-3606(ii). Like a organizations are exempt PTA or PTO, a qualified organization will not pay sales tax on A private bus company leases school buses to the its purchases, and is exempt from collecting tax on sales of school district. They use diesel fuel and are tagged tangible personal property by or on behalf of the organization. in the company name. The bus company cannot It must, however, register to collect sales tax on its sales of purchase dyed diesel fuel. For the period of Sept. 1 through admissions or taxable services. The Department of Revenue Dec. 31, the company purchased 8,000 gallons of clear diesel has determined that the following organizations qualify for fuel; 5,000 of which were used for the transportation of pupils, the exemption and have been issued a Tax-Exempt Entity students or school personnel to or from school or to or from Exemption Certificate that details their exemption: school-related functions or activities. It applies for a refund of • Business Professionals of America the special fuel tax paid from Sept. 1 to Dec. 31 (.26 per gallon) • Distributive Education Clubs of America (DECA) on the 5,000 gallons of clear diesel eligible for refund, and • Family, Career & Community Leaders of America (FCCLA) receives a refund of $1,300. • Future Business Leaders of America The same private bus company must now pay the • Future Farmers of America applicable state and local sales tax on these 5,000 • Health Occupations Students of America gallons of diesel fuel – it does not have an exemption • Skills USA - Vocational Industrial Clubs of America available for the fuel use under sales tax law. It will report its • Technology Student Association fuel cost in the merchandise consumed section of the sales A nonprofit day care provider may also qualify for exemption tax return and self-accrue the applicable tax due. The sales Day Care Q&A under K.S.A 79-3606(ii). See the in our Policy tax due on the fuel is based on the actual purchase price per Information Library. Other exempt school-related organizations gallon, at the state and local rate applicable to the actual are endowment associations and foundations, and PTA/ location where the fuel was purchased. PTOs. For questions about the sales tax status of a particular contact the Department of Revenue organization, for advice. If the fuels are purchased in only one local taxing jurisdiction, the company will report the tax using the ST-16 filing process; if purchased in more than one locality, the SEMINARS ST-36 filing process must be used. Fees for seminars and workshops are not generally subject SCHOOL CLUBS AND ORGANIZATIONS to sales tax. Textbooks and materials provided as an integral part of the seminar and included in the fee charged may be purchased without tax by an exempt entity such as a school. Most organizations that work with a school to raise funds to If food is provided as a part of the fee, the charge for the food be spent on students and their extracurricular activities are not (voluntary or mandatory) is subject to sales tax. exempt. School organizations and clubs that are separate from the school or university must pay sales tax on all purchases of A school administrator is attending a seminar sponsored property or services for their use or for the school’s use. Taxable by a teachers college. The college charges $150 for student organizations and clubs include, but are not limited to: the two-day seminar. The fee includes lunch and • Cheerleaders, Pep Squads, Pep Clubs, Drill Team seminar materials. The charge for lunch is taxable unless it is • Chess club a direct purchase by the administrator’s school or school district. • Class clubs (freshman, sophomore, junior, senior) r open to the A fee charged to attend a lecture or semina • Clubs for art, computers, history, music, languages, public would generally be viewed as a taxable admission. A sports, science, etc. the public free of charge is not lecture or seminar open to Fellowship of Christian Athletes • subject to sales tax. • Forensics Club and National Forensics League • Fraternities and Sororities (honorary and social) An alumni group sponsors a breakfast lecture for $25; Honor Societies (academic and specific fields) • this charge taxable. A university’s lecture series • Journalism Society offered free of charge to the public is not taxed. • Kansas Association for Youth - KAY • Letterman Club TEXTBOOKS • Ethnic Student Associations and Multicultural Clubs • Music groups (band, choir, orchestra) or private The rental of nonsectarian textbooks by public • National Honor Society elementary or secondary schools is specifically exempted • ROTC/Jr. ROTC from sales tax at K.S.A. 79-3606(h). Nonsectarian means • Student Council/Student Government Association that the book is not associated with, or limited to, a particular • Students Against Drunk Driving (SADD) religious denomination. Since the textbook rental exception • Teens as Teachers applies only to nonsectarian textbooks, the rental of a textbook These organizations and clubs must register and collect of a religious nature by an elementary or secondary school is sales tax on their taxable fund-raising activities. The fact that subject to sales tax. 15

16 NOTE : This exemption does not apply to institution of learning from the machine by 1 plus the state and local sales tax rate beyond the 12th grade. The rental of any type of textbook by that is in effect where the machine is located (for example, a college, university or vo-tech school is subject to sales tax. 1.073 if the state and local tax rate is 7.3%). The sale of new or used books, including all types of The ax ut o actor F ow To h T ales s textbooks, is subject to sales tax. Your university owns the vending machines located in its dormitories and student union. Proceeds from UTILITIES the sales are used to fund a scholarship. One month’s collections from the soda and video game machines is Public and private nonprofit schools are exempt on their $4,225.00 and the tax rate in your city is 6.75%. direct purchases of the utilities of electricity, gas, water and heat, regardless of how the utility is used*. To obtain the 1) Calculate the sales tax base. Divide the total receipts by exemption, complete and file your Department of Revenue- one plus the sales tax rate where the machines are located. issued Tax Exempt Entity Exemption Certificate, with your $4,225.00 / 1.0675 = $3,957.85 utility providers. For K-12 public schools, the school district Calculate the sales tax collected and included in the total 2) $3,957.85 X .0675 = $267.15 take from the machines. usually handles the paperwork needed to obtain the exemption 3) Check your calculation. The total of steps one and two (the for each school building in the district. sales tax base and the sales tax) should equal the gross * A school district (political subdivision) must pay sales tax on electricity, gas, water or heat used to provide a taxable product or service to the amount removed from the vending machine. public unless the use qualifies for another exemption (such as ingredient $3,957.85 + $267.15 = $4,225.00 or component part). If you do not own the vending machine but merely receive a commission on the sales made from it, the vending machine VEHICLES/EQUIPMENT owner will report the sales and pay the tax due. The receipts or commission received by the school as payment for placing A school may directly purchase, rent or lease any type of the machine on school property is not subject to any sales tax. vehicle or equipment without sales tax, including cars, heavy machinery, school buses and vans. There is also no sales tax Your school receives 25% of the sales made each on a school’s rental or lease payments to the vehicle owner as month from the vending machines on school property long as the lease is between the exempt school and the vehicle owned by a vending machine company. The owner owner and all lease payments are made with school funds. of the machines paid the Kansas sales tax on the total amount A school may also purchase any repair and maintenance taken from the machines. The 25% commission paid to the services on its vehicles without tax using its Department of school is not subject to sales tax. Revenue-issued Tax-Exempt Entity Exemption Certificate. This is a repair of tangible personal property so a Project VOCATIONAL TECHNICAL SCHOOLS AND TRAINING Exemption Certificate is not required in order to purchase the materials tax exempt. However, when a school or school As part of the instructional process, an educational institution class is engaged in providing vehicle repair for a fee, it must may supplement classroom instruction with hands-on training. charge its customers sales tax on these taxable services. In In the process of providing this type of work experience, a this capacity the school has become the retailer of a taxable vo-tech may provide taxable services or make retail sales to service, and must collect sales tax from its customers just like the general public, such as the vehicle or equipment repair a privately-owned automotive repair shop. service illustrated earlier in this guide. As part of its course work, your Vo-Tech heavy Vo-tech classes may also construct a home, storage equipment class makes repairs on construction shed or similar structure which is later sold. Even though the equipment. Customers are charged for parts and construction is undertaken by the school’s class or classes for labor; the entire repair bill is taxable. If the construction educational purposes, there are two distinct situations involving equipment is owned by a business, the business pays the the construction and sale of this type of property where a sales tax. If the equipment is owned by a county or other school will incur a liability for sales tax. This section deals with exempt entity, it must provide its Department of Revenue- the tax treatment of the materials and labor when a school issued exemption certificate for the sale to be exempt. builds real property and/or tangible personal property for sale. T s ale of r he P c roPerty onsTRucTion and eal VENDING MACHINE SALES GENERAL RULE: MATERIALS–TAXABLE AS THE FINAL CONSUMER OF THE MATERIALS ON A REAL supplies, phone cards and other Candy, snacks, school PROPERTY PROJECT. LABOR SERVICES–ORIGINAL items sold from a vending machine are taxable. Kansas sales CONSTRUCTION AND RESIDENTIAL LABOR IS tax is due on the total sales made from any coin-operated EXEMPT; COMMERCIAL REMODEL WORK IS TAXABLE. device that dispenses goods, amusement (video games) or A school engaged in the construction of real property services (except laundry services). When the vending machine , and as such is considered contractor is functioning as a is owned and operated by a school, sales tax is due on the to be the final consumer of the materials used for the real gross receipts received. property project. Like a private building contractor, the school Since sales tax is already included in the price paid for is required to pay sales tax to its suppliers on all tangible a vending machine, you will need to each item sold through personal property (materials) purchased for incorporation factor out the tax amount before reporting the total sales on into a home, storage shed or similar structure which will be your tax return. To determine the gross receipts without the classified as real property when it is sold. Although generally sales tax (sales tax base), divide the total amount collected 16

17 exempt on its direct purchases, a school’s exemption found However, as a retailer of tangible personal property, the school at K.S.A. 79-3606(c) does not apply to tangible personal is entitled to purchase its raw materials without tax since the for the erection, construction, property or services used sales tax will be collected when the property is sold to the final repair, enlargement or equipment of buildings used primarily consumer (retail sale). for human habitation . Therefore, an educational institution A college’s class is constructing a modular home on cannot use its Tax-Exempt Entity Exemption Certificate to campus. When complete, the home will be sold at materials purchase for either its own residential property auction and moved to the buyer’s designated location. (dormitories, faculty or student housing) or for any residential MATERIALS : The The sales tax treatment is as follows. real property it is constructing or repairing for resale; it must college may buy the materials to construct this tangible pay the tax on them. personal property without tax using a Resale Exemption to install or apply tangible However, the labor services . LABOR SERVICES: The labor services of students Certificate personal property in connection with the original construction are not taxed; the labor of outside contractors is not taxed or repair of a building or facility, or the construction, remodel since this project is the original construction of a residence. of a residence are not subject to sales tax. The exemption of TAX ON THE SALE : The sale of a manufactured or modular residential labor services supersedes the prohibition against home is subject to sales tax. However, the sales tax base is a school’s purchase of residential labor without tax, therefore 60% of the home’s value. K.S.A. 79-3606(ff). The tax will either the labor purchased by the school to build or repair residential be collected and remitted by the school or by the auctioneer. property (whether school property or a residential project for A woodworking class builds furniture and bookcases resale) is exempt. Only the labor on a commercial remodel : The school should purchase MATERIALS for resale. project is taxable. the materials without tax using the Resale Exemption For the purpose of this publication, a home, storage shed LABOR SERVICES: Student labor not taxed. The Certificate. is permanently affixed to the land on or similar structure which school may purchase the direct labor of outside contractors which it is located at the time it is sold should be classified as : with the Resale Exemption Certificate. TAX ON THE SALE real property. Conversely, if they are not permanently affixed The school must charge tax when the furniture and bookcases to the land on which they are located at the time they are sold are sold to the general public at the state and local rate in they should be classified as ta ngible personal property. effect where the customer takes delivery of the items. A community college’s vo-tech class is building a home for ultimate sale; sale proceeds are used to buy REPORTING AND materials for its next building project and other school needs. Much of the labor is supplied by the students and PAYING SALES TAX outside contractors are used. MATERIALS: The college must pay sales tax to its vendors on all of the building materials, wiring, etc. used on the home. LABOR SERVICES: Labor REGISTRATION AND TAX NUMBERS services to construct, reconstruct or remodel a residential : The TAX ON THE SALE property are not subject to sales tax. Kansas schools, groups and organizations must register sale of real property is not subject to sales tax. with the Department of Revenue in order to collect sales tax from their retail customers. There is no minimum amount of A college’s heating and air conditioning class is sales or sales tax due before you are required to register to replacing a compressor at a dental office (a commercial collect the tax. Depending on the activity, other tax registrations remodel project). MATERIALS: This real property Other Kansas Taxes, may also be required. See herein. project is not residential in nature, therefore the college may buy the compressor and other job materials without tax using and sign in to the KDOR To register, visit its School or Educational Institution Exemption Certificate. Customer Service Center. After you complete the application LABOR SERVICES: Labor services on a commercial remodel receive a confirmation number for your registration you will project are taxable. TAX ON THE SALE: The college must and account number(s). See , Business Tax Pub. KS-1216 charge the dentist sales tax on its labor services, profit Application/Instructions, for more information. (including any mark-up on the materials) and overhead. The Department of Revenue assigns a sales tax account er you complete a Business Tax Application number to you aft T he c onsTRucTion and s roPerty P ersonal P angible t ale of ). The account number is printed on your Retailers’ CR-16 ( GENERAL RULE: MATERIALS–EXEMPT AS Sales Tax Registration Certificate and is used to report and INGREDIENT OR COMPONENT PARTS OF TANGIBLE pay the sales tax you collect from your customers. PERSONAL PROPERTY FOR RESALE. LABOR When making retail sales you are required to display your SERVICES–TAXABLE ON TANGIBLE PERSONAL registration certificate in a location to let your conspicuous PROPERTY UNLESS THE PROJECT QUALIFIES AS customers know you are duly registered to collect and remit the RESIDENTIAL OR THE ORIGINAL CONSTRUCTION OF A BUILDING OR FACILITY. taxes you are charging them. Have a copy of your registration certificate to present at each temporary sales location should A school selling homes, storage sheds or similar structures a local or state official request proof of registration. If it is lost classified as tangible personal property, as well as furniture, or destroyed, request a duplicate from the Department of art, and other types of tangible personal property is considered Revenue. You may copy the certificate. of these items, and must collect sales tax on the retailer to be a gross receipts received from such sales (K.S.A. 79-3603(a)). For more information about Kansas sales tax account The rate of tax collected will be the state and local sales ormatted, see Pub.KS-1510 , numbers, including how they are f tax in effect where the buyer takes delivery of the property. Kansas Sales and Compensating Use Tax. 17

18 wash are taxable. The total collected will include the state and RETAILER RESPONSIBILITIES local sales tax where the car wash is provided and be factored out before reporting the sale in your sales tax filing. Kansas retailers are responsible for collecting the full A complete discussion of the application of sales tax to the amount of state and local sales tax due on each sale to the various aspects of a sale is in Pub. KS-1510 , Kansas Sales final user or consumer. It is illegal for a retailer to advertise and Compensating Use Tax. to the public or any consumer, directly or indirectly, that the ocal T ax c ollecTing l ales s sales/use tax or any part of the tax will be paid or absorbed The rate of local tax that is added to the state tax on a retail by the retailer; sales/use tax is not a part of the price to the sale of goods or taxable services is generally determined consumer; or, when sales/use tax is added to the price all or sourced or according to where the buyer takes delivery of part of it will be refunded. the goods or taxable service provided. This is known as You will avoid many sales tax problems if you follow these sourcing. For Kansas retailers this means destination-based two rules when making retail sales. sales remain subject to the state over-the counter that while 1) All retail sales of goods and enumerated services are and local sales tax in effect at the retailer’s location, shipped unless specifically exempt. taxable considered or delivered sales of goods or taxable services are taxed at 2) For every sale of merchandise or taxable services in the state and local rate in effect at the customer’s Kansas Kansas, the sales receipt, invoice, or bill must either show delivery address. that the total amount of sales tax due was collected, or be IMPORTANT : Retailers who ship or deliver sold items accompanied by a completed exemption certificate. to their customers’ locations are therefore required ollecTing T ax f Rom c y ouR c usTomeRs to collect the state and local sales tax rate in effect at the customer’s Kansas location (destination) . Retailers There are two acceptable ways to collect sales tax on retail providing taxable services are required to collect the local tax as a separately stated sales. The sales tax must either be in effect where the services are performed. line item on an invoice, or included in the price of the item. The most common method is to he t separately state Your Dodge City school is selling commemorative shirts. tax due on the invoice, bill, receipt, or other evidence of the On sales made at your school and throughout Dodge transaction. If the tax is a line item, it must be clearly stated to City, you will collect the combined state and local rate the public as sales tax and there must be a separate line on in effect for Dodge City. You will collect the Ford County rate the invoice, receipt, etc. for the sales tax. If the tax is included on shirts mailed or delivered to customers outside Dodge City , it must be clearly stated to the public that the in the price but still in Ford County, and on shirts mailed to customers in . This method is often applicable sales taxes price includes all other Kansas cities or counties, you will collect the combined used by contractors and when it is not convenient to add the state and local rate in effect for that customer’s address. tax at the point of sale, such as vending machine sales and T o accurately determine the correct jurisdiction for a Kansas sale of admission tickets and concessions. sale, retailers should consult Notice 03-04 , Destination-Based CAUTION : When sales tax is included in the retail Sourcing Rules, and use the Jurisdiction Code Booklet ( Pub. price of an item, service or admission, you must state and local KS-1700 ) to determine the correct combined from the total proceeds before factor out the tax tax rate for that customer’s tax jurisdiction. reporting on your return. Failure to do so will Gross Sales uT o of ales s TaTe -s - cause you to be paying tax on tax. To calculate the sales amount without the tax, divide the total by “1” plus the Sales of property shipped or delivered to a customer in combined state and local sales tax rate due on that sale. another state by are not subject to Kansas sales tax. Only Kansas customers must pay Kansas sales tax. However, ax b T ase s ales T he customers in other states may owe a use tax to the state The sales amount to which sales (or use) tax is added is where the item is used or consumed. In the example above, called the sales tax base. The law uses the term gross receipts. shirts shipped or delivered to residents of other states would is the total selling price or amount received ross receipts g not be subject to Kansas sales tax. in money, credits, property or other consideration valued in money. is the total cost to the consumer, Selling price RECORD KEEPING excluding discounts allowed and credited, but including freight and transportation charges from retailer to consumer. Selling It is most important to keep neat, thorough, and adequate price includes the cost of the property, materials, labor, or re cords of the school’s sales and receipts. Good records service used or expended, losses, overhead, and profit. will enable you to accurately file the tax returns; determine IMPORTANT : If the price of an item is not established the overall profitability of events and fund-raising activities; (i.e., donation of any kind accepted) sales tax is not and, spend more time on school business and less time on amount is advertised and due. But if the suggested donation government reports and filings. Your business tax records expected, the sales tax base for the taxable sale has been must contain the following documents and information: amount. suggested donation established at the • Gross receipts for the sale, rental or lease of all tangible personal property and all services provided in Kansas The cheerleaders hold a car wash to raise money for (taxable or nontaxable); uniforms. The car wash is free but they are suggesting • allowable deductions claimed on sales tax returns; a donation of $5 per car. Amounts collected at the car 18

19 the buyer is a retailer—it does not certify the purchase shows • cost of all inventory, equipment and fixtures; is exempt from tax. all exemption certificates; and, • • a true, complete inventory taken at least once a year. e ompleTing an c eRTificaTe c xempTion For sales and use tax purposes you must keep these Follow the following three rules when completing any for your current year of business and three prior records exemption certificate. years. Some records (i.e., the purchase price of equipment 1) Print or type all information, except for the authorized and fixtures) must be kept longer for federal tax purposes. must be signature. The information on the certificate legible both to you and to our auditors. Do not print a EXEMPTION CERTIFICATES signature on paper forms, although it is often helpful to print or type the name below the signature. (A signature An exemption certificate is a document that shows why is not required on an electronic exemption certificate.) sales or use tax was not charged on a retail sale of goods 2) in all the blanks. A certificate is complete only when Fill or taxable services. The buyer furnishes or completes the all the information is provided. If there is a blank on the exemption certificate. The seller keeps the certificate on file it must be filled in. Addresses must include the street form, with other sales tax records. When the appropriate certificate is or PO Box, city, state, and zip code. used, and all the blanks are accurately filled out, the certificate may be accepted by a retailer. hen the certificate requires a tax registration number, be W exemption certificate sure your customer provides it. An As a buyer, exempt on most of its purchases, schools should is not complete unless the customer supplies the proper be proactive in furnishing a completed exemption certificate to registration number(s). its vendors and service providers. For more information about all sales tax exemptions currently provided in Kansas law, the 3) Give specific descriptions. Be as precise as possible exemption certificates to use, and penalties for misuse, obtain when descri bing the property or services purchased. a copy of , Kansas Exemption Certificates . Pub. KS-1520 You may use an itemized list, refer to an itemized invoice number, or at the very least provide a general description accept a copy of a customer’s CAUTION : Do not of the items. When describing a business activity, include sales tax registration certificate instead of an the principal product(s) sold or manufactured. exemption certificate. The registration certificate TAXABLE SALES BY SCHOOLS AND EDUCATIONAL INSTITUTIONS The following is a representative, but not all-inclusive, list of the types of sales by schools and educational institutions which are generally subject to sales tax. The examples illustrate the three general categories of taxable transactions: 1) retail sale, rental or lease of tangible personal property; 2) providing taxable services; and, 3) sale of admissions to any place providing amusement, entertainment or recreation. If you are engaged in any of these activities (there is no required minimum amount of sales or tax due), you must register with the Department of Revenue to collect sales tax from your students and other retail customers and then report and pay it to on a regular basis. Retailer Responsibilities For information about your responsibilities as a retailer, see , herein. Graduation gown rentals Admissions (tickets) to school School supply kits RETA IL SALE OF GOODS AND events, including basketball ME RCHANDISE (includes renting/ Shop & art projects Graduation items 1 games, carnivals, concerts, leasing property) (announcements, charms, Sporting goods, shoes, sports dances, football games, mugs, robes, tassels, etc.) Athletic equipment and shoes equipment, etc. fun nights, movies, plays, Health supplies Bake sales, doughnuts Storage sheds special events, swim meets, Home economics projects Balloons Tote bags track meets, wrestling meets Jewelry Books, workbooks and Towel rentals and other sporting events, manuals (obsolete & others) etc. Lock rentals (separate from Uniforms Class jewelry, pictures and locker rental) Admission to amusement Upholstery sales and repairs rings (if tax is not collected parks or rides, museums and Magazine subscriptions Vending machine sales (if and remitted by the firm planetariums Meals (if open to the general machine is owned by the selling the merchandise) Admission to fund-raising public) school) Clothing (t-shirts, etc.) events including auctions, Musical instrument rentals Yearbooks Concession sales (candy, hot chili suppers, haunted Newspapers and periodicals and cold drinks, ice cream, AXABLE SER VICES PROVIDING T houses, home tours, and golf 2 Party food items nachos, popcorn, etc.) or tennis tournaments Auto and truck repair Printing and duplicating Corsages, flowers and plants L yceum tickets to lectures and Car washes charges Family and individual portraits other public programs Repair of tangible personal Reproduction of printed Fireworks Teacher or student banquets property materials Food and beverages (receipts are exempt if the ehicle body work V School pictures banquet is held at an outside Freight or delivery charges ADMISSIONS/TICKETS restaurant which charges School supplies (pencils, (when included in cost of the tax) Activity tickets paper , notebooks) taxable items) 1 Sales of items in this category are exempt when sold by a nonprofit youth development organization, by a PTA, a PTO, or by others on behalf of a PTA or PTO. However, these entities must still collect tax when providing taxable services or selling admissions. 2 Schools and universities must charge sales tax on these admissions. Only political subdivisions (school districts and cities) are exempt from collecting sales , herein. tax on fees charged to participate in sports. See Golf Courses 19

20 Retailers in other states that do not have a physical presence in Kansas are not required to collect Kansas sales or use tax. OTHER KANSAS TAXES Your technical college orders building materials from Nebraska. The state and local sales and use tax rate in your city is 6.5%. These supplies will be used in a home being built by your carpentry and mechanical contractor COMPENSATING USE TAXES classes that will be sold as real property. The following situations show various tax treatments for this type of sale. Throughout this guide we have referred to sales and SITUATION 1: You pick up the items in Nebraska. Since the use tax. When an item is taxable or exempt, it applies to sale took place in Nebraska, you will pay Nebraska sales tax if both the application of sales and of use tax. The purpose of Nebraska imposes tax on these items. The Nebraska state and compensating use tax is to protect Kansas businesses from local sales tax rate is 6%. As a Kansas consumer, you will owe unfair competition with retailers in other states. There are the difference between the combined rates (6.5% - 6% = .5%) two types of use tax — Consumers’ Compensating Use and to Kansas as consumers’ compensating use tax. Retailers’ Compensating Use. SITUATION 2: The Nebraska retailer delivers the items to your retailer Kansas school. As a retailer delivering into Kansas, the ompensaTing u onsumeRs se T ax c ’ c be registered to collect Kansas retailers’ compensating should The consumer’s use tax is due when Kansas residents use tax of 6.5% on this sale, and will add this tax to the total (individuals or businesses) buy goods or merchandise for their invoice amount (cost of items plus any delivery charge). use or consumption in Kansas from vendors in other states SITUATION 3: The Nebraska retailer ships the items to your Kansas c ollege by common carrier (UPS, freight company, etc.). on which a state and local sales tax equal to the Kansas rate Retailers shipping into Kansas do not have to register to collect has not been paid. The Kansas use tax rate is the same as the Retailers’ compensating use tax. Therefore, as a Kansas the Kansas state and local sales tax rate in effect where the consumer you will owe Consumers’ compensating use tax of item is used, stored or consumed. If the state and local sales 6.5% on the total cost, including delivery charge. tax paid in another state is less than the Kansas state and More information about compensating use taxes can be local sales rate, the difference is due to Kansas. , Kansas Sales and Compensating Use Pub. KS-1510 found in school’s exemption from sales tax also applies to the A Tax. Rules that govern which local tax to apply to a sale are refore, only the items taxable compensating use tax; the , Sales and Use Tax Sourcing Rules. To in our Notice 03-04 when purchased in Kansas by a school are subject to use How to Register, herein. obtain a use tax reporting number, see tax when purchased in another state by a Kansas school. A common example is equipment and furniture for dormitories or WITHHOLDING TAX residence halls. If purchased from a Kansas vendor, you must pay state and local Kansas sales tax on them; if purchased This tax is deducted by employers and payors from the from a vendor in another state, you will owe state and local wages and other taxable payments made to employees and Kansas use tax on them. The state and local sales or use tax to help pre-pay the income tax liability of that individual. payees ) rate is determined by where you take delivery (the destination Generally, you are required to withhold Kansas income tax of the items. from a payment if federal withholding is required. Withholding You want to buy a desk/chair set for a dorm room at is also required on certain taxable non-wage payments. For your college. The sales and use tax rate in your city more information see , A Guide to Kansas Pub. KW-100 is 7.8%. After shopping around your find the desk/ Withholding Tax. chair set you want at three different places. The following situations show how tax is applied in each case. YOUR FILE AND SITUATION 1: You buy the desk/chair set from a retailer in your city for $85 each (delivery and set-up is free). The cost is PAY OPTIONS . total cost of $91.63 $85 plus 7.8% sales tax of $6.63, for a : You go to another city in Kansas and find the SITUATION 2 red, by law, to submit qui Kansas businesses are re same set for $82.50 plus $5 shipping. This purchase will cost Retailers’ Sales, Compensating Use, and Withholding sales tax (the rate in effect where you take $87.50 plus 7.8% and there are several electronic returns electronically Tax . total cost of $94.33 delivery) of $6.83; for a filing solutions available (see next page). SITUATION 3: An Oklahoma vendor has the same desk/chair Most businesses choose to file and pay online through cost you a set for $70 plus $10 shipping. This purchase will the KDOR Customer Service Center (KCSC) . To use this total of $86.24 – $80 plus 7.8% use tax of $6.24 (the rate in method of filing, simply go to and log into the effect where delivery is taken). KSCS . Once you create a user login ID and select a password, ompensaTing se R ax T u eTaileRs ’ c Each tax account you can attach your business tax accounts. that only needs to be entered has a unique access code Retailers’ use tax is collected by retailers in other states once. This access code binds your account to your login ID. who are registered with the Kansas Department of Revenue For future filings, you simply log into your account using your to collect it from their Kansas customers. Retailers in other self-selected user login and password. A history of all returns states are required to register to collect this use tax if they filed or payments made will be retained in the KCSC. have a physical presence in Kansas (retail store, warehouse, If you prefer a telephone option, you may wish to try delivery into Kansas, etc.), or they have voluntarily registered lows you to file online option, al TeleFile . This option, like the to collect the tax as a convenience to their Kansas customers. 20

21 ) that is available on our website. EF-101 form ( authorization returns and make payments for several tax accounts with an access code. TeleFile requires that you use your access Credit card payments are also accepted through third-party ANNUAL FILERS code each time you file or make payment. . isit our website for a current list of vendors vendors. V REPORTING ZERO SALES: You may use your touch-tone Our electronic filing methods are simple, safe, and FREE telephone to file your annual multi-jurisdiction sales and/or . y, 7 days a week available 24 hours a da and conveniently use tax “zero-sales” returns. You also receive immediate confirmation that your return is Electronic tax payments must settle on or before the filed. Refer to your tax type in the table on the next page to KCSC due date. Using the , you can have your tax payment find the electronic filing and payment options available to you . electronically debited from your bank account (ACH Debit) If you need assistance with your access code email us at may initiate your tax payment through your bank or you kdor_ e [email protected] or call 785-368-8222. (ACH Credit). Thi ompleted s payment method requires a c AY OPTIONS ELECTRONIC FILE and P For assistance with your tax return filing electronically, contact Electronic Services staff payment our or making your at [email protected] 785-296-6993; or you may email Electronic Services at: kdor_ ELECTRONIC FORMS PROGRAM DESCRIPTION GETTING STARTED REQUIREMENTS OPTIONS ACCEPTED Sales and Compensating Use Tax • Go to and sign into the KDOR • Internet • ST ONLINE Use the KDOR Customer Service Center (KCSC) -16 access Customer Service Center to file single and multi-jurisdiction sales and use tax . • ST-36 returns. • Access Create a user login and a password. • • CT-9U Code(s) KCSC allows filers to upload jurisdictions and The • Contact the Kansas Department of Revenue for • CT-10U • EIN tax payments directly into returns. Users can also your access code. opt to retain jurisdiction information from previous • EF-101 form • Connect your tax account to your login and begin (ACH Credit returns into their current return; saving time and filing. Payments) improving accuracy. BY PHONE • Complete a TeleFile worksheet (download it • Touch-tone • -16 single system can be used to file The TeleFile from our website or make copies of your current telephone jurisdiction returns. It may also be used for annual 877-317-5639 With zero worksheet for filing future periods). multi-jurisdictions and zero tax to filers with • TeleFile sales: • Contact the Kansas Department of Revenue for report. Using a touch-tone phone, tax information worksheet • ST-36 your access code. is entered from a completed worksheet into the • Access • Call 1-877-317-5639 and use your access code TeleFile system. Your assigned access code and • CT-9U Code(s) and EIN to access the eleFile system. Using T federal EIN remains the same for each filing period. • CT-10U • EIN the keypads on a touch-tone phone, enter the information from your worksheet. Withholding Tax Internet • KW-5 Deposit Reports can be made using the and sign into the KDOR • Go to ONLINE • KW-3 access KDOR Customer Service Center (KCSC) . After Customer Service Center. • KW-5 connecting to your withholding account, click the • Access • Create a user login and a password. • W- 2 “Make an EFT Payment” link to complete your filing Code(s) Contact the Kansas Department of Revenue for • • 1099 KCSC and make payment. The also allows you to • EIN your access code. , Annual Withholding Tax return, and file your KW-3 • EF-101 form • Connect your tax account to your login and begin W-2/1099 your , Withholding Reports, electronically. (ACH Credit filing. , Authorization for Electronic Funds A Form EF-101 Payments) • Go online and complete a Form EF-101 (ACH Transfer, must be completed for ACH Credit before Credit payers only) using the EFT payment method. This form, for ACH Credit payers only, is available on our website. PHONE A return with payment can be made through KW-5 BY • KW-5 • Touch-tone . Form EF-101 • Go online and complete a telephone • Contact the Kansas Department of Revenue for 877-317-5639 the EFT payments telephone system. your access code. • Access Code(s) • Call 1-877-600-5640 and use your access code and federal EIN to access the EFT Payment • EIN system. Using the keypads on your touch-tone • EF-101 form phone, follow the phone prompts to complete (ACH Credit payment and submit your return. Payments) ACH Debit: Kansas Department of Revenue debits the tax payment from your bank account. You initiate a tax payment through your bank. ACH Credit: 21

22 based is not altered by the Legislature, changed by a court decision, or the ruling itself modified or rescinded by the ADDITIONAL Department of Revenue. INFORMATION You should not rely on a verbal opinion from the Department specifically addressed in of Revenue regarding taxability not the law. When an issue arises in your business that is not TAX ASSISTANCE directly addressed in the law, document the problem in writing and request a Private Letter Ruling or an Opinion Letter from When there is a question not answered in this publication, the Department of Revenue. Fax or mail your request for a contact the Department of Revenue. Do not guess. Clarification written ruling to: of whether a purchase or sale is taxable or exempt will save Tax Policy Group you time in dealing with the issue in the future. Resolving Kansas Department of Revenue issues of taxability could also save you money; you will be PO Box 3506 taking full advantage of the exemptions available and avoiding Topeka, KS 66601-3506 costly sales or use tax deficiencies on taxable purchases. Fax: 785-296-7928 Many business questions can be answered by the customer You will receive a written ruling within 30 days after your representatives in our Tax Assistance Center in Topeka. (and any additional information necessary for the request However, like many businesses, the Department of Revenue ruling) is received. Private letter rulings are published in ed answering system to direct incoming uses an automat our Policy Information Library (PIL), but the letters have phone calls to the appropriate area. See back cover for the been “scrubbed” to protect the privacy of the taxpayer—any address and phone numbers of our assistance center. information identifying the taxpayer, such as name, address, product, etc., is blanked out. WEBSITE – CAUTION: Although published in our PIL, a private letter ruling is limited to the requesting taxpayer and Our website contains information about all aspects of the that taxpayer’s specific factual situation. It cannot be Kansas Department of Revenue. Forms and publications, relied upon or cited by any other person. exemption certificates, and information about all the taxes administered are published here. Each division of the KEY STATUTES AND REGULATIONS Department of Revenue is represented. preparing this guide we cited the following laws and In POLICY INFORMATION LIBRARY (PIL) PIL regulations. The full text of these are a part of the on our website and are also available in libraries throughout the state. Another service available to taxpayers is an online library K.S.A. 8-126 - Vehicle definitions ) for all taxes administered by the of policy information ( PIL K.S.A. 72-1111 - School defined Kansas Department of Revenue. The PIL contains Kansas K.S.A. 79-3401 - Motor Fuel Tax statutes and regulations, Revenue Notices, Revenue Rulings K.S.A. 79-3602(r) - Educational Institution defined and other written advice issued by the Department of Revenue. K.S.A. 79-3606(c) - Sales tax exemption Opinion Letters and Private Letter Rulings are also included. K.S.A. 79-3606(d) - Construction projects K.S.A. 79-3606(h) - Nonsectarian textbooks ulings R w RiTTen K.S.A. 79-3606(ii) - Nonprofit nonsectarian multidiscipline At times there are unique situations that may require an youth development organizations interpretation or clarification based upon the law, regulations, K.S.A. 79-3606(yy) - PTA/PTO exemption and specific facts of the case. To assist you in understanding K.S.A. 79-5117 - Vehicle Rental Excise Tax how the law applies to your business, the Department of K.A.R. 92-19-21 - Meals & Drinks Revenue issues three types of written advice: revenue notices, K.A.R. 92-19-22 - Admissions revenue rulings, and private letter rulings. This written advice K.A.R. 92-19-66e - Project Exemptions is binding on the Department of Revenue and may be relied K.A.R. 92-19-67 - Sales by not-for-profit entities K.A.R. 92-19-75 - Educational institutions upon as long as the statute or regulation on which they are 22

23 Kansas Department of Revenue Sales and Use Tax Entity Exemption Certificate The Kansas Department of Revenue certifies this entity is exempt below. from paying Kansas sales and/or compensating use tax as stated Kansas Exemption Number: Expiration Da te: The tax-exempt entity understands and agrees that if the tangible personal property and/or service are used other than as state d, or for any purpose uthorized use of this that is not exempt from the tax, the tax exempt entity is liabl e for the state and local sales or use tax. The unlawful or una The certificate is issued for the sole use of the exempt entity as named certificate is expressly prohibited, punishable by fine and/or imprisonment. EXEMPT ENTITY INFORMATION: Authorization and scope: • K.S.A 79-3606(yy) - Parent Teacher Associations or Organizations. • Exemption applies to all direct purchase, rental and lease of tangible personal property and services. Limitations: • Only direct purchases are exempt through the use of this certificate • pay Kansas tificate (PEC). Therefore, contractors and subcontractors must This entity is NOT authorized to obtain a Project Exemption Cer le labor services sales or compensating use tax on materials purchased when contracting with the above identified entity. Furthermore, all taxab performed for the above identified entity by contractors and subcontractors are subject to Kansas sales tax. ______________________________________________________ _______________________ Federal ID Number Authorized Signature (Officer, Office Manager or Administrator) Exempt Entity ___________________ ________________________________ _______________________ _____________ Printed Name Date RETAILER INFORMATION: • To qualify for exemption, the certificate must have an expiration date in the future and be signed by an authorized individual. • Payment must be made by the entity on their checking account or on a credit/debit card issued to the entity. Acceptance of cas h, personal checks, or personal credit/debit cards is not allowed for a tax exempt purchase. This entity is NOT authorized to obtain a • Project Exemption Certificate (PEC). • The entity must have a Kansas exemption certificate. Exemption certificates issued by other states are not valid in Kansas. purchase. Retailers • Retailers are required to maintain a copy of the purchaser’s certificate in their records for at least 3 years from the date of must maintain a current certificate on file. Selling tax exempt goods or services that are not exempt by statute may result in the assessment of tax. • urpose. • A completed certificate may be used as a blanket exemption for future purchases when of the same type and for the same exempt p ____________________________________________________________________________________________________ Seller’s name and address ____________________________________________________________________________________________________ Description of goods and/or services purchased and Publication Kansas Sales Tax and Compensating Use Tax For additional information on Kansas sales and use taxes see Publication KS-1510, KS-1520, , located at: Kansas Exemption Certificates Questions would be directed to Taxpayer Assistance at 785-368-8222. PR-78PT (07/14)

24 REQUEST FOR PROJECT EXEMPTION CERTIFICATE ________________________ Kansas Department of Revenue Date Tax Policy Group 915 SW Harrison St. Telephone: 785-296-3041 Topeka, KS 66612-1588 Fax: 785-296-7928 It is requested that a Certificate of Exemption be issued to the Petitioning Authority for the following described project if it is determined by the Department of Revenue that the proposed project qualifies for exemption from sales tax under the provisions of K.S.A. 79-3606(d) – public or private nonprofit hospital, elementary or secondary school, educational institution, political subdivisions of the state of Kansas and state correctional institutions; K.S.A. 79-3606(e) – United States Government, its agencies or instrumentalities; K.S.A. 79-3606(xx) – 501(c)(3) nonprofit zoo; K.S.A. 79-3606(aaa) – 501(c)(3) religious organization; K.S.A. 79-3606(ccc) – 501(c)(3) primary care clinic; K.S.A. 79-3606(iii) non-profit food distribution center; K.S.A. 79-3606(qqq) – TLC for Children and Families, Inc.; K.S.A. 79-3606(sss) non-profit charitable family providers; K.S.A. 79-3606(ttt) museum within a designated qualified hometown or K.S.A. 79-3606(uuu) Kansas Children’s Service League. ______________________________________________________________________________________________________________________________________________________________ (A) Type of project: Describe work to be done 1. Present use of facility: _____________________________________________________________________________________________________________________________________________ 2. Proposed use of facility after project: ______________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________________________________________ (B) Project location: Building Number, Street Address, City, State, and Zip Code (C) Is this project being constructed as part of a business enterprise whose sales are subject to sales tax (e.g., municipal o o Yes water, electric or gas companies)? No o o No Yes (D) Is the Petitioning Authority authorized to levy ad valorem taxes on tangible property? o o (E) 1. Is this project being totally financed by industrial revenue bonds? Yes No o o 2. Is this project being partially financed by industrial revenue bonds? Yes No 3. Amount of bonds being issued for project: _______________________________________________________________________________________________________________ Yes you answered “ If enclose a copy ” to (E)1 or (E)2, you must complete the agreement on the back of this form and . of the letter of intent or resolution of intent to issue bonds )1 or (E you answered “ No ” to (E ? )2, how is the project being financed (explain type of tax, bonds, etc.) If _______________________________________________________________________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________________ (F) Name of claimant owner of project: _______________________________________ _______________________________________________________ (G) Starting date: (H) Estimated completion date: ( I ) Estimated project cost: (J) List names and addresses of prime contractors: ________________________________________ (K) Contract date: __________________________________________________________________________________________ ____________________________________________________________________ (L) Contract number: __________________________________________________________________________________________ _________________________________________________ (M) Project number: ___________________________________________________ __________________________________________________________________________________________ ______________________________________________________________________________________________ _________________________________________________________________________________________ Mailing Address Petitioning Authority ______________________________________________________________________________________________ _________________________________________________________________________________________ Signature of Authorized Representative City, State & Zip Code ________________________________________________________ _______________________________ ___________________________________________________ ___________________________________ Type or Print Name Title Tax Exempt Entity No. Phone Number PR-76 Rev. 5-17

25 ONLY COMPLETE THIS PAGE IF YOU ANSWERED YES TO LINE (E) ON PAGE 1. _______________________________________________________________________________________________ This agreement is made and entered into between and by the _______________________________________________________________________________________________________ (name of political subdivision), hereinafter referred to as (name of beneficiary of industrial revenue bond proceeds), Exempt Entity; and ________________________________________________________________________ hereinafter referred to as Beneficiary. all parties to this agreement that the construction project for which the request for an exemption It is hereby agreed by certificate is being made would be exempt from sales tax solely due to the fact that it is being financed by industrial revenue bonds. It shall be the duty of the Exempt Entity to notify the Kansas Department of Revenue when the industrial revenue bonds have actually been issued. Whereas, the Kansas Department of Revenue deems it necessary to ensure that sales or compensating tax is paid should by industrial revenue bonds, it is hereby further agreed by the Beneficiary that if the industrial the project not be financed revenue bonds have not been issued by the time the project is completed then the Beneficiary will remit to the Kansas Department of Revenue the sales or compensating tax and applicable interest on tax which is due based upon the cost of tangible personal property or services used or consumed in the construction of the project. It is agreed that the Secretary of Revenue shall determine when the project has been completed. The Secretary of Revenue shall have the right to demand from the Beneficiary payment of the sales and compensating tax and applicable interest due the state should the Kansas Department of Revenue not receive such payment within thirty (30) days after the project has been completed. Any and all notices required herein shall be mailed and addressed as follows: A. Notices to the Departmen t of Revenue shall be addressed to: Secretary of Revenue, Kansas Department of Revenue, 915 SW Harrison St., Topeka, Kansas 66612-1588 B. Notices to the Exempt Entity shall be addressed to: _________________________________________________________________________________________________________ __________________________________________________________________________________________________________________________________________________________________________________________ C. Notices to the Beneficiary shall be addressed to: _____________________________________________________________________________________________________________ __________________________________________________________________________________________________________________________________________________________________________________________ This agreement shall be binding upon all parties hereto and any and all their successors. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by persons authorized to do so lawfully and with full corporate authority. BENEFICIARY OF INDUSTRIAL REVENUE BOND PROCEEDS POLITICAL SUBDIVISION __________________________________________________________________________________________ ___________________________________________________________________________________________ Authorized Signature Authorized Signature __________________________________________________________________________________________ ___________________________________________________________________________________________ Type or Print Name and Title Type or Print Name and Title _________________________________________________________________________ DATED: DATED: _ ____________________________________________________________________________

26 Kansas Department of Revenue Tax Policy Group Telephone: 785-296-3081 915 SW Harrison St. Topeka, KS 66612-1588 FAX: 785-296-7928 STATE OF KANSAS PROJECT COMPLETION CERTIFICATION ____________________________________________________________________________________________ _ TO: Name of Entity to whom Project Exemption Certificate was Issued ________________________________________________________________________________________________ Zip Code Street Address State City This is to certify, to the best of my knowledge and belief, that all materials purchased under Exemption Certificate Number , issued by the Kansas Department of Revenue, were incorporated into _______________________________________ exemption was issued and were entitled to an exemption pursuant to K.S.A. 79-3606(d), the building or project for which the (e) or (cc), as amended. ________________________________________________________________________________________________ Contractor / Subcontractor ________________________________________________________________________________________________ P.O. Box and/or Street Number and Name ________________________________________________________________________________________________ Zip Code Street Address City State __________________________________ __________________________________________________________ Date Signature and Title of Authorized Representative INSTRUCTIONS Upon completion of a tax exempt project, the contractor must furnish this certification to the taxpayer for which the work was performed. A copy of this certification must also be forwarded to the address shown at the top of this form. All invoices must be retained by the contractor for a period of five years and are subject to audit by the Kansas Department of Revenue. PR-77 Rev. 11-16

27 KANSAS DEPARTMENT OF REVENUE AGENT ISSUED PROJECT EXEMPTION CERTIFICATE PERMIT TO PURCHASE TANGIBLE PERSONAL PRO PERTY OR SERVICES WITHOUT PAYMENT OF SALES TAX, LOCAL SALES TAX, OR COMPENSATING TAX The undersi gned purchaser certifies that the sale of tangible personal property by of endor Name) (V (City, State) is exempt from the Kansas Sales and Compensating (Use) Tax pursuant to K.S.A. 79-3606(d) or (e) of the Retailers' Sales Tax Act. Pursuant to the above section, the exemption certificate number below must appear on the invoice covering such sale. Date Purchaser (Contractor/Subcontractor) Address City, State SAMPLE OT VALID ON PURCHASES MADE PRIOR TO April 1, 2006 : N OT VALID ON PURCHASES MADE AFTER : July 31, 2006 N Agent Status Number: 123-01 This entity has been granted agent status pursuant to K.S.A. 79-3606(d) or (e): ABC Elementary Project number (if used): 1234567 Location of project (city or county): 120 S. Main, Anytown, KS Description of project: Construction of a utility building INSTRUCTIONS EXEMPT ORGANIZATION-A copy of this certificate should be furnished to each contractor or subcontractor who will be purchasing tangible personal property for use on the project. CONTRACTOR/SUBCONTRACTOR-Contractors and subcontractors working on the exempt project must furnish a completed copy of this exemption certificate to each retailer from whom you are buying tangible personal property or services for this project, or from whom you are renting or leasing construction machinery for use on the project. RETAILER-Retailers must obtain a completed copy of this exemption certificate from each contractor or subcontractor the project, or renting or leasing construction machinery for making purchases of tangible personal property or services for use on the project. Important Note: All invoices and exemption certificates for this project must be maintained by all parties for a period of five years and are subject to audit by the Kansas Department of Revenue. PR-74a (Rev. 12-05)

28 KANSAS DEPARTMENT OF REVENUE RESALE EXEMPTION CERTIFICATE The undersigned purchaser certifies that the tangible personal property or service purchased from: _________________________________________________________________________________________________ : Seller Business Name Address: _________________________________________________________________________________________________ City Zip + 4 State Street, RR, or P. O. Box will be resold by me in the form of tangible personal property or repair service. I hereby certify that I hold valid Kansas sales tax registration number , ______________________ __________________________ and I am in the business of selling (May attach a copy of registration certificate) _______________________________________________________________________________________________ (Description of product(s) sold; food clothing, furniture, etc.) Description of tangible personal property or services purchased : ________________________________________ ________________________________________________________________________________________________________________________________________ I understand and agree that if the items purchased with this certificate are used for any purpose other than retention, demonstration, or display while being held for sale in the regular course of business, I am required to report and pay the sale s tax, based upon the purchase price of the items. Purchaser : _________________________________________________________________________________________________ Name of Kansas Retailer Address: _______________________________________________________________________________________ State Street, RR, or P. O. Box City Zip + 4 Signature: ______________________________________________________________ Date : ___________________ THIS CERTIFICATE MUST BE COMPLETED IN ITS ENTIRETY. WHO MAY USE THIS CERTIFICATE? Only those businesses and organizations that are registered to collect Kansas sales tax and provide their Kansas sales tax registration number on this form may use it to purchase inventory without tax. For additional information see Publication KS-1520, Kansas Exemption Certificates . Nonprofit groups or organizations exempt by law from collecting tax on their retail sales of tangible personal property (such a s a PTA or a nonprofit youth development organization) should use the exemption certificate issued to it by the Kansas Department of Revenue when buying items for resale. Wholesalers and buyers from other states not registered in Kansas should use the Multi-Jurisdiction Exemption Certificate, Form ST -28M, to ax nexus with Kan purchase their inventory. HOWEVER, if the inventory item purchased by an out-of-state retailer who has sales t sas is drop shipped to a Kansas location, the out-of-state retailer must provide to the third party vendor a Kansas sales tax registration number, either on this certificate or the Multi-Jurisdiction Exemption Certificate, for the sale to be exempt. If the out-of-state retailer DOES NOT have sales tax nexus with Kansas, it may provide the third party vendor a resale exemption certificate evidencing qualification for a resale e regardless xemption, of the state in which the retailer is registered for sales tax. Contractors, subcontractors, or repairmen may not use this certificate to purchase their materials, parts, or tools. Retailer/Contractors should use a Retailer/Contractor Exemption Certificate, Form ST-28W, to purchase their resale inventory. WHA T PURCHASES ARE EXEMPT? Only goods or merchandise intended for resale (inventory) are exempt. Tools, equipment, fixtures, supplies, and other items purchased for business or personal use are TAXABLE since the buyer is the final consumer of the prope rty . The items purchased with this certificate must correspond to the type of business buying them. For example, a retail clothing s tore may only reasonably purchase items of wearing apparel and accessories with this certificate. All other kinds of items are not usually so ld by a clothing store to their customers and, therefore, cannot be purchased with this certificate. LABOR SERVICES. This certificate applies ONL Y to items of tangible personal property. A contractor may not use an exemption certificate to purchase the labor services of another contractor or subcontractor. Taxable labor services performed by a contractor can ONLY b e purchased without tax with a Project Exemption Certificate issued by the department or its authorized agent. RETAINING THIS CERTIFICATE: Sellers should retain a completed copy of this certificate in their records for at least three years from the ains a completed exemption certificate from a purchaser with which the seller has date of sale. A seller is relieved of liability for the tax if it obt a recurring business relationship. A certificate need not be renewed or updated when there is a recurring business relationship between the buyer and seller. A recurring business relationship exists when a period of no more than 12 months elapses between sales transa ctions. ST-28A (Rev. 6-09)

29 Kansas Department of Revenue Sales and Use Tax Entity Exemption Certificate The Kansas Department of Revenue certifies this entity is exempt below. from paying Kansas sales and/or compensating use tax as stated Kansas Exemption Number: Expiration Da te: The tax-exempt entity understands and agrees that if the tangible personal property and/or service are used other than as state d, or for any purpose e for the state and local sales or use tax. The unlawful or una uthorized use of this that is not exempt from the tax, the tax exempt entity is liabl certificate is expressly prohibited, punishable by fine and/or imprisonment. The certificate is issued for the sole use of the exempt entity as named. EXEMPT ENTITY INFORMATION: Authorization and scope: K.S.A 79-3606(c) & (d) - Public or Private Elementary or Secondary Schools or Nonprofit Educational Institutions. • Exemption applies to all direct purchase, rental or lease of tangible personal property and services, except purchases of goods for human • habitation and indirect purchases by a contractor for a real property project. Limitations: Only direct purchases are exempt through the use of this certificate. • This entity qualifies for exemption on indirect purchases by a c ontractor through the issuance of a Project Exemption Certifica te (PEC). PECs • should be obtained from the department prior to the start of the project. Apply on-line at KDOR’s web site: • This exemption does not apply to the purchase of any construction machinery, equipment or tools used in the constructing, maint aining, repairing, enlarging, furnishing or remodeling facilities for the exempt entity. • Subject to sales tax are purchases of capital goods used for human habitation (i.e. residential housing and dormitories) to inc lude materials for construction, remodeling or repair and furnishings such as beds, curtains, desks and furniture. Labor services on dormitories are exempt as residential construction. _______________________ ______________________________________________________ Exempt Entity Authorized Signature (Officer, Office Manager or Administrator) Federal ID Number _____________ ___________________ _______________________ ________________________________ Date Printed Name RETAILER INFORMATION: • To qualify for exemption, the certificate must have an expiration date in the future and be signed by an authorized individual. • Payment must be made by the entity on their checking account or on a credit/debit card issued to the entity. Acceptance of cas h, personal checks, or personal credit/debit cards is not allowed for a tax exempt purchase. The entity must have a Kansas exemption certificate. Exemption certificates issued by other states are not valid in Kansas. • • Retailers are required to maintain a copy of the purchaser’s certificate in their records for at least 3 years from the date of purchase. Retailers must maintain a current certificate on file. • Selling tax exempt goods or services that are not exempt by statute may result in the assessment of tax. purpose. • A completed certificate may be used as a blanket exemption for future purchases when of the same type and for the same exempt ____________________________________________________________________________________________________ Seller’s name and address ____________________________________________________________________________________________________ Description of goods and/or services purchased For additional information on Kansas sales and use taxes see Publication KS-1510, Kansas Sales Tax and Compensating Use Tax and Publication KS-1520, Kansas Exemption Certificates , located at: Questions would be directed to Taxpayer Assistance at 785-368-8222. PR-78ED (07/09)

30 Kansas Department of Revenue Sales and Use Tax Entity Exemption Certificate from paying Kansas sales and/or compensating use tax as stated The Kansas Department of Revenue certifies this entity is exempt below. te: Expiration Da ber> Kansas Exemption Number: The tax-exempt entity understands and agrees that if the tangible personal property and/or service are used other than as state d, or for any purpose uthorized use of this that is not exempt from the tax, the tax exempt entity is liabl e for the state and local sales or use tax. The unlawful or una The certificate is issued for the sole use of the exempt entity as named. certificate is expressly prohibited, punishable by fine and/or imprisonment. EXEMPT ENTITY INFORMATION: Authorization and scope: cities, counties, townships, sp • K.S.A 79-3606(b) & (d) - State of Kansas, political subdivisions of the state of Kansas (Kansas ecial districts), nonprofit hospitals, and blood, tissue, or organ banks. for human Exemption applies to all direct purchase, rental or lease of tangible personal property and services, except purchases of goods • property project habitation or purchases made for any business activity specifically taxable, and indirect purchases by a contractor for a real except as noted below. Limitations: • Only direct purchases are exempt through the use of this certificate. • Except for state government, this entity qualifies for exemption on indirect purchases by a contr actor through the issuance of a Project site: State of Kansas agency allowed a PEC is a The only Exemption Certificate (PEC). Apply on-line at KDOR’s web as co Kans o sal nstitution. Indi rect purchases by al l o ther rrectional i state agencies are subject t es tax. This exemption does not apply to the purchase of any construction machinery, equipment or tools used in the constructing, maint • aining, repairing, enlarging, furnishing or remodeling facilities for the exempt entity. lude materials for Subject to sales tax are purchases of capital goods used for human habitation (i.e. residential housing and dormitories) to inc • construction, remodeling or repair and furnishings such as beds, curtains, desks and furniture. Labor services on residential housing and dormitories are exempt as residential construction. his includes All purchases of goods and services used in a business that is specifically taxable by the Sales Tax Act are subject to tax. T • operation of a utility, restaurant, and selling of goods or services at retail. ______________________________________________________ Federal ID Number Exempt Entity Authorized Signature (Officer, Office Manager or Administrator) _______________________ ___________________ _____________ ________________________________ Date Printed Name RETAILER INFORMATION: • To qualify for exemption, the certificate must have an expiration date in the future and be signed by an authorized individual. • Payment must be made by the entity on their checking account or on a credit/debit card issued to the entity. Acceptance of cas h, personal checks, or personal credit/debit cards is not allowed for a tax exempt purchase. The entity must have a Kansas exemption certificate. Exemption certificates issued by other states are not valid in Kansas. • Retailers are required to maintain a copy of the purchaser’s certificate in their records for at least 3 years from the date of purchase. Retailers • must maintain a current certificate on file. • Selling tax exempt goods or services that are not exempt by statute may result in the assessment of tax. urpose. • A completed certificate may be used as a blanket exemption for future purchases when of the same type and for the same exempt p ____________________________________________________________________________________________________ Seller’s name and address ____________________________________________________________________________________________________ Description of goods and/or services purchased For additional information on Kansas sales and use taxes see Publication KS-1510, Kansas Sales Tax and Compensating Use Tax and Publication KS-15 20, Kansas Exemption Certificates , located at: Questions would be directed to Taxpayer Assistance at 785-368-8222. PR-78KS (07/14)

31 NOTES 31

32 State of Kansas PARCEL POST Department of Revenue U.S. POSTAGE PO Box 750680 PAID Topeka KS 66675-0680 KANSAS DEPT. OF REVENUE ┐ ┌ └ ┘ TAXPAYER ASSISTANCE This publication is a general guide and will not address every situation. If you have questions or need additional information, please contact taxpayer assistance at the Kansas Department of Revenue. Taxpayer Assistance Center Phone: 785-368-8222 Scott Office Building Fax: 785-291-3614 120 SE 10th Ave PO Box 750680 Topeka KS 66675-0680 Office hours are 8 a.m. to 4:45 p.m., Monday through Friday. PUBLICATIONS Below is a list of publications available on the Kansas Department of Revenue’s website . These publications contain instructions applicable to specific business industries and general information for all business owners. • Publication KS-1216, Kansas Business Tax Application • Publication KS-1500, North American Industry Classification System • Publication KS-1510, Kansas Sales and Compensating Use Tax • Publication KS-1515, Kansas Tax Calendar of Due Dates • Publication KS-1520, Kansas Exemption Certificates • Publication KS-1525, Kansas Sales and Use Tax for Contractors, Subcontractors and Repairmen Publication KS-1526, Kansas Sales and Use Tax for Motor Vehicle Transactions • • Publication KS-1527, Kansas Sales and Use Tax for Kansas Political Subdivisions • Publication KS-1530, Kansas Tire Excise Tax • Publication KS-1540, Kansas Business Taxes For Hotels, Motels and Restaurants • Publication KS-1550, Kansas Sales and Use Tax for the Agricultural Industry • Publication KS-1560, Kansas Tax Guide for Schools and Educational Institutions • Publication KS-1700, Kansas Sales Tax Jurisdiction Code Booklet • KW-100, Kansas Withholding Tax Guide STATE SMALL BUSINESS WORKSHOPS As part of our commitment to provide tax assistance to the business community, Tax Specialists within the Kansas Department of Revenue conduct small business workshops on Kansas taxes at various locations throughout Kansas. Whether you are a new business owner, an existing business owner, or an accountant, these workshops will give you the tools and understanding necessary to make Kansas taxes easier and less time consuming for you. Topics covered include filing and reporting requirements and methods, what is taxable, what is exempt and how to work with the department in collecting and remitting Kansas taxes. For a schedule of our workshops, visit . Pre-registration is required and a fee may be charged by the sponsoring our website Small Business Development Center (SBDC). Your suggestions and comments on this publication are important to us. Please address them to: Taxpayer Education, Kansas Department of Revenue, PO Box 3506, Topeka, KS 66601-3506 or call 785-296-1048.

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