MPE would like to inform and caution Kansas homeschool families about a recent change made by the Kansas Department of Revenue to sales tax exemption eligibility for non-accredited private schools.
According to Ted Smith, general counsel for KDOR, “To benefit from the sales tax exemption, the applicant must apply and receive a sales tax exemption certificate. Upon receipt, the certificate may be used to exempt purchases of tangible personal property or services related to the educational program from sales tax. This exemption applies only to nonsectarian programs and activities and does not extend to the erection, construction, repair, enlargement, or equipment of buildings primarily used for human habitation.” (www.sentinelksmo.org)
We caution families who choose to apply for the exemption certificate to clearly and specifically:
- Read and follow all relevant regulations regarding which purchases are eligible to be tax exempt.
- Document the school-related purpose for the purchase and retain all underlying receipts and invoices associated with disbursements using the sales tax exemption (7 years).
- Separate educational purchases eligible for exemption from personal purchases in a manner that is “above reproach.”
Having a sales tax exemption certificate also subjects you to the potential of sales tax audits just like every other entity.
If that is ever the case (hopefully not!), you should have no problem getting through it if you follow the above advice.
Furthermore, just having a tax break available to you does not mean you should necessarily take it. For instance, hobby losses and home office deductions have consistently been in the top of the IRS’ list of red flags.
Of course, there is not nearly enough history and experience pertaining to this newly added benefit to be able to say this sales tax exemption falls in the same category.
However, our goal is to (1) help you understand what is involved if you do choose to participate and (2) do our part to discourage fraudulent usage and encourage doing things the right way.
We are certain there will be some degree of fraud and abuse, as there always is in sales tax. But as representatives of the homeschool community, our desire is for families to operate with integrity, which in turn prevents and deters potential accusations of fraud by others outside our community.
Related links:
How and where does this exemption apply? Does it apply only at the time the purchase was made (i.e., using the tax exempt certificate), or is it filed at the end of the year when filing state income tax (e.g., Schedule Form K-91, etc.)? I’m just trying to figure out if I should be inputting my expenses while filing my taxes or to utilize this in the coming year and it doesn’t affect how you file your taxes. Thanks.
Hi Paul,
Our goal with this article was to inform homeschoolers that this opportunity exists and to help them think through what might be involved if taken advantage of, at a higher level. For the finer points of implementation, we recommend you consult the KDOR website FAQs we referenced in our article, and with your CPA.
Hope this helps,
Shanxi