Session of 1999
         
HOUSE BILL No. 2552
         
By Committee on Federal and State Affairs
         
3-5
         
  9             AN  ACT authorizing certain nonprofit organizations to conduct raffles;
10             providing for the regulation and taxation of such raffles; amending
11             K.S.A. 1998 Supp. 21-4302 and 79-3606 and repealing the existing
12             sections.
13      
14       Be it enacted by the Legislature of the State of Kansas:
15             New Section  1. (a) Sections 1 through 12 and amendments thereto
16       shall be known as and may be cited as the charitable raffle act.
17             (b) If any provision of the charitable raffle act or the application
18       thereof to any person or circumstances is held unconstitutional or oth-
19       erwise invalid, such unconstitutionality or invalidity shall not affect other
20       provisions or applications of the act which can be given effect without
21       the unconstitutional or invalid provision or application, and, to this end,
22       the provisions of this act are severable.
23             New Sec.  2. As used in this act:
24             (a) "Department" means the department of revenue.
25             (b) "Director" means the director of taxation.
26             (c) "Nonprofit religious organization" means any organization,
27       church, body of communicants, or group, gathered in common member-
28       ship for mutual support and edification in piety, worship, and religious
29       observances, or a society of individuals united for religious purposes at a
30       definite place and of which no part of the net earnings inures to the
31       benefit of any private shareholder or individual member of such organi-
32       zation, and which religious organization maintains an established place of
33       worship within this state and has a regular schedule of services or meet-
34       ings at least on a weekly basis and has been determined by the secretary
35       to be organized and created as a bona fide religious organization and
36       which has been exempted from the payment of federal income taxes as
37       provided by section 501(c)(3) or section 501(d) of the federal internal
38       revenue code of 1986, as amended, or determined to be organized and
39       operated as a bona fide nonprofit religious organization by the secretary.
40             (d) "Nonprofit charitable organization" means any organization
41       which is organized and operated for:
42             (1) The relief of poverty, distress or other condition of public concern
43       within this state; or

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  1             (2) for financially supporting the activities of a charitable organization
  2       as defined in paragraph (1); or
  3             (3) for conferring direct benefits on the community at large; and of
  4       which no part of the net earnings inures to the benefit of any private
  5       shareholder or individual member of such organization and has been de-
  6       termined by the secretary to be organized and operated as a bona fide
  7       charitable organization and which has been exempted from the payment
  8       of federal income taxes as provided by sections 501(c)(3), 501(c)(4),
  9       501(c)(5), 501(c)(6) and 501(c)(7) of the federal internal revenue code of
10       1986, as amended, or determined to be organized and operated as a bona
11       fide nonprofit charitable organization by the secretary.
12             (e) "Nonprofit fraternal organization" means any organization within
13       this state which exists for the common benefit, brotherhood or other
14       interests of its members and is authorized by its written constitution,
15       charter, articles of incorporation or bylaws to engage in a fraternal, civic
16       or service purpose within this state and has been determined by the sec-
17       retary to be organized and operated as a bona fide fraternal organization
18       and which has been exempted from the payment of federal income taxes
19       as provided by section 501(c)(8) or section 501(c)(10) of the federal in-
20       ternal revenue code of 1986, as amended, or determined to be organized
21       and operated as a bona fide nonprofit fraternal organization by the
22       secretary.
23             (f) "Nonprofit educational organization" means any public or private
24       elementary or secondary school or institution of higher education which
25       has been determined by the secretary to be organized and operated as a
26       bona fide educational organization and which has been exempted from
27       the payment of federal income taxes as provided by section 501(c)(3) of
28       the federal internal revenue code of 1986, as amended, or determined to
29       be organized and operated as a bona fide nonprofit educational organi-
30       zation by the secretary.
31             (g) "Nonprofit veterans' organization" means any organization within
32       this state or any branch, lodge, or chapter of a national or state organi-
33       zation within this state, the membership of which consists exclusively of
34       individuals who qualify for membership because they were or are mem-
35       bers of the armed services or forces of the United States, or an auxiliary
36       unit or society of such a nonprofit veterans' organization the membership
37       of which consists exclusively of individuals who were or are members of
38       the armed services or forces of the United States, or are cadets, or are
39       spouses, widows or widowers of individuals who were or are members of
40       the armed services or forces of the United States, and of which no part
41       of the net earnings inures to the benefit of any private shareholder or
42       individual member of such organization, and has been determined by the
43       secretary to be organized and operated as a bona fide veterans' organi-

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  1       zation and which has been exempted from the payment of federal income
  2       taxes as provided by section 501(c)(4) or 501(c)(19) of the federal internal
  3       revenue code of 1986, as amended, or determined to be organized and
  4       operated as a bona fide nonprofit veterans' organization by the secretary.
  5             (h) "Lessor" means the owner, coowner, lessor or sublessor of prem-
  6       ises upon which a licensee is permitted to manage, operate or conduct
  7       raffles, whether or not a written lease has been entered into and submit-
  8       ted to the secretary as required in section 3, and amendments thereto,
  9       and includes all political subdivisions and other public agencies.
10             (i) "Premises" means any room, hall, building, enclosure or outdoor
11       area used for the management, operation or conduct of raffles.
12             (j) "Raffle" means a game managed, operated or conducted by an
13       organization licensed pursuant to the charitable raffle act in which a prize
14       is won by one or more of the persons buying a ticket to participate in
15       such raffle.
16             (k) "Secretary" means the secretary of revenue or the secretary's
17       designee.
18             (l) "Session" means any day on which a raffle is managed, operated
19       or conducted by an organization licensed under the charitable raffle act.
20             (m) "Ticket" means any tangible evidence issued by an organization
21       licensed under the charitable raffle act to prove participation in a raffle.
22             New Sec.  3. (a) Any bona fide nonprofit religious, charitable, frater-
23       nal, educational or veterans' organization desiring to manage, operate or
24       conduct raffles within the state of Kansas may make application for a
25       license therefor in the manner provided by this section. Application for
26       licenses required under the provisions of this act shall be made to the
27       secretary upon forms prescribed by the secretary. The application shall
28       contain:
29             (1) The name and address of the organization;
30             (2) the particular place or location for which a license is desired;
31             (3) a sworn statement verifying that such organization is a bona fide
32       nonprofit religious, charitable, fraternal, educational or veterans' organi-
33       zation authorized to operate within the state of Kansas signed by the
34       presiding officer and secretary of the organization; and
35             (4) such other information as may be required by the secretary.
36             (b) A license shall not be issued to any bona fide nonprofit religious,
37       charitable, fraternal, educational or veterans' organization if any of its
38       officers, directors or officials or persons employed on the premises:
39             (1) Has been convicted of, has pleaded guilty to or pleaded nolo con-
40       tendere to a violation of gambling laws of any state or the gambling laws
41       of the United States, or has forfeited bond to appear in court to answer
42       charges for any such violation, or has been convicted or pleaded guilty or
43       pleaded nolo contendere to the violation of any law of this or any other

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  1       state which is classed as a felony under the laws of such state; or
  2             (2) at the time of application for renewal of a license issued hereunder
  3       would not be eligible for such license upon a first application.
  4             (c) An application for a license required under the provisions of this
  5       act shall be accompanied by a fee of $25. If such organization is to man-
  6       age, operate or conduct raffles on any leased premises, the terms of the
  7       lease shall be reduced to writing and a copy of the lease also shall be
  8       submitted to the secretary with the application. The secretary may ap-
  9       prove or disapprove any such lease. A lease which has been approved by
10       the secretary shall not be amended, modified or renewed in any manner
11       until such amendments, modifications or renewals of such lease have
12       been filed with and approved by the secretary. A lease submitted to the
13       secretary shall not be approved unless:
14             (1) The amount of the rent for the premises is fair and reasonable.
15       The rent charged for any raffle session shall not exceed 50% of the net
16       proceeds for the session or the fair and reasonable rental value deter-
17       mined by the secretary, whichever is less. The rental costs so charged
18       shall be substantiated to the secretary under rules and regulations
19       adopted by the secretary.
20             (2) Any costs additional to the costs under paragraph (1) of this sub-
21       section (c) which are to be borne by the lessee shall reflect the actual
22       costs incurred by the lessor and first shall be substantiated to the secretary
23       under rules and regulations adopted by the secretary.
24             (3) No costs shall be borne by the lessee unless such costs are enu-
25       merated in the lease submitted to the secretary.
26             (d) Each license issued shall expire at midnight on June 30 following
27       its date of issuance. A licensee may hold only one license and that license
28       is valid for only one location. However, any licensee may manage, operate
29       or conduct raffles, not to exceed five days in any one year, at locations
30       other than that specified in the license. If any licensee does manage,
31       operate or conduct raffles under this provision at a location other than
32       that specified in the license, such licensee shall submit a written notifi-
33       cation to the secretary, at least three days prior to managing, operating
34       or conducting raffles at such other location. No organization shall be
35       issued a license to manage, operate or conduct raffles at any location
36       outside the county within which such organization is located as reported
37       in its application for licensure submitted pursuant to subsection (a). No
38       licensee shall manage, operate or conduct raffles at any location outside
39       the county within which such licensee is located. Licenses issued under
40       the provisions of this act shall not be transferred or assignable. If any
41       licensed organization changes any of its officers, directors or officials dur-
42       ing the term of the license, such organization shall report the names and
43       addresses of such individuals to the secretary immediately with the sworn

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  1       statement of each such individual as required by this section on forms
  2       prescribed by the secretary. No organization which denies its membership
  3       to persons for the reason of their race, color or physical handicap, shall
  4       be granted or allowed to retain a license issued under the authority of
  5       this act.
  6             Except for nonprofit adult care homes licensed under the laws of the
  7       state of Kansas, no license shall be issued to any organization under the
  8       provisions of this act which has not been in existence continuously within
  9       the state of Kansas for a period of 18 months immediately preceding the
10       date of making application for a license. The licensee shall display the
11       license in a prominent place in the vicinity of the area where it conducts
12       raffles.
13             (e) No lessor of premises used for the management, operation or
14       conduct of raffles shall permit the management, operation or conduct of
15       raffles on such premises unless such lessor has been issued a registration
16       certificate by the secretary. Application for registration shall be accom-
17       panied by a fee of $100. Such application shall be made upon forms
18       prescribed by the secretary and shall be submitted to the secretary. The
19       application shall contain:
20             (1) The name or names of the lessor of premises which will be used
21       for the management, operation or conduct of raffles including, in the case
22       of a corporation, partnership, association, trust or other entity, the names
23       of all individuals having more than a 10% ownership interest, either di-
24       rectly or indirectly in such entity;
25             (2) the address of such premises;
26             (3) the name or names of any and all organizations which will manage,
27       operate or conduct raffles on such premises during the period for which
28       the registration certificate is valid;
29             (4) such other information as may be required by the secretary.
30             (f) Each registration certificate, or renewal thereof, issued under the
31       provisions of subsection (e) shall expire at midnight on June 30 following
32       its date of issuance. The certificate of registration shall be valid for only
33       one premises and shall be displayed in a prominent place in the registered
34       premises.
35             (g) No registration certificate shall be issued for any premises if any
36       individual who is connected in any way, directly or indirectly, with the
37       owner or lessor of the premises, within five years prior to registration,
38       has been convicted of or pleaded guilty or nolo contendere to any felony
39       or illegal gambling activity or purchased a tax stamp for wagering or gam-
40       bling activity.
41             New Sec.  4. For the purpose of providing revenue which may be
42       used by the state and for the privilege of managing, operating or con-
43       ducting raffles under the authority of this act, there is hereby levied and

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  1       there shall be collected and paid by each licensee a tax at the rate of 3%
  2       upon the gross receipts received by the licensee from charges for partic-
  3       ipation in raffles and any admission fees or charges in connection with
  4       such raffles. The tax imposed by this section shall be in addition to the
  5       license fee imposed under section 3, and amendments thereto.
  6             New Sec.  5. (a) On dates prescribed by the director, every licensee
  7       shall make a return to the director upon forms prescribed by the director.
  8       Such form shall contain:
  9             (1) The name and address of the organization;
10             (2) the amount of the gross receipts received from charges for par-
11       ticipation in raffles during the preceding reporting period;
12             (3) the amount of the gross receipts received from charges for ad-
13       mission to the premises for participation in raffles during the preceding
14       reporting period; and
15             (4) such other information as the director may deem necessary.
16             (b) At the time of making such return, licensees shall pay to the di-
17       rector the amount of the tax then due under subsection (a) of section 4,
18       and amendments thereto. The director may extend the time for the pay-
19       ment of such taxes for a period not exceeding 60 days under rules and
20       regulations adopted by the secretary.
21             (c) If any licensee fails to make a return, or to pay any tax, when
22       required to do so by the provisions of this act, except in the case of an
23       extension of time granted by the director, there shall be added to the tax
24       determined to be due a penalty of 25% of the amount of such tax, together
25       with interest at the rate per month prescribed by subsection (a) of K.S.A.
26       79-2968, and amendments thereto, from the date the tax was due until
27       paid.
28             (d) If any tax determined and assessed by the director taxation is
29       unpaid due to fraud with intent to evade the tax imposed by this act, there
30       shall be added thereto a penalty of 50% of the amount of such tax, to-
31       gether with interest at the rate per month prescribed by subsection (a)
32       of K.S.A. 79-2968, and amendments thereto, from the date the tax was
33       due until paid.
34             (e) Whenever, in the judgment of the director, the failure of any
35       licensee to comply with the provisions of subsection (a) was due to rea-
36       sonable cause, the director may waive or reduce any of the penalties or
37       interest imposed by this section, upon making a record of the reason
38       therefor.
39             (f) The penalties imposed under this section shall be in addition to
40       all other penalties imposed by law.
41             New Sec.  6. (a) For the purpose of ascertaining the correctness of
42       any return or for the purpose of determining the receipts and payments
43       of any licensee, the secretary may examine any books, papers, records or

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  1       memoranda, bearing upon the matters required to be included in the
  2       records of the licensee. The secretary may require the attendance of the
  3       licensee in the county where the licensee resides, or where the location
  4       of the registered premises for raffles are located, or of any person having
  5       knowledge relating to such records, and may take testimony and require
  6       proof of such person or persons.
  7             (b) The secretary may issue subpoenas to compel access to or for the
  8       production of such books, papers, records or memoranda in the custody
  9       of or to which the licensee has access, or to compel the appearance of
10       such persons. The secretary may issue interrogatories to any such person
11       to the same extent and subject to the same limitations as would apply if
12       the subpoena or interrogatories were issued or served in aid of a civil
13       action in the district court. The secretary may administer oaths and take
14       depositions to the same extent and subject to the same limitations as
15       would apply if the deposition was in aid of a civil action in the district
16       court. In case of the refusal of any person to comply with any subpoena
17       or interrogatory or to testify to any matter regarding which such person
18       lawfully may be questioned, the district court of any county, upon appli-
19       cation of the secretary, may order such person to comply with such sub-
20       poena or interrogatory or to testify. Failure to obey the court's order may
21       be punished by the court as contempt. Subpoenas or interrogatories is-
22       sued under the provisions of this section may be served upon individuals
23       and corporations in the manner provided in K.S.A. 60-304, and amend-
24       ments thereto, for the service of process by any officer authorized to serve
25       subpoenas in civil actions or by the secretary.
26             New Sec.  7. Raffles managed, operated or conducted by organiza-
27       tions licensed under the provisions of this act shall be managed, operated
28       or conducted subject to rules and regulations adopted by the secretary
29       and the following restrictions:
30             (a) The entire gross receipts received by any such organization from
31       the management, operation or conduct of raffles, except that portion util-
32       ized for the payment of the cost of prizes, license fees and taxes imposed
33       under the provisions of this act, shall be used exclusively for the lawful
34       purposes of such organization.
35             (b) No person except a bona fide member or spouse of a bona fide
36       member of the sponsoring organization or parent organization or an aux-
37       iliary unit or society of such sponsoring organization may participate in
38       the management, conduct or operation of any raffle.
39             (c) No lessor, employee of such lessor or employee, officer or share-
40       holder of a for profit corporation which is the lessor shall participate in
41       any raffle on premises leased by any such lessor nor shall such person be
42       responsible for or assist in the management, operation or conduct of any
43       raffle on such premises.

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  1             (d) No person may participate in the management, conduct or op-
  2       eration of a raffle if such person, within five years prior to such partici-
  3       pation, has been convicted of or pleaded guilty or nolo contendere to any
  4       felony or illegal gambling activity or purchased a tax stamp for wagering
  5       or gambling activity.
  6             (e) No person may receive any remuneration or profit for participat-
  7       ing in the management, conduct or operation of any raffle.
  8             (f) The aggregate value of all prizes including the retail value of all
  9       merchandise awarded or offered by any such organization on any single
10       day to winners of raffles shall not exceed $1,200. Any monetary prize of
11       $100 or more shall be paid by a check drawn on the raffle trust bank
12       account of the licensee.
13             (g) The total number of raffles managed, operated or conducted by
14       any licensee in any one day shall not exceed five. Not more than one
15       licensee may conduct raffles at a given location or registered premises in
16       any one calendar day.
17             (h) The prize awarded in any one regular raffle shall not exceed $50
18       in cash or its equivalent. The prize in any special raffle shall not exceed
19       $500 in cash or its equivalent.
20             (i) The retail value of any merchandise received by a winner of a raffle
21       shall be considered as the cash value for the purposes of determining the
22       value of the prize.
23             (j) The charge made for a single raffle ticket shall not exceed $5.
24             (k) Raffles shall not be managed, operated or conducted by any li-
25       censee on more than two calendar days in any one week.
26             (l) All licenses issued under the provisions of this act shall be issued
27       in the name of the organization licensed.
28             (m) Each licensee shall keep a record of all raffles managed, operated
29       or conducted by it for a period of three years following the date the raffle
30       is managed, operated or conducted.
31             (n) No person under the age of 18 years shall participate in the man-
32       agement, operation or conduct of any raffle managed, operated or con-
33       ducted under the provisions of this act.
34             (o) A lessor of premises used for the management, operation or con-
35       duct of raffles or a licensee may not advertise raffles except to the extent
36       and in the manner prescribed by the rules and regulations adopted by
37       the secretary. Any advertisement of a raffle by or on behalf of such lessor
38       or licensee shall specify the organization which is managing, operating or
39       conducting such raffle. The announcement of the cancellation of a raffle
40       shall not be considered to be an advertisement.
41             (p) No licensee shall manage, operate or conduct raffles on any leased
42       premises unless all of the terms and conditions of rental or use, including
43       the rental of chairs, equipment, tables, security guards, janitor service or

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  1       any other services, are set forth in a lease submitted, approved and on
  2       file with the secretary.
  3             (q) No premises shall be used for the management, operation or con-
  4       duct of raffles on more than three calendar days in any one week.
  5             (r) No premises shall be subdivided to provide multiple premises
  6       where raffles are managed, operated or conducted, whether or not the
  7       multiple premises have different addresses.
  8             (s) No raffle shall be managed, operated or conducted on leased
  9       premises if at any time during the immediately preceding 44 hours the
10       premises, or any leased premises within 1,000 feet of such premises, have
11       been used for the management, operation or conduct of a raffle.
12             (t) Every licensee who has gross receipts of $1,000 or more received
13       from participation in raffles, admission fees or charges and from any other
14       source directly related to the operation or conduct of any raffle in any
15       calendar month shall maintain a raffle trust bank account into which all
16       such receipts are deposited daily and from which all payments are made
17       relating to the management, operation or conduct of any raffle, except
18       payment of prizes of less than $100. Having once established such raffle
19       trust bank account, the licensee shall continue to make deposits of all
20       receipts therein. Every licensee shall notify the secretary of the name of
21       the bank in which the raffle trust bank account is maintained, together
22       with the number and name of the account. Every licensee who maintains
23       a raffle trust bank account shall maintain a complete record of all deposits
24       and withdrawals from such account and the same shall be available to the
25       secretary to audit at any reasonable time.
26             The records required under this subsection are in addition to all other
27       records required to be kept by the licensee. The records required by this
28       subsection shall be maintained in the same place as all other records
29       required to be kept by the licensee.
30             New Sec.  8. (a) The secretary, after a hearing in accordance with the
31       provisions of the Kansas administrative procedure act, may revoke or
32       suspend any license or registration certificate issued under the provisions
33       of this act for any of the following reasons:
34             (1) The licensee or registrant has obtained the license or registration
35       certificate by giving false information in the application therefor;
36             (2) the licensee or registrant has violated any of the laws of the state
37       of Kansas or provisions of this act or any rules and regulations of the
38       secretary for the registration, licensing, taxing, management, conduct or
39       operation of raffles; or
40             (3) the licensee or registrant has become ineligible to obtain a license
41       under this act.
42             (b) Any action of the secretary pursuant to subsection (a) is subject
43       to review in accordance with the act for judicial review and civil enforce-

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  1       ment of agency actions. In case of the revocation of a license or registra-
  2       tion, a new license or registration shall not be issued to such lessor, sub-
  3       lessor or organization, or any person acting for or on its behalf, for a period
  4       of six months thereafter. The period of revocation or suspension of a
  5       license or registration shall not exceed one year if the applicant otherwise
  6       is qualified on the date the applicant makes a new application therefor.
  7             (c) The secretary is hereby authorized to enjoin any person from
  8       managing, operating or conducting raffles, or from leasing any premises
  9       for such purposes, if such person does not possess a valid license or reg-
10       istration certificate issued pursuant to the provisions of the charitable
11       raffle act. The secretary shall be entitled to have an order restraining such
12       person from managing, operating or conducting raffles or for any other
13       purpose contrary to the provisions of the charitable raffle act or from
14       leasing premises for any of such purposes. No bond shall be required for
15       any such restraining order, nor for any temporary or permanent injunc-
16       tion issued in such proceedings.
17             New Sec.  9. The administration and enforcement of the charitable
18       raffle act shall be vested in the secretary. The secretary shall adopt and
19       enforce rules and regulations to administer and enforce the provisions of
20       the charitable raffle act.
21             New Sec.  10. (a) All amounts received by or for the secretary from
22       license and registration fees pursuant to this act shall be remitted to the
23       state treasurer. The state treasurer shall deposit all of such moneys in the
24       state treasury and, except as provided by section 11, and amendments
25       thereto, shall credit the same to the charitable raffle regulation fund.
26             (b) All amounts received by or for the secretary from the tax levied
27       pursuant to section 4, and amendments thereto, shall be remitted to the
28       state treasurer. The state treasurer shall deposit all of such moneys in the
29       state treasury and shall credit the same to the charitable raffle regulation
30       fund.
31             (c) There is hereby created, in the state treasury, the charitable raffle
32       regulation fund. Moneys in the charitable raffle regulation fund shall be
33       expended exclusively for the enforcement of the charitable raffle act and
34       rules and regulations adopted pursuant thereto. Such expenditures shall
35       be made upon vouchers approved by the secretary.
36             (d) Except as otherwise provided by this act, all operating expenses
37       of the secretary related to the enforcement of the charitable raffle act
38       appropriated by the legislature shall be paid from the charitable raffle
39       regulation fund. On the 15th day of each month, and at such other times
40       as provided by law, the director of accounts and reports shall transfer to
41       the state general fund any moneys in the charitable raffle regulation fund
42       on each such date in excess of the amount required for operating ex-
43       penditures of the secretary related to the enforcement of the charitable

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  1       raffle act and an adequate fund balance, taking into consideration encum-
  2       brances, anticipated revenues, revenue and expenditure experience to
  3       date and other relevant factors, as determined by the secretary and the
  4       director of accounts and reports.
  5             New Sec.  11. There is hereby created the charitable raffle refund
  6       fund in the state treasury. The charitable raffle refund fund shall be a
  7       refund clearing fund. Refunds of the fees imposed under section 3, and
  8       amendments thereto, and taxes imposed under section 4, and amend-
  9       ments thereto, shall be made from such fund. The charitable raffle refund
10       fund shall be maintained by the secretary from the license and registration
11       fees received and taxes collected under the charitable raffle act in an
12       amount sufficient for such refunds not to exceed $10,000.
13             New Sec.  12. (a) In addition to or in lieu of any other civil or criminal
14       penalty provided by law and upon a finding that a licensee or lessor has
15       violated any provision of the charitable raffle act, any rule and regulation
16       adopted pursuant thereto, shall impose on such licensee or lessor a civil
17       fine not exceeding $500 for each violation.
18             (b) No fine shall be imposed pursuant to this section except upon the
19       written order of the secretary to the licensee or lessor who committed
20       the violation. Such order shall state the violation, the fine to be imposed
21       and the right of the licensee or lessor to appeal the order. Such order
22       shall be subject to appeal and review in the manner provided by the
23       Kansas administrative procedure act.
24             (c) Any fine collected pursuant to this section shall be paid to the
25       state treasurer, who shall deposit the entire amount in the state treasury
26       and credit it to the charitable raffle regulation fund.
27             Sec.  13. K.S.A. 1998 Supp. 21-4302 is hereby amended to read as
28       follows: 21-4302. (a) "Bet" means a bargain in which the parties agree
29       that, dependent upon chance, one stands to win or lose something of
30       value specified in the agreement. A bet does not include:
31             (1) Bona fide business transactions which are valid under the law of
32       contracts including, but not limited to, contracts for the purchase or sale
33       at a future date of securities or other commodities, and agreements to
34       compensation for loss caused by the happening of the chance including,
35       but not limited to, contracts of indemnity or guaranty and life or health
36       and accident insurance;
37             (2) offers of purses, prizes or premiums to the actual contestants in
38       any bona fide contest for the determination of skill, speed, strength, or
39       endurance or to the bona fide owners of animals or vehicles entered in
40       such a contest;
41             (3) a lottery as defined in this section;
42             (4) any bingo game by or for participants managed, operated or con-
43       ducted in accordance with the laws of the state of Kansas by an organi-

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  1       zation licensed by the state of Kansas to manage, operate or conduct
  2       games of bingo;
  3             (5) a lottery operated by the state pursuant to the Kansas lottery act;
  4             (6) any system of parimutuel wagering managed, operated and con-
  5       ducted in accordance with the Kansas parimutuel racing act; or
  6             (7) tribal gaming.
  7             (b) "Lottery" means an enterprise wherein for a consideration the
  8       participants are given an opportunity to win a prize, the award of which
  9       is determined by chance. A lottery does not include:
10             (1) A lottery operated by the state pursuant to the Kansas lottery act;
11       or
12             (2) a raffle operated, managed or conducted by an organization li-
13       censed pursuant to the charitable raffle act; or
14             (2) (3) tribal gaming.
15             (c) "Consideration" means anything which is a commercial or finan-
16       cial advantage to the promoter or a disadvantage to any participant.
17             Mere registration without purchase of goods or services; personal at-
18       tendance at places or events, without payment of an admission price or
19       fee; listening to or watching radio and television programs; answering the
20       telephone or making a telephone call and acts of like nature are not
21       consideration.
22             As used in this subsection, consideration does not include:
23             (1) Sums of money paid by or for participants in any bingo game
24       managed, operated or conducted in accordance with the laws of the state
25       of Kansas by any bona fide nonprofit religious, charitable, fraternal, ed-
26       ucational or veteran organization licensed to manage, operate or conduct
27       bingo games under the laws of the state of Kansas and it shall be conclu-
28       sively presumed that such sums paid by or for such participants were
29       intended by such participants to be for the benefit of the sponsoring
30       organizations for the use of such sponsoring organizations in furthering
31       the purposes of such sponsoring organizations, as set forth in the appro-
32       priate paragraphs of subsection (c) or (d) of section 501 of the internal
33       revenue code of 1986 and as set forth in K.S.A. 79-4701 and amendments
34       thereto;
35             (2) sums of money paid by or for participants in any lottery operated
36       by the state pursuant to the Kansas lottery act;
37             (3) sums of money paid by or for participants in any system of pari-
38       mutuel wagering managed, operated and conducted in accordance with
39       the Kansas parimutuel racing act; or
40             (4) sums of money paid by or for a person to participate in tribal
41       gaming.
42             (d)  (1) "Gambling device" means:
43             (A) Any so-called "slot machine" or any other machine, mechanical

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  1       device, electronic device or other contrivance an essential part of which
  2       is a drum or reel with insignia thereon, and (i) which when operated may
  3       deliver, as the result of chance, any money or property, or (ii) by the
  4       operation of which a person may become entitled to receive, as the result
  5       of chance, any money or property;
  6             (B) any other machine, mechanical device, electronic device or other
  7       contrivance (including, but not limited to, roulette wheels and similar
  8       devices) which is equipped with or designed to accommodate the addition
  9       of a mechanism that enables accumulated credits to be removed, is
10       equipped with or designed to accommodate a mechanism to record the
11       number of credits removed or is otherwise designed, manufactured or
12       altered primarily for use in connection with gambling, and (i) which when
13       operated may deliver, as the result of chance, any money or property, or
14       (ii) by the operation of which a person may become entitled to receive,
15       as the result of chance, any money or property;
16             (C) any subassembly or essential part intended to be used in connec-
17       tion with any such machine, mechanical device, electronic device or other
18       contrivance, but which is not attached to any such machine, mechanical
19       device, electronic device or other contrivance as a constituent part; or
20             (D) any token, chip, paper, receipt or other document which evi-
21       dences, purports to evidence or is designed to evidence participation in
22       a lottery or the making of a bet.
23             The fact that the prize is not automatically paid by the device does not
24       affect its character as a gambling device.
25             (2) Gambling device does not include:
26             (A) Any machine, mechanical device, electronic device or other con-
27       trivance used or for use by a licensee of the Kansas racing commission as
28       authorized by law and rules and regulations adopted by the commission
29       or by the Kansas lottery or Kansas lottery retailers as authorized by law
30       and rules and regulations adopted by the Kansas lottery commission;
31             (B) any machine, mechanical device, electronic device or other con-
32       trivance, such as a coin-operated bowling alley, shuffleboard, marble ma-
33       chine (a so-called pinball machine), or mechanical gun, which is not de-
34       signed and manufactured primarily for use in connection with gambling,
35       and (i) which when operated does not deliver, as a result of chance, any
36       money, or (ii) by the operation of which a person may not become entitled
37       to receive, as the result of the application of an element of chance, any
38       money;
39             (C) any so-called claw, crane, or digger machine and similar devices
40       which are designed and manufactured primarily for use at carnivals or
41       county or state fairs; or
42             (D) any machine, mechanical device, electronic device or other con-
43       trivance used in tribal gaming.

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  1             (e) A "gambling place" is any place, room, building, vehicle, tent or
  2       location which is used for any of the following: Making and settling bets;
  3       receiving, holding, recording or forwarding bets or offers to bet; con-
  4       ducting lotteries; or playing gambling devices. Evidence that the place
  5       has a general reputation as a gambling place or that, at or about the time
  6       in question, it was frequently visited by persons known to be commercial
  7       gamblers or known as frequenters of gambling places is admissible on the
  8       issue of whether it is a gambling place.
  9             (f) "Tribal gaming" has the meaning provided by K.S.A. 1998 Supp.
10       74-9802 and amendments thereto.
11             (g) "Tribal gaming commission" has the meaning provided by K.S.A.
12       1998 Supp. 74-9802 and amendments thereto.
13             Sec.  14. K.S.A. 1998 Supp. 79-3606 is hereby amended to read as
14       follows: 79-3606. The following shall be exempt from the tax imposed by
15       this act:
16             (a) All sales of motor-vehicle fuel or other articles upon which a sales
17       or excise tax has been paid, not subject to refund, under the laws of this
18       state except cigarettes as defined by K.S.A. 79-3301, and amendments
19       thereto, cereal malt beverages and malt products as defined by K.S.A. 79-
20       3817, and amendments thereto, including wort, liquid malt, malt syrup
21       and malt extract, which is not subject to taxation under the provisions of
22       K.S.A. 79-41a02, and amendments thereto, motor vehicles taxed pursuant
23       to K.S.A. 79-5117, and amendments thereto, tires taxed pursuant to
24       K.S.A. 1998 Supp. 65-3424d, and amendments thereto, and drycleaning
25       and laundry services taxed pursuant to K.S.A. 1998 Supp. 65-34,150, and
26       amendments thereto;
27             (b) all sales of tangible personal property or service, including the
28       renting and leasing of tangible personal property, purchased directly by
29       the state of Kansas, a political subdivision thereof, other than a school or
30       educational institution, or purchased by a public or private nonprofit hos-
31       pital or public hospital authority or nonprofit blood, tissue or organ bank
32       and used exclusively for state, political subdivision, hospital or public hos-
33       pital authority or nonprofit blood, tissue or organ bank purposes, except
34       when: (1) Such state, hospital or public hospital authority is engaged or
35       proposes to engage in any business specifically taxable under the provi-
36       sions of this act and such items of tangible personal property or service
37       are used or proposed to be used in such business, or (2) such political
38       subdivision is engaged or proposes to engage in the business of furnishing
39       gas, water, electricity or heat to others and such items of personal prop-
40       erty or service are used or proposed to be used in such business;
41             (c) all sales of tangible personal property or services, including the
42       renting and leasing of tangible personal property, purchased directly by
43       a public or private elementary or secondary school or public or private

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  1       nonprofit educational institution and used primarily by such school or
  2       institution for nonsectarian programs and activities provided or sponsored
  3       by such school or institution or in the erection, repair or enlargement of
  4       buildings to be used for such purposes. The exemption herein provided
  5       shall not apply to erection, construction, repair, enlargement or equip-
  6       ment of buildings used primarily for human habitation;
  7             (d) all sales of tangible personal property or services purchased by a
  8       contractor for the purpose of constructing, equipping, reconstructing,
  9       maintaining, repairing, enlarging, furnishing or remodeling facilities for
10       any public or private nonprofit hospital or public hospital authority, public
11       or private elementary or secondary school or a public or private nonprofit
12       educational institution, which would be exempt from taxation under the
13       provisions of this act if purchased directly by such hospital or public hos-
14       pital authority, school or educational institution; and all sales of tangible
15       personal property or services purchased by a contractor for the purpose
16       of constructing, equipping, reconstructing, maintaining, repairing, en-
17       larging, furnishing or remodeling facilities for any political subdivision of
18       the state, the total cost of which is paid from funds of such political
19       subdivision and which would be exempt from taxation under the provi-
20       sions of this act if purchased directly by such political subdivision. Nothing
21       in this subsection or in the provisions of K.S.A. 12-3418, and amendments
22       thereto, shall be deemed to exempt the purchase of any construction
23       machinery, equipment or tools used in the constructing, equipping, re-
24       constructing, maintaining, repairing, enlarging, furnishing or remodeling
25       facilities for any political subdivision of the state. As used in this subsec-
26       tion, K.S.A. 12-3418 and 79-3640, and amendments thereto, "funds of a
27       political subdivision" shall mean general tax revenues, the proceeds of
28       any bonds and gifts or grants-in-aid. Gifts shall not mean funds used for
29       the purpose of constructing, equipping, reconstructing, repairing, enlarg-
30       ing, furnishing or remodeling facilities which are to be leased to the do-
31       nor. When any political subdivision of the state, public or private non-
32       profit hospital or public hospital authority, public or private elementary
33       or secondary school or public or private nonprofit educational institution
34       shall contract for the purpose of constructing, equipping, reconstructing,
35       maintaining, repairing, enlarging, furnishing or remodeling facilities, it
36       shall obtain from the state and furnish to the contractor an exemption
37       certificate for the project involved, and the contractor may purchase ma-
38       terials for incorporation in such project. The contractor shall furnish the
39       number of such certificate to all suppliers from whom such purchases are
40       made, and such suppliers shall execute invoices covering the same bearing
41       the number of such certificate. Upon completion of the project the con-
42       tractor shall furnish to the political subdivision, hospital or public hospital
43       authority, school or educational institution concerned a sworn statement,

HB 2552

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  1       on a form to be provided by the director of taxation, that all purchases so
  2       made were entitled to exemption under this subsection. As an alternative
  3       to the foregoing procedure, any such contracting entity may apply to the
  4       secretary of revenue for agent status for the sole purpose of issuing and
  5       furnishing project exemption certificates to contractors pursuant to rules
  6       and regulations adopted by the secretary establishing conditions and stan-
  7       dards for the granting and maintaining of such status. All invoices shall
  8       be held by the contractor for a period of five years and shall be subject
  9       to audit by the director of taxation. If any materials purchased under such
10       a certificate are found not to have been incorporated in the building or
11       other project or not to have been returned for credit or the sales or
12       compensating tax otherwise imposed upon such materials which will not
13       be so incorporated in the building or other project reported and paid by
14       such contractor to the director of taxation not later than the 20th day of
15       the month following the close of the month in which it shall be deter-
16       mined that such materials will not be used for the purpose for which such
17       certificate was issued, the political subdivision, hospital or public hospital
18       authority, school or educational institution concerned shall be liable for
19       tax on all materials purchased for the project, and upon payment thereof
20       it may recover the same from the contractor together with reasonable
21       attorney fees. Any contractor or any agent, employee or subcontractor
22       thereof, who shall use or otherwise dispose of any materials purchased
23       under such a certificate for any purpose other than that for which such a
24       certificate is issued without the payment of the sales or compensating tax
25       otherwise imposed upon such materials, shall be guilty of a misdemeanor
26       and, upon conviction therefor, shall be subject to the penalties provided
27       for in subsection (g) of K.S.A. 79-3615, and amendments thereto;
28             (e) all sales of tangible personal property or services purchased by a
29       contractor for the erection, repair or enlargement of buildings or other
30       projects for the government of the United States, its agencies or instru-
31       mentalities, which would be exempt from taxation if purchased directly
32       by the government of the United States, its agencies or instrumentalities.
33       When the government of the United States, its agencies or instrumen-
34       talities shall contract for the erection, repair, or enlargement of any build-
35       ing or other project, it shall obtain from the state and furnish to the
36       contractor an exemption certificate for the project involved, and the con-
37       tractor may purchase materials for incorporation in such project. The
38       contractor shall furnish the number of such certificates to all suppliers
39       from whom such purchases are made, and such suppliers shall execute
40       invoices covering the same bearing the number of such certificate. Upon
41       completion of the project the contractor shall furnish to the government
42       of the United States, its agencies or instrumentalities concerned a sworn
43       statement, on a form to be provided by the director of taxation, that all

HB 2552

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  1       purchases so made were entitled to exemption under this subsection. As
  2       an alternative to the foregoing procedure, any such contracting entity may
  3       apply to the secretary of revenue for agent status for the sole purpose of
  4       issuing and furnishing project exemption certificates to contractors pur-
  5       suant to rules and regulations adopted by the secretary establishing con-
  6       ditions and standards for the granting and maintaining of such status. All
  7       invoices shall be held by the contractor for a period of five years and shall
  8       be subject to audit by the director of taxation. Any contractor or any agent,
  9       employee or subcontractor thereof, who shall use or otherwise dispose of
10       any materials purchased under such a certificate for any purpose other
11       than that for which such a certificate is issued without the payment of
12       the sales or compensating tax otherwise imposed upon such materials,
13       shall be guilty of a misdemeanor and, upon conviction therefor, shall be
14       subject to the penalties provided for in subsection (g) of K.S.A. 79-3615,
15       and amendments thereto;
16             (f) tangible personal property purchased by a railroad or public utility
17       for consumption or movement directly and immediately in interstate
18       commerce;
19             (g) sales of aircraft including remanufactured and modified aircraft,
20       sales of aircraft repair, modification and replacement parts and sales of
21       services employed in the remanufacture, modification and repair of air-
22       craft sold to persons using directly or through an authorized agent such
23       aircraft and aircraft repair, modification and replacement parts as certified
24       or licensed carriers of persons or property in interstate or foreign com-
25       merce under authority of the laws of the United States or any foreign
26       government or sold to any foreign government or agency or instrumen-
27       tality of such foreign government and all sales of aircraft, aircraft parts,
28       replacement parts and services employed in the remanufacture, modifi-
29       cation and repair of aircraft for use outside of the United States;
30             (h) all rentals of nonsectarian textbooks by public or private elemen-
31       tary or secondary schools;
32             (i) the lease or rental of all films, records, tapes, or any type of sound
33       or picture transcriptions used by motion picture exhibitors;
34             (j) meals served without charge or food used in the preparation of
35       such meals to employees of any restaurant, eating house, dining car, hotel,
36       drugstore or other place where meals or drinks are regularly sold to the
37       public if such employees' duties are related to the furnishing or sale of
38       such meals or drinks;
39             (k) any motor vehicle, semitrailer or pole trailer, as such terms are
40       defined by K.S.A. 8-126, and amendments thereto, or aircraft sold and
41       delivered in this state to a bona fide resident of another state, which motor
42       vehicle, semitrailer, pole trailer or aircraft is not to be registered or based
43       in this state and which vehicle, semitrailer, pole trailer or aircraft will not

HB 2552

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  1       remain in this state more than 10 days;
  2             (l) all isolated or occasional sales of tangible personal property, serv-
  3       ices, substances or things, except isolated or occasional sale of motor
  4       vehicles specifically taxed under the provisions of subsection (o) of K.S.A.
  5       79-3603, and amendments thereto;
  6             (m) all sales of tangible personal property which become an ingre-
  7       dient or component part of tangible personal property or services pro-
  8       duced, manufactured or compounded for ultimate sale at retail within or
  9       without the state of Kansas; and any such producer, manufacturer or
10       compounder may obtain from the director of taxation and furnish to the
11       supplier an exemption certificate number for tangible personal property
12       for use as an ingredient or component part of the property or services
13       produced, manufactured or compounded;
14             (n) all sales of tangible personal property which is consumed in the
15       production, manufacture, processing, mining, drilling, refining or com-
16       pounding of tangible personal property, the treating of by-products or
17       wastes derived from any such production process, the providing of serv-
18       ices or the irrigation of crops for ultimate sale at retail within or without
19       the state of Kansas; and any purchaser of such property may obtain from
20       the director of taxation and furnish to the supplier an exemption certifi-
21       cate number for tangible personal property for consumption in such pro-
22       duction, manufacture, processing, mining, drilling, refining, compound-
23       ing, treating, irrigation and in providing such services;
24             (o) all sales of animals, fowl and aquatic plants and animals, the pri-
25       mary purpose of which is use in agriculture or aquaculture, as defined in
26       K.S.A. 47-1901, and amendments thereto, the production of food for
27       human consumption, the production of animal, dairy, poultry or aquatic
28       plant and animal products, fiber or fur, or the production of offspring for
29       use for any such purpose or purposes;
30             (p) all sales of drugs, as defined by K.S.A. 65-1626, and amendments
31       thereto, dispensed pursuant to a prescription order, as defined by K.S.A.
32       65-1626, and amendments thereto, by a licensed practitioner;
33             (q) all sales of insulin dispensed by a person licensed by the state
34       board of pharmacy to a person for treatment of diabetes at the direction
35       of a person licensed to practice medicine by the board of healing arts;
36             (r) all sales of prosthetic and orthopedic appliances prescribed in
37       writing by a person licensed to practice the healing arts, dentistry or
38       optometry. For the purposes of this subsection, the term prosthetic and
39       orthopedic appliances means any apparatus, instrument, device, or equip-
40       ment used to replace or substitute for any missing part of the body; used
41       to alleviate the malfunction of any part of the body; or used to assist any
42       disabled person in leading a normal life by facilitating such person's mo-
43       bility; such term shall include accessories attached or to be attached to

HB 2552

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  1       motor vehicles, but such term shall not include motor vehicles or personal
  2       property which when installed becomes a fixture to real property;
  3             (s) all sales of tangible personal property or services purchased di-
  4       rectly by a groundwater management district organized or operating un-
  5       der the authority of K.S.A. 82a-1020 et seq., and amendments thereto,
  6       which property or services are used in the operation or maintenance of
  7       the district;
  8             (t) all sales of farm machinery and equipment or aquaculture ma-
  9       chinery and equipment, repair and replacement parts therefor and serv-
10       ices performed in the repair and maintenance of such machinery and
11       equipment. For the purposes of this subsection the term "farm machinery
12       and equipment or aquaculture machinery and equipment" shall include
13       machinery and equipment used in the operation of Christmas tree farm-
14       ing but shall not include any passenger vehicle, truck, truck tractor, trailer,
15       semitrailer or pole trailer, other than a farm trailer, as such terms are
16       defined by K.S.A. 8-126, and amendments thereto. Each purchaser of
17       farm machinery and equipment or aquaculture machinery and equipment
18       exempted herein must certify in writing on the copy of the invoice or
19       sales ticket to be retained by the seller that the farm machinery and
20       equipment or aquaculture machinery and equipment purchased will be
21       used only in farming, ranching or aquaculture production. Farming or
22       ranching shall include the operation of a feedlot and farm and ranch work
23       for hire and the operation of a nursery;
24             (u) all leases or rentals of tangible personal property used as a dwell-
25       ing if such tangible personal property is leased or rented for a period of
26       more than 28 consecutive days;
27             (v) all sales of food products to any contractor for use in preparing
28       meals for delivery to homebound elderly persons over 60 years of age and
29       to homebound disabled persons or to be served at a group-sitting at a
30       location outside of the home to otherwise homebound elderly persons
31       over 60 years of age and to otherwise homebound disabled persons, as
32       all or part of any food service project funded in whole or in part by
33       government or as part of a private nonprofit food service project available
34       to all such elderly or disabled persons residing within an area of service
35       designated by the private nonprofit organization, and all sales of food
36       products for use in preparing meals for consumption by indigent or home-
37       less individuals whether or not such meals are consumed at a place des-
38       ignated for such purpose;
39             (w) all sales of natural gas, electricity, heat and water delivered
40       through mains, lines or pipes: (1) To residential premises for noncom-
41       mercial use by the occupant of such premises; (2) for agricultural use and
42       also, for such use, all sales of propane gas; (3) for use in the severing of
43       oil; and (4) to any property which is exempt from property taxation pur-

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  1       suant to K.S.A. 79-201b Second through Sixth, and amendments thereto.
  2       As used in this paragraph, "severing" shall have the meaning ascribed
  3       thereto by subsection (k) of K.S.A. 79-4216, and amendments thereto;
  4             (x) all sales of propane gas, LP-gas, coal, wood and other fuel sources
  5       for the production of heat or lighting for noncommercial use of an oc-
  6       cupant of residential premises;
  7             (y) all sales of materials and services used in the repairing, servicing,
  8       altering, maintaining, manufacturing, remanufacturing, or modification of
  9       railroad rolling stock for use in interstate or foreign commerce under
10       authority of the laws of the United States;
11             (z) all sales of tangible personal property and services purchased di-
12       rectly by a port authority or by a contractor therefor as provided by the
13       provisions of K.S.A. 12-3418, and amendments thereto;
14             (aa) all sales of materials and services applied to equipment which is
15       transported into the state from without the state for repair, service, al-
16       teration, maintenance, remanufacture or modification and which is sub-
17       sequently transported outside the state for use in the transmission of
18       liquids or natural gas by means of pipeline in interstate or foreign com-
19       merce under authority of the laws of the United States;
20             (bb) all sales of used mobile homes or manufactured homes. As used
21       in this subsection: (1) "Mobile homes" and "manufactured homes" shall
22       have the meanings ascribed thereto by K.S.A. 58-4202, and amendments
23       thereto; and (2) "sales of used mobile homes or manufactured homes"
24       means sales other than the original retail sale thereof;
25             (cc) all sales of tangible personal property or services purchased for
26       the purpose of and in conjunction with constructing, reconstructing, en-
27       larging or remodeling a business or retail business which meets the
28       requirements established in K.S.A. 74-50,115, and amendments thereto,
29       and the sale and installation of machinery and equipment purchased for
30       installation at any such business or retail business. When a person shall
31       contract for the construction, reconstruction, enlargement or remodeling
32       of any such business or retail business, such person shall obtain from the
33       state and furnish to the contractor an exemption certificate for the project
34       involved, and the contractor may purchase materials, machinery and
35       equipment for incorporation in such project. The contractor shall furnish
36       the number of such certificates to all suppliers from whom such purchases
37       are made, and such suppliers shall execute invoices covering the same
38       bearing the number of such certificate. Upon completion of the project
39       the contractor shall furnish to the owner of the business or retail business
40       a sworn statement, on a form to be provided by the director of taxation,
41       that all purchases so made were entitled to exemption under this subsec-
42       tion. All invoices shall be held by the contractor for a period of five years
43       and shall be subject to audit by the director of taxation. Any contractor

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  1       or any agent, employee or subcontractor thereof, who shall use or oth-
  2       erwise dispose of any materials, machinery or equipment purchased un-
  3       der such a certificate for any purpose other than that for which such a
  4       certificate is issued without the payment of the sales or compensating tax
  5       otherwise imposed thereon, shall be guilty of a misdemeanor and, upon
  6       conviction therefor, shall be subject to the penalties provided for in sub-
  7       section (g) of K.S.A. 79-3615, and amendments thereto. As used in this
  8       subsection, "business" and "retail business" have the meanings respec-
  9       tively ascribed thereto by K.S.A. 74-50,114, and amendments thereto;
10             (dd) all sales of tangible personal property purchased with food
11       stamps issued by the United States department of agriculture;
12             (ee) all sales of lottery tickets and shares made as part of a lottery
13       operated by the state of Kansas;
14             (ff) on and after July 1, 1988, all sales of new mobile homes or man-
15       ufactured homes to the extent of 40% of the gross receipts, determined
16       without regard to any trade-in allowance, received from such sale. As used
17       in this subsection, "mobile homes" and "manufactured homes" shall have
18       the meanings ascribed thereto by K.S.A. 58-4202, and amendments
19       thereto;
20             (gg) all sales of tangible personal property purchased in accordance
21       with vouchers issued pursuant to the federal special supplemental food
22       program for women, infants and children;
23             (hh) all sales of medical supplies and equipment purchased directly
24       by a nonprofit skilled nursing home or nonprofit intermediate nursing
25       care home, as defined by K.S.A. 39-923, and amendments thereto, for
26       the purpose of providing medical services to residents thereof. This ex-
27       emption shall not apply to tangible personal property customarily used
28       for human habitation purposes;
29             (ii) all sales of tangible personal property purchased directly by a non-
30       profit organization for nonsectarian comprehensive multidiscipline youth
31       development programs and activities provided or sponsored by such or-
32       ganization, and all sales of tangible personal property by or on behalf of
33       any such organization. This exemption shall not apply to tangible personal
34       property customarily used for human habitation purposes;
35             (jj) all sales of tangible personal property or services, including the
36       renting and leasing of tangible personal property, purchased directly on
37       behalf of a community-based mental retardation facility or mental health
38       center organized pursuant to K.S.A. 19-4001 et seq., and amendments
39       thereto, and licensed in accordance with the provisions of K.S.A. 75-
40       3307b, and amendments thereto. This exemption shall not apply to tan-
41       gible personal property customarily used for human habitation purposes;
42             (kk) on and after January 1, 1989, all sales of machinery and equip-
43       ment used directly and primarily for the purposes of manufacturing, as-

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  1       sembling, processing, finishing, storing, warehousing or distributing ar-
  2       ticles of tangible personal property in this state intended for resale by a
  3       manufacturing or processing plant or facility or a storage, warehousing or
  4       distribution facility, and all sales of repair and replacement parts and
  5       accessories purchased for such machinery and equipment:
  6             (1) For purposes of this subsection, machinery and equipment shall
  7       be deemed to be used directly and primarily in the manufacture, assem-
  8       blage, processing, finishing, storing, warehousing or distributing of tan-
  9       gible personal property where such machinery and equipment is used
10       during a manufacturing, assembling, processing or finishing, storing,
11       warehousing or distributing operation:
12             (A) To effect a direct and immediate physical change upon the tan-
13       gible personal property;
14             (B) to guide or measure a direct and immediate physical change upon
15       such property where such function is an integral and essential part of
16       tuning, verifying or aligning the component parts of such property;
17             (C) to test or measure such property where such function is an in-
18       tegral part of the production flow or function;
19             (D) to transport, convey or handle such property during the manu-
20       facturing, processing, storing, warehousing or distribution operation at
21       the plant or facility; or
22             (E) to place such property in the container, package or wrapping in
23       which such property is normally sold or transported.
24             (2)  For purposes of this subsection "machinery and equipment used
25       directly and primarily" shall include, but not be limited to:
26             (A) Mechanical machines or components thereof contributing to a
27       manufacturing, assembling or finishing process;
28             (B) molds and dies that determine the physical characteristics of the
29       finished product or its packaging material;
30             (C) testing equipment to determine the quality of the finished
31       product;
32             (D) computers and related peripheral equipment that directly control
33       or measure the manufacturing process or which are utilized for engi-
34       neering of the finished product; and
35             (E) computers and related peripheral equipment utilized for research
36       and development and product design.
37             (3) "Machinery and equipment used directly and primarily" shall not
38       include:
39             (A) Hand tools;
40             (B) machinery, equipment and tools used in maintaining and repair-
41       ing any type of machinery and equipment;
42             (C) transportation equipment not used in the manufacturing, assem-
43       bling, processing, furnishing, storing, warehousing or distributing process

HB 2552

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  1       at the plant or facility;
  2             (D) office machines and equipment including computers and related
  3       peripheral equipment not directly and primarily used in controlling or
  4       measuring the manufacturing process;
  5             (E) furniture and buildings; and
  6             (F) machinery and equipment used in administrative, accounting,
  7       sales or other such activities of the business;
  8             (4) for purposes of this subsection, "repair and replacement parts and
  9       accessories" means all parts and accessories for exempt machinery and
10       equipment, including but not limited to dies, jigs, molds, and patterns
11       which are attached to exempt machinery or which are otherwise used in
12       production, short-lived replaceable parts that can be readily detached
13       from exempt machinery or equipment, such as belts, drill bits, grinding
14       wheels, cutting bars and saws, and other replacement parts for production
15       equipment, including refractory brick and other refractory items for kiln
16       equipment used in production operations;
17             (ll) all sales of educational materials purchased for distribution to the
18       public at no charge by a nonprofit corporation organized for the purpose
19       of encouraging, fostering and conducting programs for the improvement
20       of public health;
21             (mm) all sales of seeds and tree seedlings; fertilizers, insecticides,
22       herbicides, germicides, pesticides and fungicides; and services, purchased
23       and used for the purpose of producing plants in order to prevent soil
24       erosion on land devoted to agricultural use;
25             (nn) except as otherwise provided in this act, all sales of services ren-
26       dered by an advertising agency or licensed broadcast station or any mem-
27       ber, agent or employee thereof;
28             (oo) all sales of tangible personal property purchased by a community
29       action group or agency for the exclusive purpose of repairing or weath-
30       erizing housing occupied by low income individuals;
31             (pp) all sales of drill bits and explosives actually utilized in the explo-
32       ration and production of oil or gas;
33             (qq) all sales of tangible personal property and services purchased by
34       a nonprofit museum or historical society or any combination thereof, in-
35       cluding a nonprofit organization which is organized for the purpose of
36       stimulating public interest in the exploration of space by providing edu-
37       cational information, exhibits and experiences, which is exempt from fed-
38       eral income taxation pursuant to section 501(c)(3) of the federal internal
39       revenue code of 1986;
40             (rr) all sales of tangible personal property which will admit the pur-
41       chaser thereof to any annual event sponsored by a nonprofit organization
42       which is exempt from federal income taxation pursuant to section
43       501(c)(3) of the federal internal revenue code of 1986;

HB 2552

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  1             (ss) all sales of tangible personal property and services purchased by
  2       a public broadcasting station licensed by the federal communications
  3       commission as a noncommercial educational television or radio station;
  4             (tt) all sales of tangible personal property and services purchased by
  5       or on behalf of a not-for-profit corporation which is exempt from federal
  6       income taxation pursuant to section 501(c)(3) of the federal internal rev-
  7       enue code of 1986, for the sole purpose of constructing a Kansas Korean
  8       War memorial;
  9             (uu) all sales of tangible personal property and services purchased by
10       or on behalf of any rural volunteer fire-fighting organization for use ex-
11       clusively in the performance of its duties and functions;
12             (vv) all sales of tangible personal property purchased by any of the
13       following organizations which are exempt from federal income taxation
14       pursuant to section 501 (c)(3) of the federal internal revenue code of
15       1986, for the following purposes, and all sales of any such property by or
16       on behalf of any such organization for any such purpose:
17             (1) The American Heart Association, Kansas Affiliate, Inc. for the
18       purposes of providing education, training, certification in emergency car-
19       diac care, research and other related services to reduce disability and
20       death from cardiovascular diseases and stroke;
21             (2) the Kansas Alliance for the Mentally Ill, Inc. for the purpose of
22       advocacy for persons with mental illness and to education, research and
23       support for their families;
24             (3) the Kansas Mental Illness Awareness Council for the purposes of
25       advocacy for persons who are mentally ill and to education, research and
26       support for them and their families;
27             (4) the American Diabetes Association Kansas Affiliate, Inc. for the
28       purpose of eliminating diabetes through medical research, public edu-
29       cation focusing on disease prevention and education, patient education
30       including information on coping with diabetes, and professional education
31       and training;
32             (5) the American Lung Association of Kansas, Inc. for the purpose of
33       eliminating all lung diseases through medical research, public education
34       including information on coping with lung diseases, professional educa-
35       tion and training related to lung disease and other related services to
36       reduce the incidence of disability and death due to lung disease;
37             (6) the Kansas chapters of the Alzheimer's Disease and Related Dis-
38       orders Association, Inc. for the purpose of providing assistance and sup-
39       port to persons in Kansas with Alzheimer's disease, and their families and
40       caregivers; and
41             (ww) all sales of tangible personal property purchased by the Habitat
42       for Humanity for the exclusive use of being incorporated within a housing
43       project constructed by such organization.

HB 2552

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  1             (xx) all sales of tangible personal property and services purchased by
  2       a nonprofit zoo which is exempt from federal income taxation pursuant
  3       to section 501(c)(3) of the federal internal revenue code of 1986, or on
  4       behalf of such zoo by an entity itself exempt from federal income taxation
  5       pursuant to section 50 501(c)(3) of the federal internal revenue code of
  6       1986 contracted with to operate such zoo and all sales of tangible personal
  7       property or services purchased by a contractor for the purpose of con-
  8       structing, equipping, reconstructing, maintaining, repairing, enlarging,
  9       furnishing or remodeling facilities for any nonprofit zoo which would be
10       exempt from taxation under the provisions of this section if purchased
11       directly by such nonprofit zoo or the entity operating such zoo. Nothing
12       in this subsection shall be deemed to exempt the purchase of any con-
13       struction machinery, equipment or tools used in the constructing, equip-
14       ping, reconstructing, maintaining, repairing, enlarging, furnishing or re-
15       modeling facilities for any nonprofit zoo. When any nonprofit zoo shall
16       contract for the purpose of constructing, equipping, reconstructing, main-
17       taining, repairing, enlarging, furnishing or remodeling facilities, it shall
18       obtain from the state and furnish to the contractor an exemption certifi-
19       cate for the project involved, and the contractor may purchase materials
20       for incorporation in such project. The contractor shall furnish the number
21       of such certificate to all suppliers from whom such purchases are made,
22       and such suppliers shall execute invoices covering the same bearing the
23       number of such certificate. Upon completion of the project the contractor
24       shall furnish to the nonprofit zoo concerned a sworn statement, on a form
25       to be provided by the director of taxation, that all purchases so made were
26       entitled to exemption under this subsection. All invoices shall be held by
27       the contractor for a period of five years and shall be subject to audit by
28       the director of taxation. If any materials purchased under such a certifi-
29       cate are found not to have been incorporated in the building or other
30       project or not to have been returned for credit or the sales or compen-
31       sating tax otherwise imposed upon such materials which will not be so
32       incorporated in the building or other project reported and paid by such
33       contractor to the director of taxation not later than the 20th day of the
34       month following the close of the month in which it shall be determined
35       that such materials will not be used for the purpose for which such cer-
36       tificate was issued, the nonprofit zoo concerned shall be liable for tax on
37       all materials purchased for the project, and upon payment thereof it may
38       recover the same from the contractor together with reasonable attorney
39       fees. Any contractor or any agent, employee or subcontractor thereof,
40       who shall use or otherwise dispose of any materials purchased under such
41       a certificate for any purpose other than that for which such a certificate
42       is issued without the payment of the sales or compensating tax otherwise
43       imposed upon such materials, shall be guilty of a misdemeanor and, upon

HB 2552

26

  1       conviction therefor, shall be subject to the penalties provided for in sub-
  2       section (g) of K.S.A. 79-3615, and amendments thereto;
  3             (yy) all sales of tangible personal property and services purchased by
  4       a parent-teacher association or organization, and all sales of tangible per-
  5       sonal property by or on behalf of such association or organization;
  6             (zz) all sales of machinery and equipment purchased by over-the-air,
  7       free access radio or television station which is used directly and primarily
  8       for the purpose of producing a broadcast signal or is such that the failure
  9       of the machinery or equipment to operate would cause broadcasting to
10       cease. For purposes of this subsection, machinery and equipment shall
11       include, but not be limited to, that required by rules and regulations of
12       the federal communications commission, and all sales of electricity which
13       are essential or necessary for the purpose of producing a broadcast signal
14       or is such that the failure of the electricity would cause broadcasting to
15       cease;
16             (aaa) all sales of tangible personal property and services purchased
17       by a religious organization which is exempt from federal income taxation
18       pursuant to section 501 (c)(3) of the federal internal revenue code, and
19       used exclusively for religious purposes; and
20             (bbb) all sales of food for human consumption by an organization
21       which is exempt from federal income taxation pursuant to section 501
22       (c)(3) of the federal internal revenue code of 1986, pursuant to a food
23       distribution program which offers such food at a price below cost in
24       exchange for the performance of community service by the purchaser
25       thereof.; and
26             (ccc) all sales of raffle tickets by licensees operating, managing or
27       conducting raffles under the charitable raffle act. 
28       Sec.  15. K.S.A. 1998 Supp. 21-4302 and 79-3606 are hereby
29       repealed.
30        Sec.  16. This act shall take effect and be in force from and after the
31       date of certification of the results of the election at which the voters
32       approve 1999 House Concurrent Resolution No. 5032, and its publication
33       in the statute book.