95-084
Response
December 5, 1995
Reuest
XXXXX
Customer
Services Division
State
Tax Commission
RE:
Advisory Opinion - Application of sales tax to fees paid by bowling leagues for
the use of bowling facilities.
Dear
XXXXX,
We
have received a request from the Executive Director' s Office to address the
issue of fees paid by bowling leagues for use of bowling facilities and
equipment. Apparently XXXXX has
received requests for sales tax refunds from a number of bowling lane proprietors. We are not sure what prompted the refund
claims, but this opinion addresses three arguments that have been raised in
support of the exemption.
1.
The statutory change in the tax on admissions took effect July 1, 1994. The Commission announced a transition policy
in Tax Bulletin 154 to accommodate bowling center proprietors who had entered
contracts in the spring for league play that would begin the following fall.
Under the transition policy, bowling center proprietors who entered contracts with
the leagues prior to July 1, 1994 were not required to remit sales tax on those
contracts. Some proprietors may be
confused about the temporary nature of the exemption.
2.
Some business owners may theorize that league fees paid by league members are
comparable to membership fees paid by members of a private country club. They assume that the league fees are tax
exempt, and, therefore that fees paid to use the bowling facilities are also
tax exempt. We disagree.
Annual
league fees paid by members to the league may qualify as exempt annual
membership dues, but the exemption, if applicable, only relieves the league
from a duty to collect sales tax on the membership fees. The exemption does not extend to the league's
purchases, nor does it create a claim for refund for the bowling alley
proprietors. Under Utah law, admission
or user fees charged for the use of bowling lanes are subject to sales tax,
whether the fees are paid by an individual or by a league on behalf of its
members.
3.
A third theory raised is that a league rents the entire bowling facility for an
evening, and payment by the league is a nontaxable payment of rent. Under Utah Administrative Rule R865-19S-33,
if a league acquires the sole right to use a facility and to dispose of all of
the admission or user fees, the transaction is a nontaxable rental of real
property. We do not believe that the
league' s transaction qualifies as a tax exempt rental, but even if it does the
league must collect and remit sales tax on the fees it collects from its
members for use of the bowling lanes.
Based
on the foregoing arguments, we find that neither the leagues nor the bowling
lane proprietors are entitled to a sales tax refund. We advise you to deny these claims.
For
the Commission,
Alice
Shearer
Commissioner