97-071
Response December 8, 1997
November
5, 1997
Dear
Joe:
I
enclose a letter from a client of mine who desires clarification of the
admission or user fee sales tax. They
have had several discussions with someone in sales tax but have not gotten what
they feel is a clear answer. They asked
me to request this information on a "no name" basis. I hope
that's
OK - you know how paranoid people are about the "tax man".
I
appreciate your help in this matter.
I'm not sure who the person is that you would have respond to this. Please have them call me if there are
questions.
Thanks
again for your consideration.
Best
regards,
NAME
October
31, 1997
Utah
State Tax Commission
210
North 1950 West
Salt
Lake City, Utah 84134
Re:
Sales tax exemption for charitable organization sponsoring amateur athletic
events.
Although
under prior law, it is clear that payments made in connection with the amateur
athletic events sponsored by our client would not be subject to sales tax, it
is a concern of the organization that under the current law they may be liable
for sales tax payments.
Our
client therefore respectfully requests a ruling, based upon the following
specific facts, if participant payments, that would be considered as
"admission or user fees" under the definitions of the current law,
made in connection with amateur athletic events sponsored by a non-profit
charitable organization, would be subject to sales tax?
Utah
Law, Regulations and Bulletins:
• Effective July 1, 1994, Senate Bill 191 required that all
admissions and user fees are subject to Utah sales tax, however the bill also
states that ".. .the tax imposed on admission or user fees in Subsection
(1)(f)(i) does not affect an entity's sales tax exempt status under Section
59-12-104.1" (Utah Code Ann. Section 59-12-103 (1)(f)(ii))
• Utah Code Ann. Section 59-12-104.1 states that
"...Sales made to a religious or charitable institution or organization
are exempt from the sales and use tax imposed by this chapter if the sale is
made in the conduct of the institution's or organization's regular religious or
charitable functions or activities...
• Utah Tax Commission Bulletin 15-94 issued July 1, 1994
states "Religious and charitable organizations are not affected by Senate
Bill 191. Sales to or by religious and charitable organizations, including
admissions and user fees, are not subject to the tax..."
• Rule R865-19S-33 states that pursuant to Utah Code Ann.
Section 59-12-103 that amounts paid for the following activities would not be
treated as admissions or user fees
"sign up for amateur athletics if the activity is sponsored by a nonprofit
corporation or organization, the primary purpose of which, as stated in the
corporation's or organization's articles or bylaws, is the sponsoring,
promoting, and encouraging of amateur athletics..."
Specific
Facts:
• The organization sponsoring these specific amateur athletic
events is a non-profit charitable institution formally recognized by the
Internal Revenue Service as exempt from tax under Section 501(c)(3) of the
Internal Revenue Code as required by Rule R865-19S-43.
• The articles of incorporation of the organization state
that the purpose of the organization is specifically to foster and promote
amateur athletics of a type recognized in the Pan-American and Olympic Games.
• The athletic events in question are part of the regular
conduct of the charitable organization's activities.
• Participants in the athletic events pay an admission or
user fee which covers all costs of the charitable organization in sponsoring
the amateur athletic event.
Discussion:
It
appears based upon Rule R865-19S-43 that if the organization is formally
recognized by the Internal Revenue Service as exempt from tax under Section
501(c)(3) it will be considered as a qualifying organization for purposes of
the exemption from sales tax provided by Utah Code Ann. Section 59-12-103(1)(D(ii). It should also be noted that the Utah
Supreme Court held in Youth Tennis Foundation of Utah that an organization
sponsoring amateur athletic events could qualifying as a nonprofit charitable
corporation under the Utah statute. Since our client is formally recognized by
the Internal Revenue Service as specified in Rule R865-19S-43 and is an
organization not unlike the Youth Tennis Foundation organization, there should
be no question
regarding
its basic qualification for the sales tax exemption.
If
the payments were considered as a "sign up" payments (and that may be
appropriate) qualifying under Rule R865-195-33, they would be specifically
excluded from the definition of admission or user fees. However, no definition
of "sign up" fees is provided and provision 6 of this rule makes it
difficult to determine what would be considered as qualifying "sign
up" payments since it seems logical that "sign up" fees could
also be considered as "amounts charged for activities" and therefore
be subject to the tax. In connection with almost all amateur athletic events,
fees designated as "sign up" fees partially or fully cover the direct
costs of the sponsoring organization in providing the event.
In
Bulletin 15-94, the Utah State Tax Commission attempted to clarify the specific
provisions of Senate Bill 191 by stating that "Religious and charitable
organizations are not affected by Senate Bill 191. Sales to or by religious and
charitable organizations, including admissions and user fees, are not subject
to the tax."
In
requesting this ruling, this organization only desires to clarify the law as
relates directly
to
them and to allow their participants not to pay the admissions and user fee
sales tax if it
is
the intent of the law to allow them this benefit.
Thank
you very much for your consideration. Should you have questions, please call
me.
Very
truly yours,
NAME
December
8, 1997
NAME
ADDRESS
CITY
STATE ZIP
Advisory
Opinion - Sales tax on athletic events sponsored by a non-profit organization.
Dear
NAME,
We have received your request for
sales tax guidance pertaining to your client, which is a non-profit
organization that sponsors amateur athletic events. Because your request mentions
both “sign up fees” and “admissions,” we are not clear about the nature
of your client’s transactions.
Therefore, we address both of these issues:
A sign up fee is an amount paid for
the purpose of participating in the athletic event. For instance, if a child pays a fee to play on a little league
team, that fee is a sign up fee. If an
athlete pays a fee to participate in an amateur tennis tournament, that is a
sign up fee. Sign up fees are not
subject to sales tax if the event is sponsored by a non-profit organization
whose primary purpose is sponsoring, promoting and encouraging amateur
athletics. Utah Administrative Rule
R865-19S-33 (copy enclosed).
Admission charges are the charges
imposed on spectators who pay to watch an event, or charges for admission to or
use of athletic facilities that do not meet the description of sign up fees as
described above. A person who purchases
a ticket to a football game is purchasing admission. A person who purchases a access to an athletic club is also
purchasing admission.
Sign up fees charged by your client
are not taxable. Additionally, sales of
admissions by a charitable organization are not subject to tax so long as the
sale is made in the conduct of the organization’s regular charitable activities
or functions. It appears from your
description that your clients admission sales may also be exempt if your client
is a charitable organization. To
qualify as a charitable organization, your client must be recognized by the
Internal Revenue Service as exempt under IRS Code Section 501(c) (3), and it
must apply for an exemption number. An
application for the exemption number (TC-160) is enclosed.
Please let us know if you have other
questions.
For
the Commission,
Joe B. Pacheco,
Commissioner
^^