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TITLE 34PUBLIC FINANCE
PART 1COMPTROLLER OF PUBLIC ACCOUNTS
CHAPTER 3TAX ADMINISTRATION
SUBCHAPTER OSTATE AND LOCAL SALES AND USE TAXES
RULE §3.298Amusement Services

(b) Charges to private club members and guests. The membership dues, initiation fees, and other assessments and fees charged for a special privilege, status, or membership classification in a private club or organization, including organizations described by the Internal Revenue Code of 1986, §501(c)(7), if the organizations provide amusements, are taxable. Taxable fees for special privileges in the organization include, but are not limited to, liquor pool dues, boat slip rental fees, golf cart storage fees, locker rental fees, locker room use fees, and fees for access to the restaurant and bar. Separate charges for amusement services by persons who operate clubs or other facilities over and above amounts that are received for membership or initiation fees, such as green fees or fees for admissions to swimming pools, racketball courts, or tennis courts, are also taxable. Initiation fees that are refundable, as evidenced by a written agreement, are not taxable.

(c) Entry fees. Entry fees will not be taxable as amusements if:

  (1) the fee substantially exceeds what would normally be paid for use of the facility, and a person is paying to compete in a contest, and part of the fee offsets the cost of conducting the contest and for prizes; or

  (2) an individual would not normally use the facility or pay a fee, except for the purpose of participation in a contest.

(d) Travel agencies.

  (1) Tickets to amusements that travel agencies sell as part of a travel package are taxable only if:

    (A) the price of the ticket is separately stated from the price for the remainder of the package; or

    (B) though not separately stated, the surrounding additional costs are inconsequential.

  (2) If the travel agency is not required to collect sales tax, then sales tax must be paid at the time the travel agency purchases the tickets.

(e) Imposition of tax.

  (1) Sales tax is due on the sale of an admission to an amusement service if the event or location of the service is within the State of Texas. Sales tax is also due on admissions to gambling ships that operate outside Texas waters, if the ships depart from and return to Texas ports. Sales tax is not due on the sale of an admission to an amusement service if the event or location of the service is outside Texas.

  (2) Use tax is due on an out-of-state sale of an admission to an amusement event that will take place in Texas.

  (3) When a sale of an amusement service occurs that does not involve the transfer of a ticket or other physical evidence of admission, possession of or title to the admission is regarded as occurring at the seller's place of business. An example is when admission is secured by a reservation that the seller makes for the purchaser.

  (4) Sales or use tax is not due on cover charges that are taxable under Alcoholic Beverage Code, 202.02.

(f) Taxable item sold or transferred with amusement service.

  (1) Sellers of service may issue a resale certificate in lieu of tax to suppliers of tangible personal property only if care, custody, and control of the property is transferred to the client. For example, a taxpayer purchases padlocks to transfer to customers when lockers are rented. The padlock is transferred to customers, and the customers use the padlock when renting the locker. The taxpayer may purchase the padlock tax free by issuing a resale certificate. Tax is due on the total amount charged the customer, including amounts for the padlock and for the services.

  (2) A resale certificate may be issued for a service if the buyer intends to transfer the service as an integral part of taxable services. A service will be considered an integral part of a taxable service if the service purchased is essential to the performance of the taxable service, and without which the taxable service could not be rendered.

  (3) A resale certificate may be issued for a taxable service if the buyer intends to incorporate the service into tangible personal property that will be resold. If the entire service is not incorporated into the tangible personal property, the presumption is that the service is subject to tax, and the service will only be exempt to the extent that the buyer can establish the portion of the service that was actually incorporated into the tangible personal property. If the buyer does not intend to incorporate the entire service into the tangible personal property, no resale certificate may be issued, but credit may be claimed at the time of sale of the tangible personal property to the extent the service was actually incorporated into the tangible personal property.

  (4) Any item, such as machinery or equipment, purchased for use in the provision of an amusement service is not an item that is transferred with an amusement service, and is subject to sales tax.

  (5) A reseller of a ticket or admission document to an amusement service may deduct from "taxable sales reported," the "adjusted value" of the ticket or admission document purchased for resale from a non-permitted purchaser of the ticket or admission document. The "adjusted value" is the face value of the ticket or admission document, less the included sales tax. A reseller is allowed the deduction from taxable sales when filing a sales tax report, if all of the following criteria are met:

    (A) the purchaser paid the sales tax, and the purchaser does not hold a Texas Sales and Use Tax Permit;

    (B) the language on the ticket or admission document purchased for resale states that all taxes have been included in the price of the ticket or admission document;

    (C) the ticket or admission document for which a deduction is claimed was not purchased tax-free by use of a resale or exemption certificate; and

    (D) the ticket or admission document is actually resold.

(g) Exemptions.

  (1) Sales tax is not due on the sale of an amusement service if the service is provided exclusively:

    (A) by a nonprofit organization, corporation, or association, other than organizations described by the Internal Revenue Code of 1986, §501(c)(7), if the proceeds do not go to the benefit of an individual, except as a part of the services of a purely public charity. Initiation and membership fees and other assorted fees charged by such a nonprofit organization, corporation, or association are not taxable. Examples include organizations, corporations, or associations recognized as nonprofit organizations under the Internal Revenue Code, §501(c); Kiwanis clubs, labor unions, and ex-students organizations. Organizations described by the Internal Revenue Code of 1986, §501(c)(7), that provide amusements, do not qualify for this exemption, even though such groups are formed as nonprofit organizations;

    (B) by a nonprofit corporation organized under the laws of this state for the purpose of encouraging agriculture by the maintenance of public fairs and exhibitions;

    (C) by an educational (including institutions of higher education as defined under Education Code, §61.003(8)), religious, law enforcement, or charitable association or organization, as long as no part of the proceeds goes to the benefit of a private individual;

    (D) by the United States, the State of Texas, a municipality, county, school district, special district, or other political subdivision of the State of Texas, other than a public institution of higher education as defined under Education Code, §61.003(8). An amusement service is not "exclusively provided" by a governmental entity if the entity contracts with an entity that is not listed in the Tax Code, §151.3101(a)(1), for the provision of the amusement;

    (E) in a place that is included in the National Register of Historic Places; or

    (F) in a place that is designated as a Recorded Texas Historic Landmark by the Texas Historical Commission.

  (2) Sales tax is not due on the sale of an amusement service by a ticket service, ticket agent, ticket outlet, or any other seller of amusement services, when the provider of the amusement service is exempt as set forth in paragraph (1) of this subsection.

  (3) Except as provided by subsection (h) of this section, a nonprofit group may hire a for-profit organization to provide the expertise to produce an event without loss of the exemption provided by paragraph (1)(A) of this subsection. The nonprofit organization must hold itself out as the provider of the amusement, and may not be a joint venturer with the for-profit entity.

  (4) Amusement services provided through coin-operated machines that the consumer operates are exempt from sales tax. The coin used to operate the machine may be a token as well as a United States coin. Examples are coin-operated:

    (A) pinball machines;

    (B) video games and motion pictures;

    (C) pool tables;

    (D) televisions;

    (E) shuffleboard;

Cont'd...

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