Were participant fees for coached rowing lessons subject to Illinois sales, use, or service taxes?

Plain-English summary

A proposed commercial rowing club planned to offer coached crew lessons to children and adults. The club would provide the necessary equipment and coaches. Participants would pay program fees, but no membership, initiation, registration, or dues charges.

IDOR said Illinois Retailers' Occupation Tax and Use Tax would not apply if no tangible personal property was transferred to participants. Service Occupation Tax and Service Use Tax likewise depended on property transferred incident to the service. If the rowing lessons transferred no property, those taxes would not apply either.

What this means for you

Supplying equipment for students to use during instruction is not the same as transferring that equipment to them. The GIL's answer was expressly conditional: a transfer of tangible personal property incident to the program could change the result.

Common questions

Were the lesson fees taxable on the described condition? No, if participants received no tangible personal property.

Did club ownership of boats or training equipment itself create tax on the lesson fee? The letter did not say so; it focused on whether property was transferred to participants.

Citations and references

• 86 Ill. Adm. Code 130.101 and 150.101.
• 86 Ill. Adm. Code 140.101 and 160.101.

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2015.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2015/st-15-0116-gil.pdf

Original ruling text

ST 15-0116 (GIL) October 28, 2015 SALE OF SERVICE

If no tangible personal property is transferred to the customer, then no Illinois Retailers’
Occupation Tax or Service Occupation Tax would apply. See 86 Ill. Adm. Code Parts 130 and

140. (This is a GIL.)

October 28, 2015

Dear XXxXxx:

This letter is in response to your letter dated October 16, 2015, in which you request
information. The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”)
are issued by the Department in response to specific taxpayer inquiries conceming the
application of a tax statute or rule to a particular fact situation. A PLR is binding on the
Department, but only as to the taxpayer who is the subject of the request for ruling and only to
the extent the facts recited in the PLR are correct and complete. Persons seeking PLRs must
comply with the procedures for PLRs found in the Department’s regulations at 2 Ill. Adm. Code
1200.110. The purpose of a General Information Letter (“GIL”) is to direct taxpayers to
Department regulations or other sources of information regarding the topic about which they
have inquired. A GIL is not a statement of Department policy and is not binding on the
Department. See 2 Ill. Adm. Code 1200.120. You may access our website at
www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant
to your inquiry.

The nature of your inquiry and the information you have provided require that we
respond with a GIL. In your letter you have stated and made inquiry as follows:

We are contemplating opening up a commercial business entity in your state for
the purpose of owning and operating a ABC CLUB.

One important component of our proposed business is to provide crew (rowing)
lessons to children and adults. Our business entity will provide all of the
equipment and the training coaches as may be necessary to provide such crew
lessons. Anyone wanting to learn about the sport of rowing can pay a participant
fee and enter one of our programs. All programs and lessons will be staffed by a
coach. There will be no membership fees, no initiation fees, no sign-
up/registration fees and no dues required to participate in our programs.

While programs vary in content, they will all be focused on rowing, both on and
off the water. Programs will be held either on the water neighboring our facility
or indoors in our facility. Our programs range in length from 2 to 12 weeks and
may be held anywhere from 2 to 6 days per week. We operate similar row clubs

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in many states and some of those jurisdictions consider our rowing lessons as
subject to sales tax.

We seek your advice as to whether or not our business activity of providing
rowing lessons to children and adults is subject to state or local sales tax AT THIS
LOCATION.

DEPARTMENT’S RESPONSE:

The Illinois Retailers’ Occupation Tax Act imposes a tax upon persons engaged in this
State in the business of selling tangible personal property to purchasers for use or consumption.
86 Ill. Adm. Code 130.101. The Use Tax Act imposes a tax upon the privilege of using in this
State tangible personal property purchased at retail from a retailer. 86 Ill. Adm. Code 150.101. If
no tangible personal property is being transferred to the customers, then neither Illinois Retailers’
Occupation Tax nor Use Tax would apply. Likewise, the Service Occupation Tax Act and
Service Use Tax are imposed on the transfer of tangible personal property incident to sales of
service. 86 Ill. Adm. Code 140.101 and 160.101. Depending on the nature of the transaction,
Service Occupation Tax or Service Use Tax could apply, but if no tangible personal property is
being transferred to participants incident to the services being provided, then neither Illinois
Service Occupation Tax nor Service Use Tax would apply.

I hope this information is helpful. If you require additional information, please visit our
website at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at
(217) 782-3336. ]

Sincerely,

Debra M. Boggess
Associate Counsel

DMB:ej

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