When must an entertainment promoter accrue Kansas sales tax on admission tickets provided to performers, vendors, media, the public, or employees?

Plain-English summary

An entertainment company provided concert and theater tickets to bands, advertisers, venue owners, sponsors, radio stations, critics, the public, and employees under several arrangements. Kansas taxed admissions under K.S.A. 79-3603(e), and K.S.A. 79-3602(c) treated a transaction for consideration as a sale even when payment was not cash.

When a contract required tickets in exchange for performance, advertising, venue access, sponsorship, signage, radio time, or another benefit, the promoter was not making a gift. It had to self-accrue and remit state and local sales tax on the tickets' face value.

Tickets given to media critics or used to “paper the house” by giving them to the general public were generally not taxable because the promoter received nothing of value in exchange.

Employee tickets depended on the employment arrangement. Tickets promised in addition to normal pay were taxable at face value; tickets outside the employment contract were treated as gifts and not taxed. The Department cautioned that the employee-ticket conclusion could change if a regulation or other policy was later published.

What this means for you

Event promoters

Treat ticket barter like a sale. If tickets are consideration for goods or services, accrue tax on face value.

Marketing teams

Document true promotional giveaways separately from contractual ticket transfers.

Payroll teams

Check whether employee tickets are promised compensation or discretionary gifts under the arrangement described in the letter.

Common questions

Q: Are tickets exchanged for advertising taxable?
A: Yes. The advertising is consideration, so tax applied to the tickets' face value.

Q: Are free tickets to critics taxable?
A: Generally no when the promoter receives nothing of value in exchange.

Q: What about tickets given to the general public?
A: The letter treated true giveaways as generally nontaxable for lack of consideration.

Q: Are employee tickets taxable?
A: Yes if promised as compensation; otherwise the letter treated them as gifts.

Citations and references

• K.S.A. 79-3603(e) — gross receipts from admissions
• K.S.A. 79-3602(c) — sale and consideration definition

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: O-2002-006

Original ruling text

Opinion Letter

Body:

Office of Policy & Research

March 7, 2002

XXXX
XXXX
XXXX

RE: Your February letter.

Dear Gentlemen:

Thank you for recent letter. Your company is in the entertainment business. Some of its subsidiaries promote live entertainment such as concerts and theater. They provides admission tickets to different people under a variety of scenarios. You ask if these tickets are subject to Kansas sales tax. Your questions require a review of some of the basic tenets of Kansas sales tax law.

Kansas taxes "the gross receipts from the sale of admissions to any place providing amusement, entertainment or recreation services. . . ." K.S.A. 79-3603(e). The term "sale" is defined by statute:

"Sale" or "sales" means the exchange of tangible personal property, as well as the sale thereof for money, and every transaction, conditional or otherwise, for a consideration, constituting a sale, including the sale or furnishing of electrical energy, gas, water, services or entertainment taxable under the terms of this act and including, except as provided in the following provision, the sale of the use of tangible personal property by way of a lease, license to use or the rental thereof regardless of the method by which the title, possession or right to use the tangible personal property is transferred. The term "sale" or "sales" shall not mean the sale of the use of any tangible personal property used as a dwelling by way of a lease or rental thereof for a term of more than 28 consecutive days. K.S.A. 79-3602(c).

You list a number of different transactions. In most of them, your company contracts with another party. Under these contracts, the party that you contract with receives money and the tickets or the tickets as consideration for something they provide you in return. This is a "sale" under the Kansas definition. For example, your contract with a band may provide that the band receives money plus a fixed number of tickets. Your contract for advertising services may provides that the advertising service receives money plus a fixed number of tickets. Your contract with the venue owner may provide that you pay over a percentage of receipts and provide them with a set number of tickets. Your contract with the sponsor may provide that you pay them part of the concert receipts and provide them with tickets in exchange for advertisements and signage at the concert. Your contract with a radio station may secure air time for tickets only. These contracts may be oral or written.

In these situations, you are providing the tickets as a requirement of the contract and receiving something of value in exchange. On transactions where you provide tickets under a contractual agreement and receive something of value in exchange (a consideration), you should self accrue and remit state and local sales tax on the face value of the tickets. Under the Kansas definition, these are taxable sales of admission tickets where the consideration is the benefits you receive under the contract. You are not giving these tickets away.

Rather than contracting to provide tickets, you sometimes give tickets to media critics who cover concerts and other events. You occasionally "paper the house" by giving away tickets to the general public. Arguably, neither of these transactions is be subject to sales tax since you do not receive something of value in exchange for the ticket. You also provide tickets to employees. Kansas does not have a regulation that addresses this type of transaction. Generally, employers who give employees something from their resale inventory are required to accrue sales tax on the cost of item. Admission tickets are different from resale inventory. Accordingly, if your employment contracts provide that employees will receive tickets in addition to their normal pay, such tickets should be taxed at face value. If not, the tickets should be considered to be gifts and not taxed. Please note that this determination may change if a regulation or other policy determination is published concerning the issue. Giving tickets away generate good will and possibly other tangible benefits.

I believe I have answered your questions. If you wish to discuss anything, please call me at 785-296-3081.

Sincerely,

Thomas E. Hatten
Attorney/Policy & Research

Date Composed: 03/18/2002 Date Modified: 03/18/2002

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