Are leases of stadium suites, hospitality chalet/tent rentals, and seat-rights memberships at sporting events subject to Kansas sales tax?

Plain-English summary

A venue operator asked how Kansas sales tax applies to three offerings at its sporting events: leases of suites, hospitality chalet/tent rentals, and a seat-rights membership program. The Department reached a mixed result - the suites and the membership are taxable admissions, but the hospitality rentals are a nontaxable service.

The Department's two-step framework. "In deciding whether a particular transaction is subject to sales tax, a two step analysis is generally necessary": first, whether the sales tax act "generally imposes tax on the type of transaction," and second, whether the act "provides an exemption." As a rule, tax is imposed on all transfers or uses of tangible personal property, but on services "only [for] those transactions[] which are specifically enumerated in the sales tax act," with exemptions allowed as enumerated.

Suites - taxable as part of an admission. "The lease of a suite is seen as being part of the total charge that a person pays for admission to a 'place providing amusement.'" The Department said "the total charge should be seen as the charge for the admission ticket, plus the lease payment for the suite" - so the suite lease is folded into the taxable admission charge.

Hospitality chalet/tent rentals - a nontaxable service. These are described in the ruling as tents and ancillary items (tables, chairs) rented to users for short periods, with the operator renting the tents from local rental retailers who pitch them on the operator's property. The Department "concluded that the [chalet/tent] rentals are a service" that "is not subject to the Kansas state sales tax or local sales taxes," because "the type of service you describe has not been enumerated in the sales tax act as a service which is subject to tax." The catch: the provider "must pay sales tax on all articles of tangible personal property and all services purchased by [it] in Kansas which enable [it] to provide the nontaxable service."

Membership program - taxable as part of an admission. The program grants "seat rights" for specified seats in exchange for an upfront fee (season tickets are bought separately). "The department asserts that charges for [the] Membership are taxable as part of the charge for 'admission to a place providing entertainment.'"

Bottom line: suite leases and seat-rights memberships are taxable because they are part of the admission charge to a place providing amusement or entertainment, while the hospitality tent/chalet rentals are an unenumerated - and therefore nontaxable - service on which the provider itself pays tax on its inputs.

What this means for you

Stadium and event-venue operators

Treat a suite lease as part of the taxable admission charge - the admission ticket plus the suite payment are taxed together. Do the same for a seat-rights membership fee, which is taxable as part of an admission to a place providing entertainment.

Hospitality tent/chalet rentals

If you provide short-term hospitality tent/chalet rentals as a service that is not enumerated in the sales tax act, you do not charge Kansas state or local sales tax on that service. But you pay sales tax on the tangible personal property and services you buy in Kansas to provide it - for example, the tents you rent from local retailers and the tables and chairs you supply.

Why services split from admissions here

Admissions to places of amusement or entertainment are taxable, so charges bundled into an admission (suites, seat rights) are taxed. A stand-alone service is taxable only if the statute specifically enumerates it - and this hospitality rental service is not enumerated.

Common questions

Q: Is leasing a stadium suite taxable in Kansas?
A: Yes. The Department treats the suite lease as part of the total charge for admission to a place providing amusement, so it is taxable along with the admission ticket.

Q: Are the hospitality tent/chalet rentals taxable?
A: No. The Department concluded they are a service that is not enumerated in the sales tax act, so they are not subject to Kansas state or local sales tax. The provider pays tax on the property and services it buys to provide them.

Q: Is the seat-rights membership fee taxable?
A: Yes. The Department asserts that the membership charges are taxable as part of the charge for admission to a place providing entertainment.

Citations and references

• The Department applied the general Kansas rule that sales tax reaches transfers/uses of tangible personal property and only those services specifically enumerated in the sales tax act, plus the taxability of admissions to places providing amusement or entertainment. On that basis it held that suite leases and seat-rights memberships are taxable as part of an admission charge, while unenumerated hospitality tent/chalet rentals are a nontaxable service on which the provider pays tax on its own Kansas purchases. No specific K.S.A. section was cited in the ruling for the holding.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2000-056

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

November 7, 2000

XXXXXXXXXXX
XXXXXXXXX
XXXXXXXXXX

The purpose of this letter is to respond to your letters dated November 8, 1999 and January 12, 2000. In your letters, you ask for guidance on the taxability of the leases of suites, hospitality XXXXand XXXXXX membership fees. Your letter states in pertinent part:

[This letter] is regarding the sale tax status of our suites and hospitality chalets. These are hospitality areas that companies and organizations have leased for multiple years for use XXXXXXXXXXX weekends. The suite payments are broken into a one-time administrative fee and yearly rental, starting in XXXXX. The XXXXX payment will work similarly to the suite program. Are these areas taxable?

Per my telephone conversation with XXXXX, I was provided addition information pertaining to the leasing of suites and XXXXXX. The suites are real property. The suites are leased to a various companies and individuals for viewing sporting events and entertaining their guests.

The XXXXXXX are tents and other ancillary items that are rented to users, usually, for a periods of less than a week. Your company rents the tents from local rental retailers. The rental retailer pitches the tents on your property. Other items such as tables and chairs are included pursuant to the specifications of the lessee.

XXXXXXX offers individuals and entities the opportunity to enter into a XXXXXX Agreement. Under the XX XXX, a "XXXXXX" is granted seat rights with respect to a number of seats located in a specific area of the facility. The founding fan pays an upfront fee ranging XXXXXXX per seat for the seat rights. Season tickets are purchased separately.

In deciding whether a particular transaction is subject to sales tax, a two step analysis is generally necessary. The first step is to determine whether the sales tax act generally imposes tax on the type of transaction in question. The second step is to determine whether the act provides an exemption for the particular type of transaction.

As a rule, sales tax is imposed on all transactions involving the transfer or use of tangible personal property. With services, however, tax is imposed only on those transactions, which are specifically enumerated in the sales tax act. Exemptions for transactions involving either tangible personal property or services are allowed as specifically enumerated.

Suites

The lease of a suite is seen as being part of the total charge that a person pays for admission to a "place providing amusement." In this case, the total charge should be seen as the charge for the admission ticket, plus the lease payment for the suite.

XXXXXXX

After reviewing the information provided in your letter and telephone conversation, we have concluded that the XXXX rentals are a service. This service is not subject to the Kansas state sales tax or local sales taxes. This determination is based on our belief that the type of service you describe has not been enumerated in the sales tax act as a service which is subject to tax. You should be aware, however, that they must pay sales tax on all articles of tangible personal property and all services purchased by you in Kansas which enable them to provide the nontaxable service.

XXXXXXX Membership

The department asserts that charges for XXXX Membership are taxable as part of the charge for "admission to a place providing entertainment."

This private letter ruling is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to make an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects this private letter ruling.

Sincerely,

Mark D. Ciardullo
Tax Specialist

Date Composed: 11/07/2000 Date Modified: 10/11/2001

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