When a company leases GPS units to golf courses that in turn charge golfers a fee to use them, who owes Texas sales tax — the company leasing to the course, or the course charging the golfer?

Plain-English summary

A CPA wrote in for a client that installs GPS units in golf carts and clubhouses, using several types of agreements with golf courses across different states — leasing the equipment to golf courses, charging a per-round fee, or a "golfer's choice" model. The golf courses in turn charge golfers a fee to cover their own costs. The CPA's question: who owes Texas sales tax — is it the fee the golf course charges the golfer, or the rental/lease payment the golf course pays to the GPS company?

The Comptroller's answer: the golf course can issue the GPS company a resale certificate for units installed on carts that are held for rental to golfers — so no tax applies to that upstream lease payment. Instead, sales tax is due on the rental of the golf cart to the golfer (the end user). The one carve-out: GPS or other equipment that's located in the clubhouse and never actually transferred to the customer's possession stays taxable to the golf course as the end user, since it isn't being resold or rented out to anyone.

What this means for you

Golf courses leasing GPS or other accessory equipment for cart rentals

You can buy equipment you'll rent out (bundled into a golf cart rental) tax-free by issuing your equipment vendor a resale certificate — but you must then collect sales tax on your rental charge to the golfer. Equipment that stays behind the counter and isn't handed over to the customer doesn't qualify for that resale treatment; you owe tax on it as the buyer.

Companies leasing GPS units or similar equipment to golf courses (or similar venues)

Whether you should collect tax on your lease to the course depends on whether the course is reselling/re-renting that equipment to its own customers. If the course gives you a valid resale certificate for units held for onward rental, don't charge tax on your lease to the course — the tax obligation shifts downstream to the course's rental charge to the golfer.

Accountants and tax professionals

This is a straightforward resale-chain analysis: tax attaches once, at the final rental to the end user (the golfer), as long as the upstream equipment purchase/lease is properly documented with a resale certificate. Equipment retained for the seller's own use (not transferred to the customer) breaks that chain and is taxable at that point instead.

Common questions

Q: Does the GPS leasing company need to collect tax when it leases units to the golf course?
A: No, if the golf course issues a valid resale certificate for units that will be held for rental to golfers — that lease payment is not taxed.

Q: Who owes the tax on the golf cart rental with the GPS unit attached?
A: The golf course must collect Texas sales tax on its rental charge to the golfer, the end user of the equipment.

Q: What about GPS or other equipment kept in the clubhouse rather than on the carts?
A: If it's never transferred to the customer, it remains taxable to the golf course as the end user — it doesn't qualify for the resale-certificate treatment.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200006387L

Original ruling text

June 7, 2000

From: Gilbert Zamora

To: **

Subject: Sales Tax issue

Dear **:

Thank you for your e-mail inquiry.

I am a CPA in CITY that has a client who has a business that installs GPS units
in golfcarts and club houses. Several different types of agreements are set
up, including leasing the equipment to the golf courses, per round charges, and
golfer's choice. Also, these courses are located in different states. The
question I have is, who collects the sales tax on the rental of this equipment?
The golf courses will charge the golfer a fee in order to cover their costs.
Is this fee subject to the sales tax, or is the rental payment from the golf
course to my client subject to the sales tax? It's my understanding that the
end user is the one subject to the tax, but could you please help clarify this
for me?

Response: The golf course may issue a resale certificate for the rental of GPS
units installed on its golf carts that are held for rental. Sales tax is due
on the rental of the golf cart to golfers. Equipment located in the clubhouse
that is not transferred to the customer is taxable.

This opinion is based on the facts presented. Other facts though similar may
provide a different result.

I hope this information answers your questions. If you need additional
information, please call me toll-free at 1-800-531-5441, extension 3-4502. The
direct line is 512/463-4502. You may also write to Tax Policy Division,
Comptroller of Public Accounts. You may also e-mail our tax help section at: