Are tickets to a nonprofit sports league's championship game exempt from Texas sales tax, and does hiring a for-profit company to help produce the event jeopardize that?

Plain-English summary

A local host committee bidding to bring a professional football league's championship game ("THE GAME," as the redacted ruling calls it) to a Texas city asked the Comptroller to confirm that tickets sold by the league would be exempt from Texas sales tax. The league is organized as a 501(c)(6) nonprofit trade association and would control all ticket allocation — 17% of tickets go to each participating team, 5% to the host team, 1% to each other team, and the rest are sold directly to the public through a random drawing.

Under Texas law, a spectator sporting event like this is generally a taxable "amusement service" (Tax Code §§ 151.010, 151.0101, 151.0028; 34 TAC § 3.298). But § 151.3101 carves out an exemption for amusement services "exclusively provided by" a nonprofit corporation or association (other than a 501(c)(7) social club), as long as proceeds don't benefit any individual except as part of a purely public charity's services. Since the league is a 501(c)(6) nonprofit, will be the exclusive ticket seller, and the proceeds won't benefit any individual, the Comptroller agreed the exemption applies to ticket sales for the game itself.

The exemption comes with real limits and conditions the letter spells out carefully:

• It only covers tickets — the league (or committee) must still collect and remit sales tax on other taxable items sold at the event, explicitly including souvenirs, concession sales, programs, and parking.
• The nonprofit must hold itself out publicly as the provider of the amusement service — in advertising, billboards, on the tickets themselves, or other event media — and the face of the tickets should state that the event is exempt from Texas sales and use tax.
• Hiring a for-profit company to actually produce the event does not forfeit the exemption, but only if the nonprofit continues to hold itself out as the event's provider and does not become a joint venturer with the for-profit production company (Rule 3.298(g)(3)). Cross that line — become a genuine joint venture rather than nonprofit-hires-contractor — and the exemption is at risk.

What this means for you

Nonprofit sports leagues and associations hosting ticketed events

Structure your league or association as the clear, public-facing "provider" of the event — on advertising and on the ticket face itself — to preserve the § 151.3101 exemption on ticket sales. Remember the exemption is narrow: it doesn't extend to souvenirs, concessions, programs, or parking, which remain fully taxable regardless of the nonprofit's status.

Host committees and local organizers bidding for major nonprofit-league events

If your bid structure involves the league selling tickets while a local committee or for-profit producer handles logistics, keep the legal relationship as a service/vendor contract rather than a joint venture — the exemption analysis specifically flags joint-venture status as the line that would jeopardize it.

Accountants and tax professionals advising nonprofits on major events

This letter is a clean roadmap for the § 151.3101 nonprofit amusement-services exemption: confirm 501(c)(6) (or similar, excluding 501(c)(7)) status, confirm the nonprofit is the sole/exclusive provider, confirm no individual benefits from proceeds, and confirm the nonprofit doesn't cross into a joint venture with any for-profit help it hires. Flag ancillary revenue (concessions, merchandise, parking) as taxable regardless.

Common questions

Q: Are all tickets to nonprofit-run sporting events exempt from Texas sales tax?
A: Only if the amusement service is exclusively provided by a qualifying nonprofit (not a 501(c)(7) social club) and proceeds don't benefit any individual except as part of a purely public charity — this letter confirms that test was met for a 501(c)(6) league's championship game tickets.

Q: Does the exemption cover souvenirs, concessions, or parking at the game?
A: No — sales tax must still be collected and reported on all taxable items sold at the event, including souvenirs, concession sales, programs, and parking.

Q: Can a nonprofit hire a for-profit company to produce the event without losing the exemption?
A: Yes, as long as the nonprofit continues to hold itself out as the provider of the event and doesn't become a joint venturer with the for-profit company.

Q: What has to appear on the tickets themselves?
A: The face of the tickets should reflect that the event is exempt from Texas sales and use tax, consistent with the nonprofit holding itself out as the provider.

Q: Can any nonprofit sports organization rely on this exact letter?
A: Not directly. This is a Texas STAR letter ruling binding on the Comptroller only for the taxpayer it addresses (34 Tex. Admin. Code Rules 3.1, 3.10). Confirm your own organizational structure and event-production arrangement with a tax professional.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.051 (imposition of sales tax)
• Tex. Tax Code § 151.010 (definition of taxable item)
• Tex. Tax Code § 151.0101 (taxable services, including amusement services)
• Tex. Tax Code § 151.0028 (definition of amusement services)
• Tex. Tax Code § 151.3101 (nonprofit exemption for amusement services)
• 34 Tex. Admin. Code § 3.298 (amusement services; (a)(4) provider definition; (g) nonprofit exemption; (g)(3) hiring a for-profit producer)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200101009L

Original ruling text

January 23, 2001

Dear **:

Thank you for your letter request on behalf of your client, the **
("Committee"). The Committee is requesting an opinion letter on the taxability
of tickets to be sold by the ** ("FOOTBALL LEAGUE") to its
championship game, known as THE GAME, which may be played in **,
Texas, in the year **. Your fact situation, discussion and
authorities cited are restated below followed by my response.

Facts
The Committee is bidding to host THE GAME. The FOOTBALL LEAGUE, which is a
non-profit association described in 501(c)(6) of the Internal Revenue Code,
will control the allocation of and sell all tickets to THE GAME. Some of THE
GAME tickets will be sold by the FOOTBALL LEAGUE to FOOTBALL LEAGUE franchise
teams, with the tickets being distributed as follows: seventeen percent (17%)
to each team participating in THE GAME, five percent (5%) to the team hosting
THE GAME and l one percent (1%) to all other teams.

Additionally, the FOOTBALL LEAGUE will sell tickets directly to members of the
general public, who will be selected through a random drawing of all written
requests for such tickets.

Law
Section 151.051 of the Texas Tax Code imposes a tax of 6.25 % percent on each
sale of a taxable item in this state. (Additional local governmental sales
taxes may also be imposed).

"Taxable Item" is defined as tangible personal property and taxable services.
VTCA Tax Code 151.010. "Taxable Services" is defined to include amusement
services. VTCA Tax Code 151.0101. "Amusement Services" means the provision of
amusement, entertainment, or recreation. VTCA Tax Code 151.0028. Furthermore,
the Texas Administrative Code defines "amusement services" to include spectator
sports, such as a football game. 34 TAC 3.298.

Section 151.3101 of the Texas Tax Code provides an exemption from sales and use
taxes. An exemption is available if the amusement services are exclusively
provided by a "non-profit corporation or association, other than an entity
described in 501(c)(7), Internal Revenue Code of 1986, " and so long as "the
proceeds do not go to the benefit of an individual except as a part of the
services of a purely public charity. "

Analysis
The Committee seeks a letter opinion that the sale of tickets by the FOOTBALL
LEAGUE to THE GAME, which may be played in **, Texas, would be
exempt from state sales and use taxes. Pursuant to the Texas Administrative
Code, a football game is considered an amusement service which is normally
subject to a sales or use tax. Section 151.3101 of the Texas Tax Code, however,
provides an exemption from state sales and use taxes for amusement services
exclusively provided by a non-profit association. The FOOTBALL LEAGUE'S selling
tickets to THE GAME fits within the definition of "a non-profit association"
providing "the amusement service, " the proceeds of which do not go to the
benefit of any individual.

Section 151.3101 of the Texas Tax Code appears to apply to the sale of THE GAME
tickets by the FOOTBALL LEAGUE because the FOOTBALL LEAGUE is a non-profit
entity described in 501 (c)(6) of the Internal Revenue Code, the FOOTBALL
LEAGUE will be the exclusive provider of tickets to THE GAME, and the proceeds
from the sales of tickets will not go to the benefit of any individual.
Consequently, the FOOTBALL LEAGUE'S production of a THE GAME and sale of the
tickets thereto fits within the exemption provided in Section 151.3101.

Request for Opinion
Based upon the facts, discussion and authorities set forth herein, it is
respectfully requested that the Comptroller of Public Accounts, Sales Tax
Policy Division, issue a letter opinion confirming that the sale of tickets by
the FOOTBALL LEAGUE to THE GAME, which may be played in **, Texas,
in the year ** would not be subject to any Texas sales and use tax.

Response: I concur that the FOOTBALL LEAGUE, as a 501(c)(6) non-profit
organization, qualifies for the exemption provided under Section 151.3101(a)(3)
of the Texas Tax Code and subsection (g) of Rule 3.298 - Amusement Services.

As such, tickets sold by the FOOTBALL LEAGUE to THE GAME, which may be played
in **, Texas in the year ** would not be subject to
Texas sales and use tax. Sales tax must be collected and reported on sales of
taxable items, such as souvenirs, concession sales, programs and parking.

Tickets for an amusement service qualify for exemption as long as the nonprofit
entity is the "provider", as that term is defined in Rule 3.298(a)(4), and it
holds itself out as the provider (in advertising, billboards, tickets, or other
media promoting the event). The face of the tickets should reflect that the
event is exempt from Texas sales and use tax.

A nonprofit group is allowed to hire a for-profit organization to provide the
expertise to produce an event without loss of the exemption. 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. Rule 3.298(g)(3)

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, you may e-mail our tax help section at .
You may also 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.

Sincerely,

Gilbert Zamora
Tax Policy Division