When a driver-education company rents racetrack garage spaces to event registrants — some used to park cars, others used as hospitality tents or meeting space — does Texas sales tax apply to the full lump-sum garage rental fee?

Plain-English summary

A high-performance driver-education company rents an entire racetrack facility — including its garages — to host driving events, then separately offers registrants an optional garage rental. Registrants use the garage to park their car, work on it, or sometimes just as a meeting space or driver's lounge. The company argued the garage rental was a nontaxable rental of real property (like a temporary lease), not taxable motor vehicle parking. The Comptroller disagreed.

Texas taxes "motor vehicle parking and storage services" as one of its specifically listed taxable services. A "parking facility" under the rules includes garages and lots even if they're sometimes used for something other than parking. The company's own lease of the whole track from the facility owner is a nontaxable real property rental (a separate transaction), but when the company turns around and rents individual garages to registrants, that's a distinct, taxable service — because the garage remains available for parking a motor vehicle, even if the registrant chooses to use it as a hospitality tent or team meeting space instead.

The key rule: a lump-sum fee for a garage that includes vehicle parking is fully taxable, and can't be prorated down based on how much of the space is "really" used for parking versus other uses. The only way to carve out a non-taxable piece is a separately stated charge, reasonably allocated to the actual non-parking square footage, backed by documentation. Two carve-outs exist regardless: garages used only to store race cars that don't meet Texas's legal definition of a "motor vehicle" (not street-legal, no VIN registration) aren't taxable, and a garage rented with literally zero vehicle parking (e.g., purely for meetings) isn't taxable either. Local sales tax is sourced to wherever the track/event physically is.

What this means for you

Event organizers, racetracks, and venues renting garage or storage space

Don't assume a garage or storage-space rental is automatically a nontaxable real property lease just because customers use it for something besides parking. If a registered motor vehicle could be parked there, Texas treats the whole lump-sum charge as taxable motor vehicle parking — hospitality-tent or lounge use doesn't change that unless you separately bill and document the non-parking portion.

Businesses billing lump-sum vs. itemized charges

This ruling is a clean example of why itemization matters for tax planning: a single combined fee for parking plus something else pulls the whole amount into the taxable category, while a properly separated and documented non-parking charge can be carved out. "Reasonable allocation" based on actual space used is required — you can't just guess a percentage.

Accountants and tax professionals

Note the layered vehicle-type distinction: Texas's parking tax turns on whether the vehicle stored meets the § 152.001(3)(A) "motor vehicle" definition (self-propelled, designed for public-highway use). Non-street-legal race cars fall outside that definition, so garages used solely for those aren't subject to the parking tax even though they look identical to garages storing a street car. This is a fact-intensive distinction worth confirming for any track/event client with mixed vehicle types.

Common questions

Q: Does renting the whole racetrack facility trigger sales tax?
A: No — the company's own lease of the track (including its garages) from the facility owner is a nontaxable rental of real property, since the company isn't sub-leasing it as parking to the owner's tenant; it's a different transaction from what the company later charges its own registrants.

Q: Can I split the fee to reduce tax owed?
A: Only if you separately state a genuine non-parking charge and document it with a reasonable square-footage allocation. A single lump-sum fee that includes any parking availability is fully taxable and can't be prorated after the fact.

Q: What if a registrant only parks a non-street-legal race car in the garage?
A: Storing a vehicle that doesn't meet Texas's "motor vehicle" definition (not designed/registered for public roads) isn't taxable parking, per STAR Accession No. 9904336L.

Q: Does this ruling apply to my venue's parking or garage rentals?
A: Not automatically. This is a private letter ruling binding only on the Comptroller as to this taxpayer's specific facts. Similar facilities should confirm their own fee structure and documentation with the Comptroller or a Texas tax professional.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.051, § 151.010 (sales tax imposition; taxable item)
• Tex. Tax Code § 151.0101(a)(4) (motor vehicle parking and storage as a taxable service)
• Tex. Tax Code § 151.007 (Sales Price or Receipts)
• Tex. Tax Code § 152.001(3)(A) (definition of motor vehicle)
• 34 Tex. Admin. Code § 3.315(a)(2), (h), (j) (parking facility definition; taxability; local tax sourcing)
• 34 Tex. Admin. Code § 3.290(a)(11) (motor vehicle definition, repair/maintenance context)
• STAR Accession No. 8801L0864F10 (1988); No. 200204922L (April 4, 2002); No. 9904336L (April 22, 1999)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/202410023L

Original ruling text

October 18, 2024

RE: Private Letter Ruling No. PLR20240509150413

Dear **:

We issue this private letter ruling in accordance with Rule 3.1, Private Letter Rulings and General Information Letters. [ENDNOTE 1] We are responding to your request dated May 6, 2024. Detrimental reliance relief is provided in accordance with Rule 3.10, Taxpayer Bill of Rights.

** (Taxpayer) requested guidance on the taxability of garage rentals when provided with a nontaxable amusement service.

Facts Presented

Taxpayer is a high-performance driver education company that hosts driving events at racetracks, including a LOCATION in CITY, TX. Taxpayer rents the entire racing facility from LOCATION, including garages located within the facility.

Taxpayer then charges its customers (registrants) a registration fee to participate in these driving events and a separate fee for helmet rentals. Taxpayer also charges a separate garage rental fee, which is optional. Taxpayer offers registrants the option to rent single or multiple garage spaces during the event.

Taxpayer collects identifying information about all vehicles driven on the track. Taxpayer requires all registrants to pass a technical inspection of the vehicle and submit the inspection form to Taxpayer. The technical inspection form provides information on the vehicle's make, model, year, suspension and steering systems, driver train, safety and braking systems.

Taxpayer says many of the cars driven at these events are race cars like 2001 Formula Mazdas or 2002 Picchio prototypes. Vehicles such as these do not meet the definition of a motor vehicle under Section 152.001 (3)(A), which defines a motor vehicle as a self- propelled vehicle designed to transport persons or property on a public highway. The racecars may look like regular street legal vehicles with assigned vehicle identification numbers (VIN); however, they were not manufactured to be legally driven on the street and cannot be registered with the Department of Motor Vehicles (DMV).

Taxpayer’s registrants also drive vehicles that meet the definition of motor vehicle in Section 152.001(3)(A). These vehicles are registered with DMV and include Ford Mustangs, BMWs, Dodge Chargers, and Porsches.

If registrants rent a garage space, it may be used for parking, to change tires, to work on motor vehicles or race cars, for instructors to meet with students, or as a driver’s lounge.

Taxpayer claims the garage rental transaction is a temporary rental of real property. Therefore, the fees should be considered nontaxable rental of real property and not taxable motor vehicle parking. Additionally, Taxpayer contends that if sales tax applies, it should only be assessed on the square footage associated with motor vehicle parking, and not the entire garage.

Questions, Rulings, and Analyses

Our restatement of your questions is shown below, followed by our responses and analysis.

Question One: Is Taxpayer required to collect sales and use tax on garage rentals?

Ruling: Taxpayer is required to collect sales and use tax on garage rentals. Taxpayer is not renting real property to registrants.

Analysis: Section 151.051 (Sales Tax Imposed) imposes a sales tax on each sale of a taxable item in this state. The term “taxable item” includes tangible personal property and taxable services. See Section 151.010 (Taxable Item). Only the specifically enumerated services listed in Section 151.0101 (Taxable Services) are taxable. Motor vehicle parking and storage services are among the list of taxable services. Section 151.0101(a)(4).

Charges to store tangible personal property and the rental charge for self-storage units are not subject to sales tax. However, if the storage facility provides storage space for a motor vehicle, then sales tax is due on a charge for the parking and storage of motor vehicles, including the lease or rental of a parking facility. See STAR Accession No. 8801L0864F10 (1988).

Rule 3.315(a)(2) defines a parking facility as “a real property structure, such as a lot or garage, whether improved or unimproved, where parking is permitted for a fee. The term includes areas, which are specifically designed and used for parking, but may at times be rented or leased for purposes other than parking.”

Rule 3.290(a)(11) (Motor Vehicle Repair and Maintenance; Accessories and Equipment Added to Motor Vehicles; Moveable Specialized Equipment) defines a motor vehicle as a self-propelled unit designed to transport property separate from itself or persons other than the driver upon the public highways. See also Section 152.001(3)(A).

When Taxpayer rents the entire track facility from LOCATION, it is renting real property and LOCATION's rental fee is not subject to sales and use tax even though the facility contains some garage spaces. Taxpayer rents the track to provide its nontaxable educational service and it is not executing a sub-lease to rent the real property to the registrants. In addition to providing educational services, Taxpayer separately rents the parking garages to the registrants for a fee.

The rental of a parking facility, such as the LOCATION garages, is presumed to be taxable under Rule 3.315(h). A parking facility rented or leased for a purpose other than parking is not taxable, for example, a parking facility leased or rented to accommodate a flea market. See Rule 3.315(h)(1). Taxpayer's scenario is different. Taxpayer's fee for space in a garage does include parking but may also sometimes also include other uses. The lump sum rental or lease of a parking facility for an event, where there will be a combination of parking and non-taxable use of the facility, is taxable as the provision of motor vehicle parking. Rule 3.315(h)(2).

The definition of a parking facility includes areas designed for parking but with potential uses other than parking. Therefore, any use by the registrants for activities other than parking vehicles does not change the character of the space into anything other than a vehicle storage space. Taxpayer’s facts are similar to those in STAR Accession No. 200204922L (April 4, 2002) where that taxpayer rented its customers two parking spaces for a combination of motor vehicle and hospitality tent use. As the customer was entitled to use both spaces for parking, the fact that the customer used the second space for entertaining rather than actual parking did not transform a portion of the taxable fee into a nontaxable rental of real property.

Rule 3.315(h)(2) provides that a separately stated charge for the use of the area in the facility that is not devoted to motor vehicle parking is not taxable. The separately stated charges for the motor vehicle parking and the nontaxable use must, however, represent a reasonable allocation based on the area used for motor vehicle parking and the nontaxable use.

Parking and storing a vehicle that does not meet the definition of a motor vehicle in Section 152.001(3)(A), Rule 3.290(a)(11)is not taxable. As a result, Taxpayer is not required to charge its registrants sales and use tax for the storage of vehicles that do not meet the definition of a motor vehicle. See STAR Accession No. 9904336L (April 22, 1999). And if Taxpayer rents out a garage and no parking occurs in the facility, (e.g., a team rents one garage for meetings and social gatherings only), no sales tax is due.

Taxpayer would be required to collect tax on these types of rentals unless it receives and retains documentation such as an exemption certificate or contract, clearly describing the nontaxable activity. Rule 3.315(h)(1).

Question Two: Can Taxpayer prorate the lump-sum charge for garage rentals?

Ruling: No, the total lump-sum charge for a garage rental is subject to sales and use tax.

Analysis: The sales price of a taxable item means the total amount for which the taxable item is sold. See Section 151.007 (Sales Price or Receipts)

Taxpayer is required to collect sales tax on a lump sum charge for motor vehicle parking and storage services. The lump sum charge cannot be prorated based on such things as the size of the car or square footage used to park or store the motor vehicle because the charges are based on the registrant’s right to use all parking spaces or garage. See STAR Accession No. 200204922L (April 4, 2002).

Separate charges for the use of areas in the facility other than those devoted to parking motor vehicles are not taxable. There must, however, be a reasonable allocation between the charges for motor vehicle parking and nontaxable use based on the areas utilized. Rule 3.315 (h)(2).

Question Three: What is the local sales tax rate Taxpayer should charge for the motor vehicle parking and storage services (garage rental)?

Ruling: Local sales and use tax is due based on the location where the parking service occurs. Rule 3.315(j). Taxpayer's motor vehicle parking and storage services are generally provided at the tracks or facilities where it hosts its driving events. Taxpayer may use the Sales Tax Rate Locator to determine the applicable local sales tax rate for events in Texas.

Comptroller’s Decisions and STAR documents cited can be found on the Comptroller’s State Tax Automated Research (STAR) system. The Texas Tax Code, Texas Administrative Code, and the STAR system are accessible at www.comptroller.texas.gov/taxes/.

If you have questions about this private letter ruling, please email us through our website at https://comptroller.texas.gov/web-forms/tax-help/ and reference Private Letter Ruling No. 20240509150413.

Sincerely,

Tax Policy Division – Indirect Taxes

Texas Comptroller of Public Accounts

ENDNOTE

1 Unless otherwise indicated, all references to “Section” are to the Texas Tax Code, and all references to “Rule” are to Title 34 of the Texas Administrative Code.