How did Texas tax and source ticket sales for home games, mail orders, subcontractors, and games outside Texas?

Plain-English summary

The requester represented a Texas professional-football franchise and asked how sales and use tax applied to tickets sold at the seller's outlets, by mail, and through independent ticket distributors.

For the Texas home games, the Comptroller agreed that the aggregate tax rate of the city where the ticketed event was held governed both outlet and Texas mail-order sales. The Comptroller also agreed that the event city received the allocation of the city sales tax.

For tickets mailed outside Texas to a spectator, the seller was not responsible for collecting, reporting, or paying Texas sales tax on the non-Texas mail-order sale. The Comptroller added, however, that use tax became due when the spectator attended the Texas game, and the seller could collect and remit it for the spectator's convenience.

The Comptroller did not agree that the seller necessarily escaped responsibility when subcontractors sold tickets. The agency could treat the subcontractors as the seller's agents if doing so would collect the tax more efficiently. The seller was not required to collect Texas sales tax on tickets for games played outside Texas.

Common questions

Which tax rate applied to tickets for Texas home games? The aggregate rate of the city where the game was held, including for the seller's other ticket outlets and Texas mail-order sales.

Where was the city sales tax allocated? To the city where the ticketed event was held.

What happened when a home-game ticket was mailed outside Texas? The seller did not owe sales tax on that mail-order sale, but use tax became due when the spectator attended the game. The seller could collect and remit that use tax.

Could independent ticket distributors eliminate the seller's responsibility? Not necessarily. The Comptroller said it could regard them as the seller's agents if that would collect the tax more efficiently.

Were tickets for games outside Texas subject to Texas sales tax? No, according to the letter.

Citations and references

• 34 Tex. Admin. Code Rule 3.298(c) — cited for non-Texas mail-order sales.
• 34 Tex. Admin. Code Rule 3.298(h)(3) — cited for treating subcontractors as agents.
• 34 Tex. Admin. Code Rule 3.298(j) — cited for the ticket-sales answers the Comptroller approved.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8604L0718C12

Original ruling text

April 11, 1986

Dear ***:

Thank you for your recent telephone call concerning my April 1, 1986
response to your letter of March 24, 1986.

I concur with the answers to Questions 1 and 2 (reference section (j) of
the enclosed Rule 3.298).

I also concur with the answer to Question 3. The seller (***)
is not responsible for collecting, reporting and paying sales tax on non-Texas
Mail Order Sales of Tickets for home games (reference section (c) of Rule 3.298).
However, the use tax is due when the spectator attends the game and the seller
may collect and remit the tax for the convenience of the spectator and, of
course, the state.

I concur with the answer to Question 4 regarding allocation of city sales
tax to CITY, Texas. I do not concur with the statement regarding the sales
tax responsibility of the seller when using subcontractors to sell tickets.
The Comptroller may regard the subcontractors as agents of the seller if
the Comptroller determines the tax will be collected more efficiently
(reference section (h)(3) of Rule 3.298).

The seller is not required to collect Texas sales tax on sales of tickets
for games played outside Texas.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

If you have any, questions or need more information, please call us at
1-800-252-5555 toll free from anywhere in Texas. You may write us at the
Tax Administration Division.

Sincerely,

Tax Policy Section
Tax Administration Division

Comptroller of Public Accounts
Tax Policy Section
Capitol Station
Austin, Texas 78774

Attention: ***

Re: ***
Taxpayer Number *****

Gentlemen:

This firm represents ***. As such, we are requested from time
to time to answer certain questions regarding Texas sales and use tax
matters. It is a result of this representation that I am sending you this
letter requesting your policy or position with respect to the matters
hereinafter addressed. I discussed these matters with ***** of
your office on March 20, 1986.

***, a Texas limited partnership (referred to herein as the "Seller")
is engaged in the business of owning, operating and managing a National Football
League franchise known as the "**". The * play professional
football games at ****, located in the CITY, COUNTY, Texas
County, Texas (such games are referred to herein as "Home Games"). The Seller
sells admission tickets to the Home Games. The admission tickets are sold in
three different manners, set forth as follows:

Seller's Ticket Outlets. Seller has two ticket outlet locations which are
leased and/or owned by Seller and staffed with Seller's employees. Location #001
is *** (Center, **, CITY, COUNTY, Texas. Location #002 is
****, CITY, COUNTY, Texas. At both these locations, the tickets are
sold and delivered directly to the purchaser.

Mail-Fulfillment Sales. Seller sells admission tickets through a mail-order
program usually whereby the purchaser fills in an order and mails the order to
the Seller. The Seller then mails the admission tickets directly to the Purchaser
and invoices the Purchaser for any unpaid amount. All admission tickets sold on
a mail order basis are either (i) mailed to addresses located within the State
of Texas ("Texas Mail Order Sales") or (ii) mailed to addresses located outside
the State of Texas ("Non-Texas Mail Order Sales"). The mail fulfillment operation
was located at *** Expressway, CITY, COUNTY, Texas until about January 15,
1986, but since that date the mail fulfillment operation is located at *****.

Subcontractor Sales. Finally, the Seller will subcontract the sale of admission
tickets to independent third party ticket distributors. The subcontractor will
actually make the sale of the admission tickets and remit a net amount to the
Seller, being the gross receipts net of applicable sales taxes and contractual
commissions. The subcontractor is supposed to collect, report and pay over to the
State of Texas all applicable sales taxes.

Based upon the foregoing, we are hereby requesting that you confirm, as being
correct, the following questions and answers regarding the proper collection,
reporting and payment of Texas sales and use taxes.

Question No. 1. With respect to ticket sales occurring at the Seller's Ticket
outlets, which city's aggregate sales tax rate (state, city and MTA) governs
the sales tax to be collected by the Seller from the purchaser at the Ticket Outlets?

Answer to Question No. 1. The aggregate sales tax rate of the city in which the
ticketed (event is held governs the sales tax to be collected by the Seller at
all of Seller's Ticket Outlets. Thus, since the Home Games are held in the City
of *** and the aggregate sales tax rate there is 6-1/8%, then the Seller
must collect 6-1/8% on ticket sales made at all of Seller's Ticket outlets,
regardless if the aggregate sales tax rate of the city in which any particular
Ticket Outlet is located is different. of course, the foregoing is subject to a
change in sales tax rates.

Question No. 2. With respect to Texas Mail Order Sales of tickets, which city's
aggregate sales tax rate governs the sales tax to be collected by the Seller from
the purchaser?

Answer to Question No. 2. The aggregate sales tax rate of the city in which the
ticketed event is held governs the sales tax to be collected by the Seller on all
Texas Mail Order Sales. Thus, since the Home Games are held in the City of
*** and the aggregate sales tax rate there is 6-1/8%, then the Seller must
collect 6-1/8% on all Texas Mail Order Sales regardless if the aggregate sales tax
rate of the city in which the mail fulfillment operation is located is different.
Of course, the foregoing is subject to a change in sales tax rates.

Question No. 3. With respect to Non-Texas Mail order Sales of tickets, is the
Seller responsible to collect, report and pay over to the State of Texas either
any sales tax or any use tax?

Answer to Question No. 3. No, the Seller is not responsible to collect, report
and pay, over to the State of Texas either any sales tax or any use tax.

Question No. 4. With respect to all sales at Seller's Ticket Outlets and Texas
Mail Order Sales, which city receives the allocation of the 1% city sales tax?

Answer to Question No. 4. The city in which the ticketed event is held receives
the allocation of the 1% city sales tax on all taxable ticket sales including,
ticket sales made at Ticket Outlets located outside the particular city and ticket
sales made through mail order operations located outside the particular city.
Thus, since the Home Games are held in the CITY, the City of *** is
entitled to receive the allocation of 100% of all city sales taxes collected on
all taxable ticket sales.

It is our understanding that the Seller is not responsible for the collection,
reporting and payment of sales taxes on ticket sales made by independent third
party subcontractors. Thus, if such subcontractors fail to collect and properly
report and pay over to the Comptroller of Public Accounts the sales tax with
respect to sales made by such subcontractors, then the Seller would have no
responsibility or liability to the State of Texas with respect to the unpaid
sales taxes. Please Confirm this understanding as being correct.

If you have any questions or comments concerning the foregoing, do not hesitate
to let me know. I would appreciate at written response to this letter as soon
as possible inasmuch as ticket sales are ongoing.

Sincerely yours,