Were annual bicycle-association membership fees and per-race competitor entry fees subject to Texas sales tax?

Plain-English summary

The Texas Comptroller said the bicycle association's annual membership fees were not taxable. The package allowed racing at sanctioned tracks and incidentally included accident insurance and a newsletter subscription.

Per-race entry fees also were not taxable. They funded awards, grounds maintenance, liability insurance, land lease, utilities, and related race costs; participants entered the facility on designated race days to compete, while spectators paid no admission or parking fee.

The letter separately gave historical state and Austin MTA rates for any future taxable sales, including a January 1, 1987 state-rate increase.

What this means for you

The ruling addressed a competitor organization rather than a spectator-admission business. The membership package and entry fees were tied to participation in sanctioned racing, not general facility access.

Common questions

Were annual membership fees taxable? No.

Were race entry fees taxable? No.

Did spectators pay admission in the stated facts? No.

Did the letter's listed tax rates remain permanent? No. They were historical rates surrounding a 1987 increase.

Citations and references

• Comptroller Rule 3.298 — cited by the taxpayer for non-amusement services and entry fees.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8612L0779A05

Original ruling text

December 1, 1986

Dear ***:

I received a taxability question from *** which is restated
with response below.

Situation:
Our business operations consist of two (2) monetary charges for which we
must account:

1. memberships - As a member track of the ASSOCIATION ABC which is
   headquartered in ***, Arizona, we hold races according to
   the rules and schedule promulgated by them. We collect $**
   from each participant annually which entitles them to the benefits of
   racing at any of the approximately 300 sanctioned tracks across the
   United States and Canada; and incidentally, also gives each participant
   both the secondary accident insurance while actually, participating in
   the activities and a subscription to the monthly newsletter. No cost
   breakdown of the insurance or subscription is known - it is a total package.
   We send the total $**** for each individual in to the ASSOCIATION
   ABC and receive no benefit from it. We believe the receipts are not taxable
   under your Rule 3.298(2), A and B Non-amusement services.

2. entry fees - The entry fees are purchased by each participant at
   each race from us. The fee covers the cost of awards, grounds
   maintenance, liability insurance, land lease, utilities, etc.
   Spectators are not charged admissions nor is there any charge for
   parking. We have seldom, if ever, made a profit from this
   enterprise; all receipts are utilized only for the perpetuation of the
   sport and the corporation. Participants are not allowed access to
   the facility except on designated race days specifically to compete
   in race activities. We believe the receipts are not taxable under
   your Rule 3.298(c), Entry fees.

We want to comply with the law and therefore, request your help by giving
us written responses to the following specific questions:

1. Are our annual "memberships" as listed in Item One (1) above
   taxable under current laws and your rules?

Response:
The membership fees are not taxable.

2. Are our "entry fees" as listed in Item Two (2) above taxable under
   current laws and your rules?

Response: No.

3. In the event that either or both of the aforementioned items are
   taxable, or if we ever have occasion to sell other items which are
   obviously taxable under current laws, please direct us as to which
   rate is applicable (4 1/8%, 5 1/8%) to such sales?

Response:
Since you are outside a city you would collect state and sales tax and
the Austin MTA sales tax (5 1/8%). Effective January 1, 1987, the state tax
increases to 5 1/4%. I am enclosing a copy of our "Sales Tax Review" for
your reference.

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

Please feel free to contact us if you have additional questions. You may
write us, call toll free 1-800-252-555S from anywhere in Texas or phone
512/463-4600.

Sincerely,

Tax Policy Section
Tax Administration Division