How did Texas tax a stadium's passed-through security and cleaning charges, employee security, cable fees, network services, and satellite uplinking?

Plain-English summary

The stadium asked about several event-related charges.

Security and cleaning

• A private security company's taxed invoice could be passed through at the exact amount without additional tax, but the stadium's bill had to show the tax. The stadium could instead give the provider a resale certificate.
• Local police and sheriff's personnel on the stadium payroll were stadium employees. Rebilling their labor to event clients was taxable security service.
• Billings for the stadium's licensed in-house security staff to clients or a sister company were taxable.
• An unrelated cleaning contractor's correctly taxed charge could be passed through without additional tax when the stadium added no markup.

Cable, network, and satellite services

• A proposed cable-television fee added to private-club dues for luxury-box users was taxable.
• Charges to television networks for power usage, equipment security, sideline camera-cart rental, and other listed services were taxable.
• Satellite equipment leased and retained or used by the stadium was taxable to the stadium. If equipment was transferred to customers and not used by the stadium, it could be bought with a resale certificate and tax collected from the customer.
• In every event, the total charge to the client for satellite uplinking or other telecommunications service was taxable.

What this means for you

The historical results distinguished exact taxed pass-throughs from the stadium's own taxable services and applied resale treatment only when equipment was actually transferred without stadium use.

Common questions

Did the stadium add tax to an exact third-party security or cleaning pass-through? No, when the contractor charged correctly and the stadium added no markup.

Were stadium-employee security charges taxable? Yes.

Was the cable fee taxable? Yes.

Were satellite-uplinking charges taxable? Yes, on the total client charge.

Citations and references

The letter cites no numbered statute or rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8801L0855A04

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller January 21, 1988

Dear **:

Thank you for your recent letter which is restated in part with responses
below.

Security Service Questions

Security at * Stadium is provided by a number of different means.
First, we use the services of a private security company, who bill me at
a
dollar amount for each hour worked by their employees here at *
Stadium. I am billed by this firm after each event. Their invoice to me
will include taxes. I, in turn, rebill my clients for this service in the
exact amount that I am billed by the contract service (including taxes
charged me). Am I responsible or obliged to bill my client for any
further taxes other than what is included in the billing submitted to me
for payment by the contractor?

Response: No. However your bill to your client must show the tax he is
paying. You may give the security service provider a resale certificate
in lieu of tax.

Secondly, specialized security is provided by the local police and
sheriff's departments. These individuals are on * Stadium payroll
and
are paid by me accordingly. This payroll is then billed to the client
renting * Stadium for that event. Am I obligated to add taxes to
this
payroll prior to billing my "client"?

Response: Yes. In this case the law enforcement officers are also your
employees. You are using their labor to provide a security service and
your billings to the clients are taxable.

Thirdly, ** Stadium Corporation maintains an in-house security
staff,
licensed by the State of Texas. These individuals work during all

Stadium events, as well as functions sponsored by a "sister company" of
ours, ** Stadium Club, Inc. All members of this staff are on

Stadium payroll. Again, am I obliged to add taxes to my billings to
either a client or our "sister company" for services rendered by these
individuals?

Response: Yes.

Cleaning Services

For all events there are certain cleaning functions provided by outside
Contractors in regard to the Stadium seating areas, Locker Room area, and
Administrative office areas. These Contractors bill * Stadium after
events at set fees plus taxes. I, in turn, pass on these billings to the
client to be reimbursed exactly per that invoice. Am I, before billing
these clients, responsible to add further taxes to these billings, or are
the taxes billed by the Contractor, as part of his billing to *
Stadium, the only applicable tax?

Response: As long as an unrelated third party cleaning contractor does
the work, charges the correct amount of tax and you pass the charges
directly through to the customer without working them up, you are not
required to charge additional tax.

Telecommunication Services

Within certain parts of * Stadium, namely the luxury level boxes
within the facility, * Stadium Corporation supplies cable
television
for the guests. Currently, there is no charge levied to these people.
However, beginning in 1988 we are planning to add a fee to these people's
* Stadium Club dues to reimburse *Stadium for the providing
of
such service. The Stadium Club is licensed as a "Private Club" facility,
thus we charge Membership Dues to belong to the Club. These members are,
basically, the individual owners, lessees, and their guests within the
luxury level boxes. If such charges are, in fact, invoked concerning the
supply of this cable television service, am I obligated to add taxes to
such billings to these Club members?

Response: Yes.

Also within this category are services which * Stadium Corporation
provides to each Television Network while here at * Stadium,
including
power-usage charges, Security services for their equipment on site, the
rental of sideline camera carts, and certain other miscellaneous charges.
After each event, I bill the appropriate Network for these charges. Am I
obligated to add taxes to this billing?

Response: Yes.

Finally, under this same category, * Stadium rents certain
Satellite
Uplinking equipment from a third party on event days and for
miscellaneous uses. With this equipment, we, in turn provide satellite
Uplinking to Television Networks who are at * Stadium to televise
an
event taking place within our facility, as well as to other, off-site,
clients needing such service. As previously stated, I rent this Satellite
equipment from a local third party, for a set monthly fee (including
taxes), regardless of my actual usage of said equipment or my ability to
re-lease it to others. When I am providing such Satellite Uplinking
services, either to a Television Network or to other customers, I bill
said client after usage for all services provided at certain rates as
designated by * Stadium Corporation. When generating this billing
to
our clients, is * Stadium Corporation obliged to add taxes to this
building.

Response: Your charge for equipment that you lease and do not transfer
to
your customers is taxable to you. If the equipment is transferred to the
customers and is not used by you, you may give your supplier a resale
certificate in lieu of tax and charge tax to your client. In any event,
the total charge you make to your client for providing telecommunication
services is subject to sales tax.

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 me if you have additional questions. You may
write me, call toll free 1-800-531-5441 from anywhere in the U.S., or
phone (512) 463-4600.

Sincerely,
Al Van Allen