Which charges at an indoor fitness and play center were taxable amusement services, and was a tumbling-style class exempt?

Plain-English summary

A fitness-oriented center offered an indoor playland, snack area, games, party space, classes, and merchandise. Under Rule 3.298, the Comptroller treated hourly zone passes, discounted club cards, group trips, parties, and paid games as taxable amusement services. Snack-bar sales and sales of apparel and promotional items were also taxable.

The creative-movement or “Jump Start” charge was different. The letter treated the class-oriented activity, such as tumbling, as instruction in a sport discipline and specifically exempt under Rule 3.298(f)(2)(B).

What this means for you

Different revenue streams within one recreation business received different treatment: admissions and games were amusement services, food and merchandise were taxable sales, and the instructional class was exempt.

Common questions

Were hourly passes, club cards, and group trips taxable? Yes.

Were parties and paid games taxable? Yes.

Were snack-bar and merchandise sales taxable? Yes.

Was the creative-movement class taxable? No. It was treated as exempt sport instruction.

Citations and references

• 34 Tex. Admin. Code § 3.298 (amusement services)
• 34 Tex. Admin. Code § 3.298(f)(2)(B) (sport-instruction exemption)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9102L1078D06

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

JOHN SHARP
Comptroller February 14, 1991

Dear ** :

This is in response to your request for information on your company's
sales tax responsibilities for various departments in COMPANY X. COM-
PANY X is a fitness oriented service center featuring an indoor play-
land, snack area, games area and party area.

The various departments in question are as follows:

1. Zone Passes- People pay by the hour to use the facilities.

2. Club Cards- People pay for a club card which allows for
   multi-use of the facilities at a discounted rate.

3. Group Trips- People pay for use of the facilities based
   on a minimum number of people.

4. Snack Bar- People pay for light snacks and non-alcoholic
   drinks.

5. Parties- People pay for the use of a party room along with
   the facilities on a group basis.

6. Games- People pay for the use of games like skee ball or
   pop-a-shots.

7. Creative Movement/Jump Start- People pay for class oriented
   participation (i.e., tumbling class).

8. Take Me Home Zone- People pay for apparel and promotional
   items, like yo yos and kazoos.

Texas Tax Rule 3.298 Amusement Services, defines an amusement service
to be entertainment, recreation, sport, pastime, diversion, or enjoy-
ment that is a pleasurable occupation of the senses. Sales tax is due
on the sale of an admission to an amusement service.

Of the eight categories that you listed, the charges made by the vari-
ous departments for Zone Passes, Club Cards, Group Trips, Parties, and
Games are considered amusement services and are subject to sales tax.

Sales made by the Snack Bar and the Take Me Home Zone would be also
subject to sales tax.

The charge for creative movement is considered an instruction in a
sport discipline and is specifically exempted from amusement tax under
Section (f)(2)(B) of rule 3.298.

I have enclosed a copy of rule 3.298 for your information.

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

If you have further questions or need more information feel free to
call me at 463-4502, or, 1-800-531-5441 from outside Austin. You may
write me at Tax Administration Division. [FAX (512) 474-1643)

Sincerely,
Gilbert Zamora
Tax Administration Division