Could an amusement provider be designated as solely responsible for sales tax when a ticket agent sold admissions and a successor disputed who had to collect and remit?

Plain-English summary

Corporation A provided the amusement service, while Corporation B acted as its ticket agent, sold admissions, and remitted the proceeds and collected tax to A. After Corporation C acquired B, C claimed responsibility for collection and remittance, prompting A to seek designation as the sole responsible party.

As the amusement provider under Rule 3.298(a)(4), A ordinarily had responsibility for collecting and remitting tax. The rule also allowed the provider to be determined by contract or agreement. The Comptroller had not reviewed the agreement, would not be bound by it, and said either party could be responsible under its terms.

The practical tax result was joint exposure: if the admission tax was not reported and paid, the Comptroller would hold both A and C liable. Their agreement also needed to address when C remitted ticket proceeds to A.

What this means for you

A private contract could divide operational duties but could not eliminate the state's collection rights. An amusement provider and its ticketing counterparty needed both a clear agreement and proof that the tax actually reached Texas.

Common questions

Was A declared solely responsible? No. Could a contract assign collection duties? Yes. Did that contract bind the Comptroller? No. Who faced liability if the tax went unpaid? Both the amusement provider and the ticket agent's successor.

Citations and references

• Texas Tax Code § 151.051 (sales tax on the sales price of a taxable item)
• Texas Tax Code § 151.010 (taxable-item definition)
• Texas Tax Code § 151.0101(a)(1) (amusement services as taxable services)
• Rule 3.298(a)(4) (amusement-service provider)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9110L1145D10

Original ruling text

October 18, 1991

Dear **:

Your letter of October 9, 1991, addressed to David Rogers was forwarded
to me for response.

You are requesting approval that the Comptroller designate your
client, ** (CORPORATION A), as the party responsible
for the remittance of sales tax on ticket sales. Section 151.051
imposes a sales tax on the sales price of a taxable item. A
taxable item is defined in Section 151.010 as tangible personal
property and taxable services. Section 151.0101(a)(1) defines
taxable services to include amusement services.

CORPORATION A is the provider of an amusement service as defined under
section (a)(4) of Rule 3.298 (34 TAC Section 3.298) concerning amusement
services. As the provider of a taxable service, CORPORATION A is
responsible for the collection and remittance of sales tax on sales of
admission tickets to the amusement service. However, under this section
of Rule 3.298, an amusement services provider may be determined by a
contract or agreement between parties.

While we have not reviewed the contract or agreement that was executed
between CORPORATION A and CORPORATION B, based on your statement, it
appears that CORPORATION B was a ticket agent for CORPORATION A. Apparently
under the agreement, CORPORATION B sold the tickets for CORPORATION A and
remitted the proceeds (and tax collected) to CORPORATION A. CORPORATION A
then filed reports and remitted the tax to the Comptroller.

CORPORATION C acquired CORPORATION B and now contends that it (CORPORATION
C) is responsible for collecting and remitting the sales tax. This
contention is the reason for your request that the Comptroller designate
you solely as the party responsible for the collection and remittance of
the sales tax. This matter should be addressed in the contract executed
between CORPORATION A and CORPORATION B, unless it was modified by
CORPORATION C.

Nevertheless, the Comptroller is not a party to any agreement between
the parties and will not be bound by any such agreement. Under the
agreement between the parties, either party may be responsible for the
collection and remittance of the tax.

However, if the sales tax due is not reported and paid to the state,
the Comptroller will hold both parties, CORPORATION C and CORPORATION A,
liable for the unpaid sales tax.

Likewise, the agreement between the parties should address other potential
concerns such as the when the proceeds should be remitted from CORPORATION
C to CORPORATION A.

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

You may call toll free 1-800-252-5555 if you have any questions or need
more information. You may write to Tax Administration Division,
Comptroller of Public Accounts.

Sincerely,

Eddie C. Washington
Tax Administration Division