Texas Letter Ruling 9209434L: Tours — Package Includes Transportation, Catered Meals, Prepaid Fees To Exhibits

Subject

Tours — Package Includes Transportation, Catered Meals, Prepaid Fees To Exhibits

Plain-English summary

The Texas Comptroller responded to a question about how sales tax applies to escorted/guided tours. Admissions to amusement events are taxable as amusement services under Rule 3.298, Amusement Services. Charges for tours, tour trains, and tour buses whose primary purpose is to show tourists sights along a route (rather than provide regular transportation) are also taxable amusement services, whether sold by the tour company itself or by a travel agency, under section (a)(1)(F)(v) of Rule 3.298.

Whether a tour company must collect tax on the total charge for a tour depends on the essence of the service:

• If the tour is primarily a guided, scenic tour of Texas attractions, the total charge — including the transportation charge — is taxable. The tour company must be permitted to collect and report sales tax on these amusement services, and it may issue a resale certificate to any amusement provider (e.g., an exhibit) whose admission it bundles into the package, instead of paying tax on that admission itself. The tour company then collects and reports tax on the full guided-tour charge.
• If the tour company is only providing transportation and admission to Texas tourist attractions — not a guided/escorted tour — no sales tax is due on the transportation charge, and the company is not required to be permitted to collect tax on that charge. Instead, the company simply pays sales tax when it purchases any taxable admissions included in the tour package. However, if the company separately states the charges for transportation, admissions, etc., it is treated as the retailer of the amusement admissions and must collect and report tax on those admission sales (again with the option to use a resale certificate when buying the admissions from the provider).

The letter closes by inviting further questions to Chuck Johnstone, Manager of Tax Administration.

What this means for you

Tour operators and travel agencies

Whether you owe sales tax on your tour package hinges on what the tour actually is, not just what it's called. A scenic, guided tour of Texas sights makes the entire package price — transportation included — a taxable amusement service, and you must be permitted to collect that tax. If you're mainly selling transportation plus separate admission tickets (no guiding/escorting), the transportation piece escapes tax, but you'll owe tax somewhere on the admissions — either as the retailer collecting tax from customers (if you itemize charges) or as the purchaser paying tax when you buy the admissions (if you bundle them into one undifferentiated charge).

Businesses selling admissions to tour operators

If a tour company buys admission to your amusement or attraction as part of a guided tour package, it may give you a resale certificate instead of paying you sales tax, because the tour company will collect tax on the full guided-tour price from its own customers.

Accountants and tax professionals

The key distinction in this ruling is between (1) a guided/escorted tour where transportation and sightseeing are inseparable amusement services taxed as a whole, and (2) mere transportation plus separately-provided admissions, where the transportation is not taxable and the admissions are taxed either at the point of resale to the customer (if separately stated) or at the point of purchase by the tour company (if bundled). The ruling ties both scenarios back to Rule 3.298, particularly section (a)(1)(F)(v) for the transportation-as-amusement rule.

Common questions

Q: Is a tour bus ride always taxable in Texas?
A: Not automatically. It's taxable as an amusement service when the primary purpose is showing tourists sights along a route (a scenic/guided tour), as opposed to providing regular transportation. See Rule 3.298, section (a)(1)(F)(v).

Q: If my guided tour includes admission to an attraction, do I pay tax twice?
A: No. The tour company can give the attraction a resale certificate instead of paying tax on the admission, and then collect and report sales tax on the total guided-tour charge to the customer.

Q: I only sell transportation and separately sell attraction tickets — do I owe tax on the bus fare?
A: According to this ruling, no sales tax is due on the transportation charge in that situation, and you aren't required to be permitted to collect tax on it.

Q: Does it matter whether I sell the tour myself or through a travel agency?
A: No — the ruling states that tours, tour trains, and tour buses of this kind are taxable as amusement services "whether sold by the tour company or by a travel agency."

Citations and references

Statutes and rules:

• Rule 3.298, Amusement Services (34 Tex. Admin. Code § 3.298), including section (a) and section (a)(1)(F)(v)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9209434L

Original ruling text

September 23, 1992

Dear **:

I am writing in response to your letter regarding the taxation of amusement
services as they relate to the escorted/guided tour industry.

Admissions to amusement events are only one of several activities that are
taxable as amusement services under section (a) of the enclosed Rule 3.298,
Amusement Services. Charges for tours, tour trains, and tour buses, whose
primary purpose is to show tourists sights along a route as opposed to regular
transportation are also taxable as amusement services, whether sold by the tour
company or by a travel agency. See section (a)(l)(F)(v) of Rule 3.298.

Whether a tour company is required to collect tax on the total charge for a
tour depends on the essence of the service provided. If the tour is primarily a
guided, scenic tour of Texas attractions, then the total charge including the
charge for transportation is taxable.

A tour company selling guided tours of tourist sights in Texas is required to
be permitted and to collect and report sales tax on the sale of these amusement
services. If, as part of a guided tour package, the tour company provides
admission tickets to an amusement identified in section (a)(1) of Rule 3.298,
the tour company may issue a resale certificate to the provider of the
amusement service in lieu of paying sales tax. The tour company would then
collect and report sales tax on the total charge for the guided tour.

On the other hand, if a tour company is only providing transportation and
admission to Texas tourist attractions, rather than guided/escorted tours, no
sales tax is due on the charge for transportation and the tour company is not
required to be permitted to collect and report sales tax. The tour company
would simply pay sales tax on the purchase of any taxable admissions that are
provided as part of the tour package. If the tour company separately states the
charges for transportation, admissions, etc., it is considered the retailer of
the amusement service admissions and must collect and report sales tax on these
amusement service sales. Again, it could issue the provider of the amusement
service a resale certificate in lieu of sales tax on these purchases.

Hopefully, this will answer the concerns you have in this area. If you have
other questions or need more information, feel free to contact Chuck Johnstone,
Manager of Tax Administration. Chuck can be reached toll-free at
1-800-531-5441, extension 3-4091. His direct number is (512) 463-4091.

Sincerely,

JOHN SHARP
COMPTROLLER OF PUBLIC ACCOUNTS