If an exempt organization resells amusement park tickets to its members, does it owe sales tax on those ticket sales?

Plain-English summary

An amusement park asked the Comptroller about a proposed arrangement: the park would assign tickets and a price list to an organization, and that organization would sell the tickets to others (for example, its own members), then return the ticket proceeds and any unsold tickets back to the park. The Comptroller held that in this arrangement the organization is acting as the park's agent, so sales tax is due on the tickets the organization sells — even if the organization is itself a tax-exempt entity.

The key distinction is between an exempt organization buying tickets for its own use or for its members' amusement (which can be done tax-exempt) versus an exempt organization reselling tickets to others. An exempt entity may purchase tickets tax-free for its own amusement or for the amusement of its members, but it may not do so for reselling purposes. The ruling cites Rule 3.322(g)(1), which states that an exempt organization selling taxable items is responsible for collecting the tax unless some other exemption applies — so exempt status alone does not make an organization's own sales tax-free.

What this means for you

Amusement parks and other ticket-selling businesses

If you set up an arrangement where an organization (exempt or not) sells your tickets to third parties on your behalf and remits the proceeds back to you, that organization is acting as your agent and sales tax is due on those ticket sales. You cannot avoid collecting tax simply because the reselling organization happens to be tax-exempt.

Exempt organizations (clubs, associations, nonprofits)

You may buy tickets tax-free for your own organization's amusement or for your members' amusement and consumption. But if you turn around and resell those tickets to your members or the public — acting as an agent for the venue and passing proceeds back — that resale is a taxable sale, and your exempt status does not shield it from sales tax.

Accountants and tax professionals advising exempt clients

When reviewing an exempt organization's activities, distinguish between the organization's own purchases (which can qualify for the exemption) and any resale or agency arrangement where the organization is passing taxable items through to others. Rule 3.322(g)(1) requires the exempt organization to collect tax on its own sales of taxable items unless a separate exemption applies to that specific sale.

Common questions

Q: Can an exempt organization buy amusement park tickets tax-free for its members to use?
A: Yes — an exempt entity may purchase tickets tax-exempt for its own amusement or for the amusement of its members.

Q: Does that same exemption cover tickets the organization resells to its members?
A: No. If the organization is reselling tickets — acting as the park's agent, collecting money per a price list and returning proceeds and unsold tickets to the park — tax is due on those sales, regardless of the organization's exempt status.

Q: Why does exempt status not cover the resale?
A: Under 34 Tex. Admin. Code § 3.322(g)(1), an exempt organization selling taxable items is responsible for collecting sales tax on those sales unless some other exemption specifically applies. Being exempt does not automatically make the organization's own sales tax-free.

Q: Could the answer change if the facts are different?
A: Yes — the letter notes the opinion is based on the facts submitted, and the outcome could change if the actual arrangement differs (for example, if the organization is not acting as the park's agent).

Citations and references

• 34 Tex. Admin. Code § 3.322(g)(1), Exempt Organizations (an exempt organization selling taxable items must collect tax unless another exemption applies)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9406809L

Original ruling text

June 29, 1994

Dear **:

This is a follow-up to my letter to you dated June 14, 1994, and our telephone
conversation.

In our telephone conversation you stated that your company (amusement park)
will enter into an agreement with an organization by which (your company) will
assign tickets and give a price list to the organization. The organization will
sell tickets to others (e.g., its members) and return the ticket money (per
amounts listed on the price list) and any unsold tickets back to (your
company). In this scenario, the organization is acting as an agent for (your
company) and sales tax is due on the tickets sold. Even if the organization is
an exempt entity, tax is still due on tickets the entity sells. An exempt
entity may purchase tickets tax exempt for its own amusement or for the
amusement of its members, but not for reselling purposes.

I am enclosing a copy of Rule 3.322, Exempt Organizations. Section (g)(1) of
the rule states that an exempt organization selling taxable items is
responsible for collecting the tax unless some other exemption applies;
therefore, being an exempt entity does not mean the entity's sales are tax
exempt.

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

You may call me toll free at 1-800-531-5441, Ext. 34663. The direct line is
512/463-4663. You may also write to Tax Administration, Comptroller of Public
Accounts.

Sincerely,

Joan Hale
Tax Administration Division