When a business sells tickets to a taxable amusement service in Texas, how much local sales tax must it collect, and can it report the tax on a mixed cash/accrual basis?

Plain-English summary

This short letter from the Texas Comptroller's Tax Administration Division (signed by Joan Hale) responds to a taxpayer's letter to the Comptroller's Audit Office about how COMPANY A collects and remits sales tax on its ticket sales for a taxable amusement service.

The Comptroller restates the basic rule: amusement services are taxable in Texas, and the seller of a ticket to an amusement service must collect tax based on the fee charged for admission — the ticket price — including any convenience fee, handling charge, service charge, or other amount charged above the amount printed on the face of the ticket. Local tax is allocated to the location of the event and is assessed on the full selling price, meaning all charges assessed to the final consumer are included in the local tax base, not just the face value of the ticket.

The letter also confirms a reporting-method rule: ticket sales may be reported on either a cash basis or an accrual basis, but not a mixed basis — a business can't switch back and forth between the two methods for its ticket sales.

Applying these rules to the facts described by the taxpayer, the Comptroller states that COMPANY A's method of collecting and remitting sales tax on its ticket sales does not comply with the state's reporting procedures, though the letter does not spell out exactly which part of COMPANY A's method fell short. The letter closes by directing any further questions about the audit to Ms. Lana Le.

What this means for you

Businesses that sell tickets to amusement services

If you sell admission tickets to a taxable amusement service in Texas, you must collect tax on the entire amount the final consumer pays for the ticket — not just the printed face price. Convenience fees, handling charges, service charges, and any other add-on amounts charged over the ticket's face value are all part of the taxable selling price for local tax purposes.

Businesses handling local tax allocation

Local tax on ticket sales is allocated to the jurisdiction where the event takes place, and it's calculated on the full selling price (face value plus fees), not a reduced amount.

Accountants and tax professionals reporting ticket sales

Pick one consistent reporting method for ticket sales — either cash basis or accrual basis — and stick with it. Reporting some ticket sales on a cash basis and others on an accrual basis (a "mixed basis") does not comply with the state's reporting procedures, as this letter found was the case for COMPANY A.

Common questions

Q: Does local sales tax apply only to the printed ticket price, or also to added fees?
A: It applies to the full amount charged to the final consumer, including any convenience fee, handling charge, service charge, or other amount over and above the price shown on the face of the ticket.

Q: Where is local tax on an amusement ticket allocated?
A: To the location of the event.

Q: Can a business report some ticket sales on a cash basis and others on an accrual basis?
A: No. Ticket sales may be reported on a cash basis or an accrual basis, but not a mixed basis.

Q: Did the Comptroller find that COMPANY A's tax collection method was acceptable?
A: No. The letter states that COMPANY A's method of collecting and remitting sales tax on its ticket sales did not comply with the state's reporting procedures.

Citations and references

No statutes, rules, or cases are cited in this letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9506L1351F11

Original ruling text

June 12, 1995

Dear ****:

This is in response to the letter you wrote to Ms. Lana Le of our *
Audit Office regarding the collection of sales tax by COMPANY A.

As you are aware, amusement services are taxable in Texas. The seller of
a ticket to an amusement service must collect tax based on the fee charged
for admission (the ticket) to the amusement, including a convenience fee,
handling charge, service charge, or other amount over and above the amount
shown on the face of the ticket. The local tax is allocated at the
event's location and is assessed on the full selling price (including all
charges assessed the final consumer). The ticket sales may be reported on
cash basis or an accrual basis, but not a mixed basis.

I appreciate your taking the time and effort to explain COMPANY A's method
of collecting and remitting the sales tax on its ticket sales. COMPANY A's
methods, however, do not comply with the State's reporting procedures.

Any further questions regarding this audit should be directed to Ms. Lana
Le at the address listed below.

Sincerely,

Joan Hale
Tax Administration Division

NOTE: Previous Accession Number 9506185L