I run a paintball field. Do I charge sales tax on field-use fees? Do I owe use tax on data processing done by an out-of-state company? And do I have to list shipping charges separately from the item price?

Plain-English summary

A paintball field operator asked the Comptroller three unrelated questions about running the business.

1. Field-use fees are taxable amusement services. A charge to a person for using the paintball field is a taxable amusement service under Rule 3.298. There's a carve-out for genuine tournament or contest entry fees — under Rule 3.298(c), an entry fee is NOT taxable as an amusement if either (a) the fee substantially exceeds what a person would normally pay just to use the facility, part of the fee funds the contest and prizes, and the person is paying to compete; or (b) the person wouldn't normally use the facility or pay a fee except to participate in the contest. A plain pay-to-play field fee doesn't get that exemption — it has to look like a real competitive-entry fee.

2. Out-of-state data processing still owes Texas use tax. If an out-of-state company does data processing work for the business and doesn't collect Texas tax, the business itself owes Texas use tax on the charge, based on the benefit of the service received in Texas. If the business's only location is in Texas, 100% of the benefit is presumed to be attributable to Texas.

3. Shipping charges don't have to be itemized, but they're still taxed. The Comptroller confirmed there's no requirement to separately list a shipping/handling charge from the item price — a business can present one combined price. Either way, though, the total charge for a taxable item, including shipping, is taxable. What IS required is separately stating the sales tax itself, or including a statement on the invoice that the total price includes sales tax.

What this means for you

Paintball, laser tag, and similar pay-to-play recreation operators

Charging a fee for someone to use your facility is a taxable amusement service by default. Don't assume labeling something a "tournament" makes the entry fee tax-free — it only escapes tax if the fee genuinely exceeds normal facility-use pricing and funds the contest/prizes, or if people wouldn't be there at all except to compete.

Any Texas business that outsources data processing to an out-of-state vendor

Expect to self-assess Texas use tax on that service if the out-of-state vendor doesn't collect it, based on where the benefit of the service is received — which is presumed to be 100% Texas if that's your only location.

E-commerce and mail-order sellers

You have flexibility on how you price shipping (bundled into one price, or broken out as "S&H") — but shipping is part of the taxable total either way. The one thing you must do is make the tax itself clear on the invoice: either state it separately or say plainly that the price includes tax.

Common questions

Q: Do I have to charge sales tax on paintball field-use fees in Texas?
A: Yes — it's a taxable amusement service under Rule 3.298.

Q: Can I avoid tax by calling my field fee a "tournament entry fee"?
A: Only if it's a genuine tournament/contest entry: the fee substantially exceeds normal facility-use pricing and funds the contest/prizes, or people wouldn't use the facility at all except to compete.

Q: Do I owe Texas tax on data processing services from an out-of-state company?
A: Yes, you self-assess Texas use tax based on the benefit of the service received in Texas (presumed 100% Texas if that's your only location), since the out-of-state provider isn't collecting it for you.

Q: Do I have to list shipping charges separately on an invoice?
A: No — you can present one combined price. But the total, including shipping, is still taxable, and you must separately state the sales tax or note that the price includes tax.

Q: Can I rely on this letter for my own paintball or e-commerce business?
A: No. This opinion is based on the facts presented, and other facts, though similar, may provide a different result; it can be relied on only by the taxpayer it was issued to.

Citations and references

Statutes and rules:

• 34 Tex. Admin. Code Rule 3.298 (Amusement Services), including subsection (c) entry-fee exemption for tournaments/contests
• 34 Tex. Admin. Code Rule 3.286 (Seller's and Purchaser's Responsibilities)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9903378L

Original ruling text

March 29, 1999

Subject: Amusement Services

Dear Mr. **:

This is in response to your request for a ruling on your following fact
situation and questions:

I have several questions:

1. If I run a paintball field in Texas, and charge a fee to play, do I have to
   collect sales tax?

Response: Yes, a charge for a person to use the paintball field would be a
taxable amusement service. See Rule 3.298 - Amusement Services. See also,
subsection (c) of this rule which provides an exemption for entry fees paid for
a tournament or contest as follows:

(c) Entry fees. Entry fees will not be taxable as amusements if:

(1) the fee substantially exceeds what would normally be paid for using the
facility and a person is paying to compete in a contest, and part of the fee
goes toward the cost of conducting the contest and for prizes;

or...

(2) an individual would not normally use the facility, or pay a fee except for
the purpose of participating in a contest.

2. If I have data processing done by a company outside of TX, do I have to pay
   use tax on the fee charged to me by the company?

Response: Yes, if the out-of-state retailer is not required to collect the tax
on a taxable item, the purchaser is still responsible for reporting Texas use
tax on the purchase. A data processing service is taxable to you based on the
benefit of service derived in Texas. If you only have a location in Texas it
is presumed that 100% of the benefit is attributable to Texas.

3. If I sell an item, do I have to list out shipping charges separately, or
   can I present one price and then add tax?

i.e. Product X is $100.00 plus tax shipped to you. or

Product X is $85.00 + $15.00 Shipping and Handling + Tax.

Response: The total charge for the taxable item, including shipping, is
taxable whether separately stated or not. You are not required to separately
state the shipping charge for sales tax purposes. You must separately state
the sales tax or include a statement on the invoice that the total price
include sales tax. See Rule 3.286 - Seller's and Purchasers Responsibilities.

Sales tax rules are available on the Internet
.

You may download an application for a sales tax permit, which allows you to
issue resale certificates for taxable items that you will resell, at:

http://www.window.state.tx.us/taxinfo/taxforms/ap-100.html

The State Tax Automated Research system may be accessed on the Internet at:
http://www.window.state.tx.us/

This opinion is based on the facts presented. Other facts though similar may
provide a different result.

I hope this information answers your questions. If you need additional
information, please call me toll-free at 1-800-531-5441, extension 3-4502. The
direct line is 512/463-4502. You may also write to Tax Policy Division,
Comptroller of Public Accounts. You may also e-mail our tax help section at:

Gilbert Zamora
Tax Policy Division