My nonprofit club sold golf tournament tickets that bundled the greens fee together with food, and separately paid out cash prizes to winners -- how does Virginia sales tax apply to each?

Plain-English summary

Virginia doesn't tax admission charges -- tickets, fees, or cover charges to get into an event -- on their own. But the moment an admission charge is bundled with tangible personal property (food, drinks, merchandise) into a single price, without separately stating the two, the whole thing becomes taxable as a sale of that property. This ruling applies that rule against a nonprofit private country club.

The club held golf tournaments for its members, selling tickets that covered the greens fee, light refreshments, and a catered meal all for one price -- with no breakdown between the greens fee and the food. It also paid cash awards to tournament winners. A Department audit assessed tax on both the ticket sales and the cash awards; the club appealed both.

On the tickets, the Department sided with the auditor. Virginia's admissions exemption (23 VAC 10-210-30) explicitly carves out an exception for "cover charges" or "minimum charges" that include the provision of food or drink -- those are taxed as a sale of property, not treated as a nontaxable admission. The Department pointed to its own prior rulings on the same pattern: a hotel/theater's combined dinner-and-admission package was fully taxable when the charges weren't broken out (P.D. 02-77), while a different dinner theater that clearly separated its dinner charge from its admission charge kept the admission portion nontaxable (P.D. 85-167). A nonprofit membership corporation lost the same argument the club made here -- that the "primary purpose" of the event wasn't the meal -- in P.D. 08-76, because the sales-price definition looks at the whole charge, not the organizer's purpose. Since the club's ticket bundled the greens fee with refreshments and a meal without separating them, the entire ticket price was taxable.

The club also argued it should get credit because it already paid sales tax to its food vendors when it bought the food. The Department agreed that's a valid basis for credit in principle, but the taxpayer bears the burden of proving the assessment wrong (Virginia assessments are presumed correct under Va. Code § 58.1-205), and the club hadn't produced any documentation to back up the claim. Rather than deny the credit outright, the Department gave the club 60 days to furnish proof of the vendor tax payments -- if it can't, the assessment stands as issued.

On the cash awards, the club won outright. The auditor originally couldn't tell from the records whether "awards" meant cash or actual merchandise prizes, but the club produced advertisements and accounting records showing three specific items were pure cash payouts with no tangible personal property involved -- and cash prizes aren't a sale of anything taxable. The Department removed those three items from the audit, while reminding the club to keep clearer physical records distinguishing cash awards from property prizes going forward.

What this means for you

Any business or nonprofit selling bundled tickets that include food or merchandise

Itemize your pricing. If your ticket, cover charge, or admission fee includes any tangible personal property (food, drinks, souvenirs, gift bags) and you don't separately state the admission portion from the property portion, Virginia will tax the ENTIRE charge -- even if the property is a minor part of the package and even if attendees are there mostly for the event itself, not the food.

Anyone claiming credit for sales tax already paid to a vendor

An assessment is presumed correct, and the burden is on you to prove otherwise with real documentation -- invoices, receipts, vendor statements. A bare claim that "we already paid the tax" isn't enough on its own; keep and produce your records, or you risk losing a credit you're actually entitled to.

Organizations that pay cash prizes or awards

Pure cash awards, with no tangible personal property changing hands, aren't a taxable sale. But keep clean, dedicated records (physical checks, clear ledger entries) that distinguish cash-only awards from prizes that include actual merchandise, so an audit doesn't lump them together.

Common questions

Q: My organization sells event tickets that include a meal along with admission -- is any part of that nontaxable?
A: Only if you separately state the admission charge from the food/property charge on the ticket or invoice. If the two are bundled into one price, Virginia taxes the whole thing.

Q: Does it matter that people are really buying the ticket for the event, not the food?
A: No. The Department has repeatedly held that the primary purpose of the event doesn't change the tax result -- what matters is whether the charges were separately stated, not why people bought the ticket.

Q: We paid sales tax to our food vendors already -- can we get a credit against the assessment?
A: Yes, in principle, but you must document it. Without proof of the vendor payments, the Department won't reduce the assessment; here, the taxpayer was given 60 days to produce that documentation before the credit request would be denied.

Q: Are cash prizes to contest or tournament winners taxable?
A: No, if they're genuinely cash with no tangible personal property provided. Keep clear records (checks, ledgers) showing the payout was cash-only, since ambiguous records can lead an auditor to assess them as taxable property transfers.

Citations and references

• Va. Code § 58.1-602 (defines "sales price" as the total amount charged for property or services sold)
• 23 VAC 10-210-30 (admissions exemption; cover/minimum charges including food or drink are taxable sales of property)
• Va. Code § 58.1-633 A (dealers must keep records substantiating taxable/exempt treatment)
• 23 VAC 10-210-470 (interprets § 58.1-633; three-year record retention requirement)
• Va. Code § 58.1-205 (Department assessments are prima facie correct; burden of proof is on the taxpayer)
• P.D. 02-77 (5/2/2002) (combined dinner-theater admission and meal charge, not separately stated, fully taxable)
• P.D. 85-167 (9/3/1995) (dinner theater that separately stated dinner and admission charges kept the admission nontaxable)
• P.D. 08-76 (6/6/2008) (nonprofit membership event tickets with catered meals taxable regardless of the event's primary purpose)

Subject

Retail Sales and Use Tax: Admission with Tangible Personal Property - Golf Tournament

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 22-68

Original ruling text

April 13, 2022

Re: § 58.1-1821 Application: Retail Sales and Use Tax

Dear *:

This is in response to your letter submitted on behalf of * (the “Taxpayer”), in which you seek correction of the retail sales and use tax assessment issued for the period December 2014 through November 2017. I apologize for the delay in responding to your letter.

FACTS

The Taxpayer, a nonprofit private country club in Virginia, holds golf tournaments for its members. Participating members purchase tickets that includes greens fees, light refreshments and a catered meal. The Taxpayer did not separate the greens fee from the price of refreshments or catered meals in the price for the ticket. In addition, cash awards are given to tournament winners.

As a result of the Department’s audit, the Taxpayer was assessed tax and interest on the sale of tournament tickets as well as the cash awards handed out to tournament winners. The Taxpayer appeals, contending that the primary purpose of the fee for the ticket was participation in the tournament and the provision of any food was merely a benefit of membership. The Taxpayer also argues that tax was paid to its food vendors at the time it was purchased and that it should be allowed a credit towards the sales tax owed. Finally, the Taxpayer asserts that the cash awards should not be taxable as no personal property was provided.

DETERMINATION

Tournament Tickets

Virginia Code § 58.1-602 defines sales price as “the total amount for which personal property or services are sold.”

Title 23 of the Virginia Administrative Code (VAC) 10-210-30 states:

The tax does not apply to sales of tickets, fees, charges, or voluntary contributions for admissions to places of amusement, entertainment, exhibition, display, or athletic contests, nor to charges made for participation in games or amusement activities. However, “cover charges” or “minimum charges” which include the provision of or the entitlement to food, drinks, or other tangible property constitute a sale of property and are subject to the tax…

The Department has previously determined that transactions involving the sale of admissions and tangible personal property are taxable. In Public Document (P.D.) 02-77 (5/2/2002), a hotel and conference center that operated a theatre. The taxpayer sold tickets for theatre admission, and also offered dinner theatre packages that included admission to the theatre and a meal for a single charge. Pursuant to Title 32 VAC 10-210-30, Title 23 VAC 10-210-930 (sale of meals) and the Virginia Code § 58.1-602 definition of sales, it was determined that the total charge for the dinner theatre package was taxable due to the fact charges for the meal and charges for theatre admission were not separately stated.

Further, the Department distinguished the hotel and conference center from a dinner theater in P.D. 85-167 (9/3/1995), wherein the charges were segregated between the dinner and the for theatre admission. In doing so, the dinner theater clearly and specifically identified the taxable dinner charge from the nontaxable theatre admission.

In P.D. 08-76 (6/6/2008), meanwhile, a nonprofit membership corporation was assessed tax and interest on the sale of event tickets to members that included catered meals. In its appeal, the membership corporation contended that the primary purpose of the events were not the provision of the catered meal, but rather the entertainment or business purposes. While the tax does not apply to admissions pursuant to Title 23 VAC 10-210-30, admissions were provided in conjunction with a taxable meal. The fact that the primary purpose of the events may not be the catered meal did not alter the fact that the ticket price included the provision of a taxable meal. Based upon the definition of sales price, the total charge for the ticket, which included the provision of a catered meal, was deemed taxable.

Consistent with the Department’s position in P.D. 08-76, the fact that the primary purpose of the tournament may not be the catered meal does not alter the fact that the ticket price includes the provision of a taxable meal. Further, pursuant with the Department’s determination in P.D. 02-77, because the charges for the greens fees were not separately stated from the charges for refreshments and the catered meal, the total charge for the ticket was taxable. Accordingly, the auditor was correct in assessing the tax on the sale of tickets that include the provision of catered meals.

Tax Paid to Vendors

Virginia Code § 58.1-633 A states:

Every dealer required to make a return and pay or collect any tax under this chapter shall keep and preserve suitable records of the sales, leases, or purchases, as the case may be, taxable under this chapter, and such other books of account as may be necessary to determine the amount of tax due hereunder, and such other pertinent information as may be required by the Tax Commissioner.

Title 23 of the Virginia Administrative Code 10-210-470, which interprets Virginia Code § 58.1-633, states “[e]very person who is liable for the collection of sales tax or remittance of use tax or both is required to keep and preserve for three years adequate and complete records necessary to determine the amount of tax liability.” Such documentation includes records for all tangible personal property used or consumed in the conduct of business and records for all merchandise purchased including bills of lading, invoices, purchase orders, and other evidence to substantiate each purchase.

While the Taxpayer claims they paid the sales tax to vendors for the food items purchased for tournaments, the Taxpayer has not provided documentation to substantiate this claim.

Virginia Code § 58.1-205 deems assessments issued by the Department to be prima facie correct. This means that the burden of proving the assessment is incorrect rests upon the Taxpayer. The provision of adequate records and other documentation is necessary to prove that the tax assessed in the audit is incorrect. In this instance, the Taxpayer has not met the burden of proof.

For purposes of this audit only, if the Taxpayer can produce documentation that the tax was paid on food items provided in connection with the tournaments, I will allow credit in the audit for the tax paid. Absent such evidence, there is no basis to revise the Department’s audit.

Cash Prizes

Upon review of the Taxpayer’s records, the auditor could not determine whether line items listed as awards were for the provision of tangible personal property or simply cash awards. The Taxpayer has provided advertisements and checks from accounting software that show the Taxpayer paid cash awards to tournament winners without the provision of tangible personal property. For this reason, I find cause to remove these three items from the audit. In the future, the Taxpayer should keep physical copies of checks and records that more clearly display that cash awards are given to tournament winners without the provision of any tangible personal property.

CONCLUSION

Based on the above determination, the audit will be adjusted accordingly. I will allow the Taxpayer 60 days from the date of this letter to furnish documentation to the auditor to substantiate sales tax paid to vendors in connection with the purchase of food for the tournaments. Should the Taxpayer fail to provide the records and documentation to the auditor within the allotted timeframe, the assessment will become immediately due and payable at that time.

The Code of Virginia sections, regulations, and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department’s web site. If you have any questions about this determination, you may contact * in the Department’s Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1765.A

Related Documents

02-77

85-167

08-76