How much of a children's play-center club package was taxable when it included a shirt, balls, passes, a magazine, and discounted hourly rates?

Plain-English summary

A children's play and fitness center proposed a flat-price club package containing a shirt, a canister of balls, a free two-hour pass, a quarterly magazine, and a membership card giving lower hourly rates.

The Board agreed that hourly charges for time in the center were not taxable. For the club package, tax applied at minimum to the fair retail selling price of the shirt and balls. If that value could not be determined, the entire club-card fee was taxable.

The current official annotation flags a subsequent statutory change concerning periodicals but does not identify the law, effective date, transition rule, or effect on this historical package allocation. Current treatment therefore requires a separate law check.

Citations and references

• No numbered statute or regulation cited in the supporting letter
• May 30, 1990 letter to Barbara Beck describing a planned California children's play and fitness franchise, two hourly rates, a club package with specified items, and the requester's proposed tax analysis — request, referral, franchise materials, membership terms, package contents, price list, valuation support, contracts, invoices, and transaction records not reproduced in the official PDF
• Example $25.95 flat club-package price covering a shirt, canister of balls, free two-hour pass, quarterly magazine, and discount membership card — no component prices or fair-retail-value evidence supplied
• June 11, 1990 Assistant Chief Counsel Gary J. Jugum response copied to Barbara Beck — no requester reply, completed franchise opening or transaction, return, audit, assessment, refund claim, appeal, or later outcome supplied
• Official Annotation 295.1537's package, shirt-and-ball valuation, full-fee fallback, and June 11, 1990 date, plus its note “Subsequent statutory change re periodicals” — annotation identifies no statute, effective date, transition rule, or effect on the historical allocation; it omits the planned posture, $25.95 example, hourly-time conclusion, request and records, copied official, later outcome, and reliance status and supplies no additional proceeding record

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/295-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/295-1537.pdf

Original ruling text

295.1537

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
(916) 445-3723

June 11, 1990

Dear
Your letter to Ms. Barbara Beck of May 30, 1990 was referred to this office for reply. We understand there is a franchise called --- that will be opening up in California. The main business is selling time in a play/fitness --- for children. Time is paid for by the hour, with two different rates--one for club card members and one for non-club card members. Non-club card members receive nothing more than the rental of time in the ---. When they sign up, Club card members receive a club shirt, canister of --- balls, free twohour pass in the Zone, quarterly magazine and club membership card which entitles then to the lower rates per hour in the ---. The club card pack will sell for a flat amount, for example, $25.95. You indicated that you think that the sale of the club card package; with the shirt and balls, may be taxable, as the club card member receives something tangible. You further assume that all hourly sales of rental time in the --- would not be subject to tax. We agree with your analysis. Time charges are not taxable. The charge for the club card is subject to tax. At a minimum, tax applies to the fair retail selling price of the shirt and canister of balls. If the fair retail selling price of the taxable item cannot be ascertained, tax applies to the entire club card fee.

Very truly yours,

Gary J. Jugum
Assistant Chief Counsel
GJJ:sr
cc: Ms. Barbara Beck