Were admission charges to a section 501(c)(3) urban marine museum exempt from Florida sales tax as charges by a nonprofit sponsoring organization?

Plain-English summary

The urban marine museum's admission charges were exempt from Florida sales tax.

The organization had federal section 501(c)(3) status and a Florida Consumer's Certificate of Exemption. It planned and developed the museum, managed day-to-day operations, carried more than $1 million in liability insurance, faced responsibility for negligence, paid operating costs, bore any net loss, and kept admissions proceeds above budget.

Those facts satisfied the cited sponsorship criteria: active participation, responsibility for safety and success, entitlement to proceeds, and responsibility for costs and losses.

What this means for you

Federal nonprofit status was necessary but not the only fact. The Department also examined whether the organization was the real sponsor bearing operational control, economic risk, and liability.

Common questions

Q: Was section 501(c)(3) status enough by itself?
A: The ruling also relied on the organization's actual sponsorship responsibilities.

Q: Who operated the museum?
A: The nonprofit organization itself.

Q: Who bore losses and negligence risk?
A: The organization.

Q: Were the admission charges taxable?
A: No.

Citations and references

• Fla. Stat. § 212.04(2)(a)2.a. — not-for-profit sponsor admission exemption
• Fla. Admin. Code r. 12A-1.005(3)(g) and (h) — nonprofit sponsorship criteria
• I.R.C. § 501(c)(3) — federal nonprofit qualification required by the cited Florida provision
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 95A-016

Original ruling text

Apr 26, 1995

Re: TAA 95A-016
Sales Tax; Admissions Exemption
Section 212.04, Florida Statutes
Rule 12A-1.005, Florida Administrative Code

Dear:

This is in response to your letter of March 2, 1995,
requesting a Technical Assistance Advisement concerning the
exempt status of XXXXX (hereafter "Organization") from sales tax

on admission charges.

Your client seeks the sales tax exemption on admission
charges based on the provisions of s. 212.04(2)(a)2.a., F.S.,
and Rule 12A-1.005(3)(h), F.A.C. Your letter provides the
following information in support of your client's eligibility

for the exemption:

"The [Organization's] mission is primarily educational in
nature. Its purpose is to educate the public and generate
interest in protecting the environment. Once opened, the
[Organization] will operate as an urban marine museum,
educating thousands of visitors and students via hands-on

exhibits, labs and classrooms.

"Operating costs of the [Organization] will be funded from
admissions charged to enter the [Organization] and by
contributions from the general public. A paid admission
allows an individual to enter the [Organization] where they
may view, in the comforts of an indoor facility, a variety

of fish, birds, plants and other wildlife in their natural
habitat. In addition, various exhibits may appear from
time to time primarily to educate visitors about Florida's
marine life and the importance of protecting our

environment.

"The [Organization] has been granted tax-exempt status by

the Internal Revenue Service under the provisions of

section 501(c)(3) of the Internal Revenue Code of 1986.

A copy of the letter from the Internal Revenue Service

demonstrating this qualification is enclosed.

".... The organization itself was founded to plan, organize
and develop the construction of the [Organization].
Obviously various sources of funding have been obtained to
construct the facility. These funds have come primarily
from municipal bonds, bank financing and charitable

donations.

"Day-to-day operations will be funded primarily from the
admission charges discussed above. Should the projected
admissions not meet budget, the [Organization] will be
liable for all indebtedness related to its operations.
Conversely, should projected admissions exceed budget, the
[Organization] is entitled to any excess proceeds. The
[Organization] will manage the facility itself and will be

the subject party should a suit arise from any negligence

in its conduct. In addition, the [Organization] carries

over $1,000,000 in general liability insurance. We believe
these responsibilities are more than sufficient to support
the fact that the [Organization], is the actual sponsor of

this activity...."

In addition to the above stated facts, you have provided a
copy of the Internal Revenue Service determination letter and a
copy of the Organization's general liability insurance policy.
Also, the Department's records show that the Organization has
applied for and has been granted a Florida Consumer's

Certificate of Exemption.

Relevant Authority

Section 212.04(2)(a)2.a., F.S., states:

"2.a. No tax shall be levied on dues, membership fees, and
admission charges imposed by not-for-profit sponsoring

organizations. To receive this exemption, the sponsoring

organization must qualify as a not-for-profit entity under
the provisions of s. 501(c)(3) of the United States

Internal Revenue Code of 1954, as amended."

Rule 12A-1.005(3)(g),(h), F.A.C., provides:

"(g)1. Through June 30, 1987, no tax shall be levied on
dues, membership fees, and admission charges imposed by
not-for-profit sponsoring organizations or community or
recreational facilities. To receive this exemption, the
organization making any such charges must qualify as a not-
for-profit entity under the provisions of s. 501(c)(3) of

the United States Internal Revenue Code of 1986, as

amended.

"2. Effective July 1, 1987, this exemption was limited to
dues, membership fees, and admission charges imposed by

not-for-profit religious sponsoring organizations.

"3. Effective January 1, 1988, this exemption was restored
to any sponsoring organization which qualifies under s.
501(c)(3) of the United States Internal Revenue Code of
1986, as amended.

"(h) For the purposes of this rule, sponsorship of an event

is determined by using the following criteria:

"1. Active participation by the entity in the planning and

conduct of the event;

"2. Assumption by it of responsibility for the safety and
success of the event, such that it will be subject to a

suit for damages for alleged negligence in its conduct;

"3. Entitlement by it to the gross proceeds from the event

and to the net proceeds after payment of its costs; and

"4. Responsibility by it for payment of costs of the event
and for bearing any net loss if the costs exceed gross

proceeds."

Response

The above stated rule provides the criteria used in
determining sponsorship of an event. Based on the Internal
Revenue Service's letter of exemption as a 501(c)(3)
organization, the copy of the general liability insurance
policy, and the information provided in your letter, the
Department concurs that the Organization meets the criteria set
forth under Rule 12A-1.005(g),(h), F.A.C., as a not-for-profit
sponsoring organization. Therefore, the admission charges made

by the Organization are exempt.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the department only
under the facts and circumstances described in the request for
this advice as specified in s. 213.22, F.S. Our response is
predicated on those facts and the specific situation summarized
above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment than

expressed in this response.

You are further advised that this response and your request
are public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of s. 213.22, F.S.
Your name, address, and any other details which might lead to
identification of the taxpayer must be deleted by the Department
before disclosure. In an effort to protect the confidentiality
of such information, we request you notify the undersigned in
writing within 15 days of any deletions you wish made to the

request or the response.

Sincerely,

Bonnie Everton

Technical Assistant

/e

Cont. #20053