Did a section 501(c)(3) nonprofit have to collect Florida admissions tax on live theater performances it actively sponsored?

Subject

Admissions by 501(c)(3) Entity

Plain-English summary

The Department concluded that the nonprofit did not have to collect Florida sales tax on its live-theater admissions. Section 501(c)(3) status was necessary, but the organization also satisfied the rule's sponsorship criteria.

The nonprofit actively participated in planning and conducting the theater events, accepted responsibility for their safety and success, was entitled to gross proceeds and net proceeds after costs, and was responsible for event costs and any net losses. Those facts made it the sponsoring organization rather than merely an exempt entity lending its name to someone else's production.

The ruling contrasted this exemption with a separate, limited live-theater, opera, or ballet exemption for qualifying organizations with more than 10,000 subscribers. If the taxpayer did not satisfy the sponsorship criteria and reached that subscriber threshold, it would need to apply in writing before March 1 each year for a Department certificate and comply with the limited exemption rules.

What this means for you

Federal nonprofit status alone did not decide the admissions-tax result. The organization needed operational and financial responsibility for the events it claimed to sponsor.

Records had to support who planned the performances, who bore risk and expenses, and who received proceeds, as well as the organization's exempt status.

Common questions

Q: Was the nonprofit actively involved in the performances? Yes. It planned the events and was responsible for their safety and success.

Q: Who received the admissions proceeds? The nonprofit was entitled to gross proceeds and net proceeds after paying costs.

Q: Who bore losses? The nonprofit did.

Q: When would an annual exemption certificate be required? The ruling described that process for an organization that did not meet the ordinary sponsorship requirements and instead sought the separate limited exemption after reaching 10,000 or more subscribers.

Citations and references

• Fla. Stat. § 212.04(1)(a), (2)(a)2.a., and (2)(a)6. — admissions tax, nonprofit sponsor exemption, and limited live-performance exemption
• Fla. Admin. Code R. 12A-1.005(3)(h) and (3)(k) — sponsorship criteria and annual certificate process
• Fla. Stat. §§ 212.13(2), 212.12(6), and 213.35 — recordkeeping sufficient to establish exemption
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 97A-010

Original ruling text

SUMMARY

The taxpayer qualified as a 501(c)(3) not-for-profit entity and complied with s. 212.04(2)(a)2a., F.S., and Rule 12A1.005(3)(h), F.A.C. Therefore, it is exempt from collecting tax on the admissions it sells. However, where a taxpayer does not meet the sponsorship requirements stated in Rule 12A-1.005(3)(h), F.A.C., and reaches 10,000 or more subscribers, it will have to comply with the requirements of s. 212.04(2)(a)6., F.S., and Rule 12A1.005(3)(k), F.A.C., and make a written request from the Department each year for a certificate of exemption in order to be entitled to the limited exemption provided therein.

Feb 25, 1997

Re: Technical Assistance Advisement 97(A)-010 Sales and Use Tax - Admissions by 501(c)(3) Entity Sections: 212.02, 212.04, F.S. Rule: 12A-1.005, F.A.C. Petitioner: XXX (herein "Taxpayer") FEI: XX

Dear :

This is a response to your petition received December 3, 1996, for the Department's issuance of a Technical Assistance Advisement ("TAA") concerning the above referenced matter. Your petition has been carefully examined and the Department finds it to be in compliance with the requisite criteria set forth in Chapter 12-11, F.A.C. This response to your request constitutes a TAA and is issued to you under the authority of s. 213.22, F.S.

STATED FACTS

Taxpayer is a non-profit organization qualified under the provisions of Section 501(c)(3) of the United States Internal

Revenue Code. Taxpayer hosts live performances at a theater. Revenue is generated by admissions charges to individuals attending the performance. Taxpayer is not registered with the Department of Revenue for Sales Tax purposes. You have indicated via telephone that Taxpayer has less than 10,000 subscribing members, is actively involved in the planning of events at the theater, is responsible for the safety and success of the events, is entitled to the gross proceeds from the events and is responsible for payment of costs and net losses of the events.

REQUESTED ADVISEMENT

You ask whether Taxpayer is required to collect Sales tax on the admissions charge. You state, in part: Since [Taxpayer]... is a 501(c)(3) exempt organization that sponsors/conducts performances, it seems quite evident that the revenues from admissions charges for these events are exempt from Florida Sales Tax.

LAW AND ANALYSIS

Section 212.04, F.S, provides in part:

*212.04 Admissions tax; rate, procedure, enforcement.-(1)(a) It is hereby declared to be the legislative intent that every person is exercising a taxable privilege who sells or receives anything of value by way of admissions.... (2)(a)...

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....

6. Also exempt from the tax imposed by this section to the
   extent provided in this subparagraph are admissions to live theater, live opera, or live ballet productions in this

state which are sponsored by an organization that has received a determination from the Internal Revenue Service that the organization is exempt from federal income tax under s. 501(c)(3) of the United States Internal Revenue Code of 1954, as amended, if the organization actively participates in planning and conducting the event, is responsible for the safety and success of the event, is organized for the purpose of sponsoring live theater, live opera, or live ballet productions in this state, has more than 10,000 subscribing members and has among the stated purposes in its charter the promotion of arts education in the communities which it serves, and will receive at least 20 percent of the net profits, if any, of the events which the organization sponsors and will bear the risk of at least 20 percent of the losses, if any, from the events which it sponsors if the organization employs other persons as agents to provide services in connection with a sponsored event. Prior to March 1 of each year, such organization may apply to the department for a certificate of exemption for admissions to such events sponsored in this state by the organization during the immediately following state fiscal year. The application shall state the total dollar amount of admissions receipts collected by the organization or its agents from such events in this state sponsored by the organization or its agents in the year immediately preceding the year in which the organization applies for the exemption. Such organization shall receive the exemption only to the extent of $1.5 million multiplied by the ratio that such receipts bear to the total of such receipts of all organizations applying for the exemption in such year; however, in no event shall such exemption granted to any organization exceed 6 percent of such admissions receipts collected by the organization or its agents in the year immediately preceding the year in which the organization applies for the exemption. Each organization receiving the exemption shall report each month to the department the total admissions receipts collected from such events sponsored by the organization during the preceding month and shall remit to the department an amount equal to 6 percent of such receipts reduced by any amount remaining under the exemption.

Tickets for such events sold by such organizations shall not reflect the tax otherwise imposed under this section. (E.S.)

The Department has promulgated Rule 12A-1.005, F.A.C., which interprets s. 212.04, F.S. Section (3)(k)&(h) provide, in part:

(3)...
(h) For the purposes of this rule, sponsorship of an event or program is determined by using the following criteria:

1. Active participation by the entity in the planning and
   conduct of the event or program;

2. Assumption by it of responsibility for the safety and
   success of the event or program, 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
   or program and to the net proceeds after payment of its costs; and

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

(k) Admissions to live theater, live opera, or live ballet productions to the extent provided in s. 212.04(2)(a)6., F.S., are exempt. In order to receive this exemption, the organization must make written request [to the Department of Revenue] prior to March 1 of each year for a certificate of exemption....

Upon receipt and approval of the application, the department will issue a certificate of exemption to the organization and advise the organization of its pro rata share of the exemption.

Based on the information you have provided, Taxpayer does qualify as a 501(c)(3) not-for-profit entity. Because it

complies with s. 212.04(2)(a)2a, F.S. and Rule 12A-1.005(3)(h), F.A.C, above, taxpayer is exempt from collecting tax on the admissions it sells.

However, if taxpayer does not meet the sponsorship requirements stated in Rule 12A-1.005(3)(h), F.A.C. reaches 10,000 or more subscribers, it will have to comply with the requirements of s. 212.04(2)(a)6., F.S., and Rule 12A-1.005(3)(k), F.A.C., and make a written request from the Department each year for a certificate of exemption in order to be entitled to the limited exemption provided therein.

RECORD KEEPING

According to Florida law, every taxpayer has the legal obligation to maintain adequate books and records.

Section 212.13(2), F.S., provides in part:

(2) Each dealer, as defined in this chapter, shall secure, maintain, and keep as long as required by s. 213.35 a complete record of tangible personal property or services received, used, sold at retail, distributed or stored, leased or rented by said dealer, together with invoices, bills of lading, gross receipts from such sales, and other pertinent records and papers as may be required by the department for the reasonable administration of this chapter; all such records which are located or maintained in this state shall be open for inspection by the department at all reasonable hours at such dealer's store, sales office, general office, warehouse, or place of business located in this state.... Any dealer subject to the provisions of this chapter who violates these provisions is guilty of a misdemeanor of the first degree, punishable as provided in s. 775.082 or s. 775.083. (E.S.)

Section 213.35, F.S., provides:

Each person required by law to perform any act in the administration of any tax enumerated in s. 72.011 shall keep suitable books and records relating to that tax, such

as invoices, bills of lading, and other pertinent records and papers, and shall preserve such books and records until expiration of the time within which the department may make an assessment with respect to that tax pursuant to s. 95.091(3). (E.S.)

Section 212.12(6), F.S., expressly provides, in part:

(6)(a) ... It shall be the duty of every person required to make a report and pay any tax under this chapter,... to keep and preserve suitable records of the sales, leases, rentals, license fees, admissions, or purchases, as the case may be, taxable under this chapter; such other books of account as may be necessary to determine the amount of the tax due hereunder; and other information as may be required by the department.... (E.S.)

As clearly provided by the above law, Taxpayer must maintain records adequate to establish the taxable or nontaxable status of its transactions.

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 confidential information, we request you notify the undersigned in writing within 15 days of any deletions you wish made to the request or this response.

Should you have any further questions concerning this matter, please do not hesitate to contact me.

Sincerely,

Eric A. de Moya, Esq.
Tax Law Specialist
Tax Policy and Dispute Resolution
(904)922-4714

NOTICE UNDER THE AMERICANS WITH DISABILITIES ACT

Persons needing an accommodation to participate in any proceeding before the Department of Revenue, should contact the Department at (904)488-0717 (voice), or 1-800-DOR-8331 (TDD), at least five working days before such proceeding. You may also call via the Florida Relay System at 1-800-955-8770.

Control No. 27218