For a Kansas STAR bond project, do sales taxes on event tickets sold off-site count toward the bond repayment increment, and does the seller need an on-site office?

Plain-English summary

A company building a state-of-the-art motorsports facility in Kansas City, Kansas — a 1.5-mile tri-oval track seating around 75,000 initially, scalable to 150,000 — asked two sales-tax questions tied to STAR bond financing. (STAR bonds, authorized by K.S.A. 12-1774, let a project's own sales-tax collections be captured as an increment to repay the development bonds.) The speedway planned to sell its 2001 season tickets during 2000 and wanted to know how those sales figured into the bond math.

Q1 — Do sales taxes on tickets sold off-site count toward the increment? Yes. "All ticket sales that are reported by [the speedway] as part of its gross receipts and upon which it remits sales tax should be considered for purposes of the sales tax increment. This would apply to tickets sold on or off the raceway site." The key is that the sales are reported as the operator's gross receipts with tax remitted — not the physical location of the ticket booth.

Q2 — Should the operator set up an official office on the site? That is "a business decision you must make." Opening or not opening an on-site office "will not affect the use of ticket sales for purposes of the sales tax increment." In other words, the increment analysis does not hinge on having a physical office at the track.

Bottom line: for the STAR bond increment, what matters is that ticket sales are reported as the operator's taxable gross receipts and the tax is remitted — regardless of whether the tickets were sold at the raceway or elsewhere.

What this means for you

STAR bond project operators

The sales-tax increment that repays STAR bonds can capture ticket sales made off-site, as long as those sales are reported as the project entity's gross receipts and sales tax is remitted on them. Structure your reporting so that all qualifying ticket revenue flows through the project entity's returns.

Location of the sale is not the test

The Department did not condition the increment on tickets being sold physically at the venue. Off-site season-ticket campaigns can still feed the increment. What controls is proper reporting and remittance, not the point of sale.

On-site office is optional for this purpose

Deciding whether to open an official office at the site is a business judgment. It does not, by itself, change whether ticket sales count toward the increment.

Common questions

Q: Do off-site ticket sales count toward a STAR bond sales-tax increment?
A: Yes. All ticket sales reported as the operator's gross receipts and on which sales tax is remitted count toward the increment, whether sold at the raceway or off-site.

Q: What determines whether a ticket sale counts?
A: That the sale is reported as part of the operator's gross receipts and sales tax is remitted on it — not the physical location where the ticket is sold.

Q: Does the operator need an on-site office for the sales to count?
A: No. Whether to establish an on-site office is a business decision and does not affect the use of ticket sales for the sales tax increment.

Citations and references

• K.S.A. 12-1774 — the Kansas STAR bond (sales tax and revenue bond) financing statute; the Department cited it as the basis for treating reported, tax-remitted ticket sales (on-site or off-site) as part of the sales tax increment used to repay the bonds.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2000-006

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

February 25, 2000

XXXXXXXXXX
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Re: Kansas Sales Tax

Dear XXXXX:

Your correspondence of January 27, 2000 has been referred to me for response. Thank you for your inquiry.

Your letter notes XXXXX XXXXX XXXXXXX (XXX) is constructing a state of the art motorsports facility in Kansas City, Kansas. It is scheduled to be a 1.5 mile tri-oval track with approximately 75,000 seat initially and the ability to ramp up to 150,000 seats. The speedway is expected to be completed by April 2001.

XXX is in the process of putting together a marketing plan to sell its 2001 season tickets during 2000. In this regard, you request answers to two questions. Your questions and our responses are set forth below:

Q1. Can sales tax collected on tickets sold off-site be used to pay off the STAR bonds?
A1. In our opinion, all ticket sales that are reported by XXXXX XXXXX XXXXXXX as part of its gross receipts and upon which it remits sales tax should be considered for purposes of the sales tax increment. This would apply to tickets sold on or off the raceway site. [K.S.A. 12-1774]

Q2. Does it make sense to establish an official XXX office on site? The sales tax is being collected based on an event to be held at the site.
A2. Deciding whether or not to establish an official XXX office on site is a business decision you must make. Your decision will not affect the use of tickets sales for purposes of the sales tax increment. [K.S.A. 12-1774]

This private letter ruling is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to make an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects this private letter ruling.

I trust this information is of assistance. If I can be of further service, please feel free to contact me.

Sincerely,

Jim Weisgerber
Attorney
Tax Specialist

JW:jw

Date Composed: 03/15/2000 Date Modified: 10/11/2001

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