Are entry fees for a nationally sanctioned youth baseball tournament subject to Kansas sales tax?

Plain-English summary

A Missouri LLC that runs youth baseball tournaments and planned to expand into Kansas asked whether the entry fees it collects from teams are subject to Kansas sales tax. Two facts mattered: the tournaments are sanctioned by the United States Sports Association, Inc. (a national organization, described as tax-exempt under I.R.C. § 501(c)(4)), and spectators are charged an admission that is itself taxable under K.S.A. 79-3603(e).

The Department ruled the entry fees are exempt from Kansas sales tax. Kansas generally taxes fees "for participation in sports, games and other recreational activities" under K.S.A. 79-3603(m) — but that same statute contains a carve-out: it does not apply to entry fees and charges for participation in a special event or tournament sanctioned by a national sporting association where spectators are charged a taxable admission. Because these tournaments are nationally sanctioned and the spectator admissions are taxed under 79-3603(e), the participation/entry fees fall within the carve-out and are not taxable.

What this means for you

Tournament and event organizers

Participation and entry fees for a sports tournament can be exempt from Kansas sales tax — but only if the event is sanctioned by a national sporting association and spectators are charged an admission that you tax under K.S.A. 79-3603(e). If you don't charge a taxable spectator admission, or the event isn't nationally sanctioned, the general rule taxing participation fees (K.S.A. 79-3603(m)) applies.

Recreational leagues and clubs

Ordinary fees for participating in sports, games, and recreation are generally taxable in Kansas. The exemption here is a specific carve-out for nationally sanctioned tournaments with taxable spectator admissions.

Common questions

Q: Are youth baseball tournament entry fees taxable in Kansas?
A: Not in this case. The Department ruled they are exempt under K.S.A. 79-3603(m) because the tournament is nationally sanctioned and spectators pay a taxable admission.

Q: Aren't fees for participating in sports usually taxable?
A: Yes — K.S.A. 79-3603(m) taxes participation fees for sports and recreation, but it carves out entry fees for a special event or tournament sanctioned by a national sporting association where spectators are charged a taxable admission.

Q: What were the key conditions for the exemption?
A: The tournament was sanctioned by a national sporting association (the United States Sports Association), and spectators were charged an admission taxable under K.S.A. 79-3603(e).

Q: Can another organizer rely on this ruling?
A: No. A Kansas private letter ruling binds the Department only as to the requesting taxpayer's facts and cannot be cited as precedent by others.

Citations and references

• K.S.A. 79-3603(m) — imposes sales tax on fees and charges for participation in sports, games, and recreational activities, but excludes entry fees and charges for participation in a special event or tournament sanctioned by a national sporting association to which spectators are charged a taxable admission; the basis for exempting the tournament entry fees.
• K.S.A. 79-3603(e) — taxes gross receipts from admissions to amusement, entertainment, or recreation; the spectator admissions taxed under this section are what trigger the (m) carve-out.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2011-006

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

July 8, 2011

XXXXXXXXX
XXXXXXXXXXX
XXXXXXXXXXXX

Dear XXXXXXXX:

Re: XXXXXXXXXXXXXXXXXXXXX

We acknowledge receipt of your letter dated May 25, 2011 regarding the application of Kansas Retailers’ Sales tax.

My understanding of the relevant facts pertaining to your taxation question are as follows: (1) the taxpayer in question is a Missouri LLC that conducts youth baseball tournaments currently in Missouri but intends to expand its operations to Kansas, (2) the tournaments are sanctioned and approved by the United States Sports Association, Inc. an organization described in I.R.C. § 501(c)(4) as an organization exempt from federal income taxation, and (3) the admission fees charged to spectators for the aforementioned baseball tournaments are subject to Kansas sales tax pursuant to K.S.A. 79-3603(e).

K.S.A. 79-3603(m) imposes a sales tax upon: “the gross receipts received from fees and charges by public and private clubs, drinking establishments, organizations and businesses for participation in sports, games and other recreational activities, but such tax shall not be levied and collected upon the gross receipts received from. . . entry fees and charges for participation in a special event or tournament sanctioned by a national sporting association to which spectators are charged an admission which is taxable pursuant to K.S.A. 79-3603(e).

Based solely upon the information and documents you submitted, it is the opinion of the Kansas Department of Revenue that entry fees collected for your youth baseball tournaments are exempt from Kansas sales tax pursuant to K.S.A. 79-3603(m).

This is a private letter ruling pursuant to K.A.R. 92-19-59. It 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.

Sincerely,

Mark D. Ciardullo
Tax Specialist

Date Composed: 07/08/2011 Date Modified: 07/08/2011

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