Does an out-of-state ticket broker have to collect Missouri sales or use tax when it resells event tickets it bought at arms' length from unaffiliated venues?

Subject

Tickets Sold by Out-of-State Broker Not Subject to Missouri Sales Tax

Plain-English summary

The Missouri Department of Revenue ruled that an out-of-state ticket broker is not required to collect and remit Missouri sales tax or use tax on its resales of event tickets.

Applicant is a ticket broker located outside Missouri (in Kansas). Applicant acquires tickets to events located both within and outside Missouri, buying from individuals and venues that contact Applicant to sell tickets, at prices ranging from below to above face value. Applicant is unaffiliated with the places of amusement and entertainment from which it buys the tickets. Applicant then resells the tickets to individuals -- most of whom live in Kansas, though some live in Missouri -- and tickets are either picked up at Applicant's Kansas office or shipped by regular mail or Federal Express to the purchaser's requested location.

On the sales tax question, Section 144.020.1(2), RSMo, taxes amounts paid for admission and seating accommodations at places of amusement, entertainment, or recreation. Under Section 144.018.2, RSMo, it is the place of amusement or entertainment itself that must collect and remit sales tax on its initial sale of admissions -- and once that initial sale is an arms' length transaction for fair market value with an unaffiliated entity, any subsequent resale of those admissions is not subject to tax. Because the venues here already collected and remitted tax on their sales of tickets to Applicant, and because Applicant bought those tickets at arms' length, for fair market value, from unaffiliated venues, Applicant's resales to its own customers are not subject to sales tax. (Applicant itself should pay sales tax on its purchases of the tickets from the venues.)

On the use tax question, Section 144.610.1, RSMo, imposes use tax on the sale price of tangible personal property stored, used, or consumed in Missouri. The Department's answer here simply points back to Response 1: because the resales are not taxable sales for the reasons above, the same result applies and Applicant is not required to collect and remit Missouri use tax on its ticket resales either.

What this means for you

Out-of-state ticket brokers and resellers

If you are a ticket broker or reseller located outside Missouri, and you buy tickets in genuine arms' length transactions, at fair market value, from venues or sellers that are unaffiliated with you, this ruling indicates that your resales of those tickets are not subject to Missouri sales or use tax -- provided the venue already remitted tax on its initial sale to you. You, as the buyer, should still pay sales tax on your own purchase of the tickets from the venue.

Venues and places of amusement

This ruling confirms the venue's obligation under Section 144.018.2, RSMo, to collect and remit tax on the initial sale of admissions or seating accommodations. That initial collection is what allows all downstream resales -- assuming they meet the arms' length, fair-market-value, unaffiliated-entity conditions -- to pass through without additional Missouri tax.

Accountants and tax professionals

When advising a ticket-resale client, verify that the purchase from the venue was genuinely at arms' length and for fair market value, and that the client is unaffiliated with the venue. The ruling's no-tax conclusion for the resale rests entirely on those facts; any affiliation between the broker and the venue, or a purchase price that doesn't reflect fair market value, could change the analysis under Section 144.018.2, RSMo.

Common questions

Q: Does Applicant have to collect Missouri sales tax when it resells tickets to its customers?
A: No. Because Applicant bought the tickets in arms' length transactions, at fair market value, from venues unaffiliated with Applicant, Section 144.018.2, RSMo, exempts Applicant's subsequent resale from sales tax.

Q: Does Applicant have to collect Missouri use tax on its ticket resales?
A: No. The Department's use tax answer relies on the same reasoning as the sales tax answer -- since the resales are not taxable transactions, no use tax is owed under Section 144.610.1, RSMo, either.

Q: Who does pay sales tax on the tickets in this arrangement?
A: The places of amusement and entertainment are required to collect and remit sales tax on their initial sales of tickets to Applicant, and Applicant should pay sales tax on those purchases.

Q: Does it matter that Applicant is based in Kansas and most of its customers live there too?
A: The ruling's conclusion turns on the nature of the transaction -- an arms' length resale of tickets originally sold at fair market value by an unaffiliated venue -- not on the location of Applicant or its customers. Some of Applicant's customers do reside in Missouri, and the same no-tax result applies to those sales.

Q: Can another ticket broker rely on this ruling for its own resales?
A: Not automatically. This is a Missouri letter ruling, binding on the Department only with respect to the requesting Applicant, only for three years from its date, and only so long as the facts and underlying law remain unchanged. A different broker should confirm its own facts match -- particularly the arms' length, fair-market-value, and unaffiliated-entity elements -- and consult a tax professional before relying on this result.

Source

• Landing page: Missouri DOR Rulings Search
• Ruling: LR 8196

Original ruling text

Dear Applicant:

This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated April 4, 2022.

The facts as presented in your letter ruling request and in a conversation with Senior Counsel Thomas A. Houdek are summarized as follows. The following facts have not changed since the Department issued the previous letter ruling on October 11, 2018:

Applicant is a ticket broker located outside Missouri. Applicant acquires and sells tickets to events located within and outside of Missouri. Applicant is unaffiliated with the places of amusement and entertainment from which it buys tickets. Applicant purchases all tickets from individuals and venues that contact the Applicant in order to sell tickets ranging from below face value to above face value. The tickets are then typically sold to individuals. Most of the individuals reside in Kansas with some residing in Missouri. Tickets are either picked up at Applicant's Kansas office or shipped through regular mail or Federal Express to the location requested by the purchaser.

ISSUE 1 :

Is Applicant required to collect and remit Missouri sales tax on its sales of event tickets?

RESPONSE 1 :

No. Applicant is not required to collect and remit Missouri sales taxes on its sales of event tickets.

Section 144.020.1(2), RSMo, imposes a tax upon "the amount paid for admission and seating accommodations, or fees paid to, or in any place of amusement, entertainment or recreation, games and athletic events."  Section 144.018.2, RSMo, provides in relevant part:

A place of amusement, entertainment or recreation, including games or athletic events, shall remit tax on the amount paid for admissions or seating accommodations, or fees paid to, or in such place of amusement, entertainment or recreation.  Any subsequent sale of such admissions or seating accommodations shall not be subject to tax if the initial sale was an arms' length transaction for fair market value with an unaffiliated entity.

The places of amusement and entertainment are required to collect and remit sales tax on their sales of tickets to Applicant.  Applicant is unaffiliated with the places of amusement and entertainment from which it buys tickets.  Applicant purchases all tickets in arms' length transactions for fair market value.  Therefore, Applicant's subsequent sales of tickets to its customers are not subject to sales tax because the initial sales to the Applicant were at arms' length for fair market value with an unaffiliated entity. Applicant should pay sales tax on its purchases of the tickets.

ISSUE 2 :

Is Applicant required to collect and remit Missouri use taxes on its sales of event tickets?

RESPONSE 2 :

No. Applicant is not required to collect and remit Missouri use taxes on its sales of event tickets.

The use tax under Section 144.610.1, RSMo, is imposed upon the sale price of the tangible personal property stored, used, or consumed in Missouri.  See Response 1 .

This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals.  If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change.  For this reason, the interpretation set forth above should be reviewed on a regular basis.  Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.

Should additional information be needed, please contact Senior Counsel Thomas A. Houdek, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, (573) 751-0961.

Sincerely,

Wayne Wallingford