Does a city-owned golf club have to charge sales tax on green fees, cart rentals, merchandise, food, and alcohol, and does it owe sales tax on its own purchases of course supplies and equipment?

Subject

Taxability of Items Sold by a Municipality Owned Golf Club

Plain-English summary

The Missouri Department of Revenue ruled that a municipality-owned, public golf club does not have to charge sales tax on the fees and items it sells, and also does not owe sales tax on the supplies and equipment it buys to run the course.

Applicant is a Missouri political subdivision that owns a golf club open to the public, run day-to-day by a contracted management company. Applicant charges green fees to play, rents golf carts, and sells food, beverages (including alcohol), and merchandise at the course. All of that revenue belongs to Applicant and goes into Applicant's own bank account, and Applicant pays the course's expenses -- things like seed, sand, fertilizer, general office supplies, and maintenance parts for carts and equipment.

Two separate questions were addressed. First, on the sales side, the Department held that green fees, cart rentals, merchandise, food, beverages, alcohol, and other tangible personal property sold at the golf course are not subject to sales tax. Golf courses are "places of amusement," and Section 144.030.2(17), RSMo exempts fees and charges to access a place of amusement owned or operated by a political subdivision, as long as the proceeds don't inure to a private party. Because Applicant is a political subdivision and represented that its proceeds don't benefit a private party, the exemption applied to the golf club's charges and sales.

Second, on the purchasing side, the Department held that Applicant's own purchases of seed, sand, fertilizer, office supplies, cart parts, and equipment for the golf course are also not subject to sales tax. Missouri's Constitution (Article III, Section 39(10)) bars the state from taxing purchases paid for out of a political subdivision's funds, and Section 144.030.1, RSMo and 12 CSR 10-110.995(3)(B) implement that by exempting sales of tangible personal property to a Missouri political subdivision. Because Applicant is a political subdivision buying items for its own golf course, those purchases were exempt too.

What this means for you

Municipalities and other political subdivisions that run public golf courses or similar recreational facilities

If your city, county, or other political subdivision owns and operates a public golf course (or a similar "place of amusement" like a pool or rec center) and the revenue stays with the political subdivision rather than benefiting a private party, this ruling indicates you don't need to charge sales tax on green fees, cart rentals, merchandise, food, or alcohol sold at the facility. Separately, because you're a political subdivision, your own purchases of supplies and equipment to run the facility -- fertilizer, seed, sand, office supplies, cart and equipment parts -- should also be exempt from sales tax, regardless of whether a private management company handles day-to-day operations.

Municipalities that hire a management company to run a facility

The presence of a contracted management company didn't change the outcome here, because all revenue belonged to and was deposited in the Applicant's own account, and Applicant (not the management company) paid the expenses. If your facility's structure is different -- for example, if a private manager keeps some of the proceeds -- the "does not inure to a private party" condition in Section 144.030.2(17), RSMo could come out differently, so pay close attention to where the money actually goes.

Accountants and tax professionals advising government clients

When evaluating a political subdivision's recreational facility, check two separate things: (1) whether the facility qualifies as a "place of amusement" under Section 144.030.2(17), RSMo and whether proceeds inure to any private party, which governs the taxability of what the facility sells to the public; and (2) whether the buyer is itself a political subdivision purchasing with its own funds, which triggers the constitutional and regulatory exemption on purchases under Article III, Section 39(10) of the Missouri Constitution, Section 144.030.1, RSMo, and 12 CSR 10-110.995(3)(B). These are two independent exemptions that both happened to apply here.

Common questions

Q: Does a city-owned golf course have to charge sales tax on green fees?
A: No. Golf courses are "places of amusement," and Section 144.030.2(17), RSMo exempts fees and charges to access a place of amusement owned or operated by a political subdivision, as long as proceeds don't inure to a private party. Applicant represented its proceeds stay with the political subdivision, so green fees were exempt.

Q: What about cart rentals, merchandise, food, and alcohol sold at the course?
A: Also not subject to sales tax under this ruling. The Department grouped green fees, cart rentals, merchandise, food, beverages, alcohol, and other tangible personal property together and held none of it was subject to sales tax, based on the same political-subdivision place-of-amusement exemption.

Q: Does the golf club owe sales tax on the seed, fertilizer, and equipment it buys?
A: No. Because Applicant is a Missouri political subdivision paying for these items out of its own funds, the purchases are exempt under Article III, Section 39(10) of the Missouri Constitution, Section 144.030.1, RSMo, and 12 CSR 10-110.995(3)(B), which exempt sales of tangible personal property to a political subdivision.

Q: Does hiring a private management company to run the golf course change the answer?
A: Not on these facts. Applicant still owned the golf course, all revenue was deposited into Applicant's own bank account, and Applicant paid the expenses. The management company was paid a monthly fee for services but didn't change who owned the revenue or who bore the costs.

Q: Can another Missouri municipality with a golf course rely on this ruling?
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 law remain unchanged. Another political subdivision should confirm its own facts (especially where the revenue goes and whether any private party benefits) match those described here and consult a tax professional before relying on this result.

Source

• Landing page: Missouri DOR Rulings Search
• Ruling: LR 8238

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 January 31, 2023.

The facts as presented in your letter ruling request are summarized as follows and are similar to facts provided in letter ruling requests sent to the Department in 2017 and 2020:

Applicant owns a golf club that is open to the public.  The Applicant has contracted with a professional management company to manage the golf club.  The Applicant pays the management company a monthly management fee for its management services.  The Applicant charges green fees to play on the golf course, and rents golf carts for use on said golf course.  The Applicant also sells food, and beverages, including alcohol, and merchandise at the golf course.  All revenue generated by the golf course belongs to the Applicant and is deposited into a bank account of the Applicant.  The Applicant pays all expenses related to the golf course, including purchasing seed, sand, fertilizer, general office supplies, and maintenance parts for carts, and equipment.

ISSUE 1:

Are the Applicant's sales of green fees, cart rentals, merchandise, food, beverages, alcohol, and tangible personal property subject to sales tax?

RESPONSE 1:

No.  The Applicant's green fees, cart rentals, merchandise, food, beverages, alcohol, and tangible personal property are not subject to sales tax.

Section 144.020.1(2) RSMo, imposes a tax upon fees and charges paid to access places of amusement.

Section 144.030.2(17) RSMo, exempts fees and charges paid to access places of amusement owned or operated by a political subdivision, with limitations applicable when proceeds inure to a private party. Golf courses are places of amusement, entertainment, or recreation.  See, e.g., Luther (Buddy) Godwing d/b/a Buddy's Gold Shop v. Director of Revenue , Case No. 90-000864 RS (Mo. Admin. Hr'g Comm. 1991).

The green fees paid to the Applicant are for access to the Applicant's golf course, a place of amusement. The Applicant is a political subdivision, and represents that its ticket proceeds do not inure to a private party. Section 144.030.2(17) RSMo, therefore exempts ticket fees and charges used to pay for access to the Applicant's golf club.

ISSUE 2:

Are the Applicant's purchases of seed, sand, fertilizer, general office supplies, maintenance parts for carts, and equipment for use in the Applicant's golf club subject to sales tax?

RESPONSE 2:

No. The Applicant's purchases of seed, sand, fertilizer, general office supplies, maintenance parts for carts, and equipment for use in the Applicant's golf club are not subject to sales tax.

Missouri Constitution Article III, Section 39(10), RSMo, prohibits the state from imposing sales or use tax on purchases paid for out of the funds of Missouri political subdivisions.  Section 144.030.1, RSMo, exempts from taxation "retail sales of tangible personal property which the general assembly of the state of Missouri is prohibited from taxing or further taxing by the constitution of this state."  Missouri Code or State Regulations 12 CSR 10-110.995(3)(B) further explains that all sales of tangible personal property to a Missouri political subdivision are exempt from sales tax.

The Applicant is a Missouri political subdivision that purchases items for use at its golf course.  Therefore, the Applicant's purchases for use in its golf course are not subject to sales tax.

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 Legal Counsel Nathan Jefferson, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.

Sincerely,

Wayne Wallingford