Does a Missouri municipality have to charge sales tax on concessions and other items sold at its Community Center and Aquatics Center?

Subject

Taxability of Items Sold by a Municipality Owned Community Center

Plain-English summary

The Missouri Department of Revenue ruled that a municipality's sales of concessions and other tangible personal property at its Aquatics Center, Community Center, and various Parks and Recreation Department events are not subject to sales tax.

Applicant is a municipality that runs an Aquatics Center, a Community Center, and recreational events through its Parks and Recreation Department, and sells concessions and other items in connection with those activities. All of the proceeds from these sales are used solely for the benefit of the Parks and Recreation Department and/or the municipality itself, and the city has not entered into any revenue-sharing agreement with any private business regarding these sales.

Missouri law generally taxes fees charged at places of amusement, entertainment, or recreation under Section 144.020.1(2), RSMo, and the Department noted that sales of concessions and other tangible personal property are ordinarily fees charged in or to such a place, making them taxable in the general case. But Section 144.030.2(17), RSMo, carves out an exemption for such fees when the place of amusement, entertainment, or recreation (including museums, fairs, zoos, and planetariums) is owned or operated by a municipality or other political subdivision, all proceeds benefit that municipality, and none of the proceeds inure to any private person, firm, or corporation -- unless the municipality has a revenue-sharing agreement, in which case amounts retained by the private party under that agreement stay taxable.

Because Applicant is a political subdivision that owns the Aquatics Center and Community Center and hosts the recreational events itself, and because all proceeds from the concessions and other sales benefit only Applicant (with no revenue-sharing arrangement in place), the Department concluded the exemption applies and the sales are not subject to sales tax.

What this means for you

Municipalities and other political subdivisions running recreational facilities

If your city, county, or other political subdivision owns and operates a community center, aquatics center, or similar recreational facility, and it sells concessions or other tangible items in connection with that facility or its recreational events, this ruling indicates those sales can be exempt from sales tax under Section 144.030.2(17), RSMo -- but only if all the proceeds benefit the municipality and don't flow to any private business. The moment you bring in a private vendor or manager under a revenue-sharing agreement, the amounts that vendor retains become taxable, even if your own share stays exempt.

Parks and recreation departments selling concessions at events

The same reasoning covers concession sales tied to recreational events your department organizes and hosts, not just fixed facilities like a community center. The key facts the Department relied on were that the municipality itself owned/operated the venues and events, and that 100% of the proceeds stayed with the municipality with no private party sharing in them.

Accountants and tax professionals advising government clients

When evaluating whether a municipal client's concession or merchandise sales at a recreational facility qualify for the Section 144.030.2(17), RSMo, exemption, confirm two things from the underlying facts: (1) the facility or event is owned or operated by the municipality or another political subdivision, and (2) there is no revenue-sharing agreement with a private person, firm, or corporation -- or if there is one, isolate and tax only the amounts that private party retains. Absent a revenue-sharing arrangement, sales fitting this fact pattern fall outside the general sales tax imposed under Section 144.020.1, RSMo.

Common questions

Q: Does a city have to collect sales tax on snacks and drinks sold at its community center?
A: Not if the facts match this ruling -- the community center is owned and operated by the municipality, and all proceeds from the concession sales benefit the municipality with no private person, firm, or corporation sharing in them. In that situation, Section 144.030.2(17), RSMo, exempts the sales.

Q: Would the answer change if the city hired a private company to run the concessions and split the revenue?
A: Yes, potentially. Section 144.030.2(17), RSMo, allows a municipality to enter into revenue-sharing agreements with private vendors, but it specifically says nothing in the exemption shields amounts retained by that private party under such an agreement. This ruling's facts involved no revenue-sharing agreement at all, so that carve-out wasn't at issue here.

Q: Does this exemption cover only community centers, or other recreational facilities too?
A: The statute's exemption language is broader than just community centers -- it covers admission, participation, or other fees for any place of amusement, entertainment, or recreation, games, or athletic events owned or operated by a municipality, and it specifically lists examples like museums, fairs, zoos, and planetariums. This ruling applied it to Applicant's Aquatics Center, Community Center, and Parks and Recreation Department events.

Q: Can another Missouri city rely on this exact ruling for its own concession sales?
A: Not automatically. This is a letter ruling binding on the Department only with respect to the requesting Applicant, only for three years from the date of the letter, and only so long as the facts described don't change and the underlying law isn't changed by the General Assembly or the courts. Another municipality should compare its own facts carefully -- especially any revenue-sharing arrangements -- and consult a tax professional before relying on this outcome.

Q: What Missouri statute imposes the tax that would otherwise apply here?
A: Section 144.020.1, RSMo, generally taxes retail sales of tangible personal property and certain services, and Section 144.020.1(2), RSMo, specifically imposes a 4% tax on amounts paid for admission, seating, or fees at places of amusement, entertainment, or recreation. Concession and merchandise sales at such venues would ordinarily fall under this tax absent the municipal exemption in Section 144.030.2(17), RSMo.

Source

• Landing page: Missouri DOR Rulings Search
• Ruling: LR 8245

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 3, 2023.

The facts as presented in your letter ruling request are summarized as follows:

Applicant is a municipality that operates an Aquatics Center, Community Center, and various recreational events sponsored by the City's Parks and Recreation Department. Applicant sells concessions and other items in conjunction with park sponsored activities. All proceeds from any such sales are used solely for the benefit of the Department and/or the municipality. The city has not entered into any revenue sharing agreements related to the sale of any of the aforementioned items.

ISSUE :

Are Applicant's sales of concessions and other items of tangible personal property subject to sales tax?

RESPONSE :

No.  Applicant's sales of concessions and other items of tangible personal property are not subject to sales tax.

Section 144.020.1, RSMo, imposes a sales tax on sales of tangible personal property and certain enumerated services. Section 144.020.1(2), RSMo, provides "[a] tax equivalent to four percent of 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 144.030.2(17) RSMo, exempts from sales tax:

Amounts paid or charged for admission or participation or other fees paid by or other charges to individuals in or for any place of amusement, entertainment or recreation, games or athletic events, including museums, fairs, zoos and planetariums, owned or operated by a municipality or other political subdivision where all the proceeds derived therefrom benefit the municipality or other political subdivision and do not inure to any private person, firm, or corporation, provided, however, that a municipality or other political subdivision may enter into revenue-sharing agreements with private persons, firms, or corporations providing goods or services, including management services, in or for the place of amusement, entertainment or recreation, games or athletic events, and provided further that nothing in this subdivision shall exempt from tax any amounts retained by any private person, firm, or corporation under such revenue sharing agreement[.]

Sales of concessions and other items of tangible personal property are fees charged in or to a place of amusement, entertainment, or recreation and are subject to sales tax under section 144.020.1, RSMo.

Applicant is a political subdivision that owns the Aquatics Center and Community Center, and it hosts various recreational events organized by its Parks and Recreation Department. All of the proceeds from the sales at the Aquatics Center, Community Center, and the various recreational events it hosts only benefit Applicant. Therefore, Applicant's sales of concessions and other items of tangible personal property are not subject to sales tax pursuant to section 144.030.2(17), RSMo.

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

Sincerely,

Wayne Wallingford