Are charges for leasing a private luxury suite at an arena, and separate charges for suite-related advertising, subject to New York's admissions tax?

Plain-English summary

Spectacor Management Group manages the Albany County Civic Center -- home to professional sports, concerts, circuses, trade shows, and graduations -- under a contract with Albany County, and executes all suite and advertising license agreements in its own name. The Civic Center's private enclosed suites were offered under three different agreement structures. Agreement A (a five-year deal) and Agreement B (a three-year deal) each gave the suiteholder permanent, exclusive use of a specific suite for every event at the arena, plus a set number of tickets and parking spaces, in exchange for an annual suite fee and a separate annual "advertising" fee (covering things like an illuminated diorama with the suiteholder's logo, a commemorative plaque, program listings, and scoreboard recognition). Agreement C was different: the suiteholder only got exclusive use of the suite for a specific event if it bought at least one ticket to that event (priced like the row directly in front of the suite); otherwise the county could resell the suite to someone else. Spectacor asked whether the suite and advertising charges under all three agreements are subject to New York's admissions tax.

New York taxes admission charges to places of amusement, and has a special rule for anyone with permanent use of a box or seat: the tax isn't based on what they actually paid for the box, but on what a comparable single seat would cost for each event at which the box is actually used or reserved -- whether or not the holder shows up. Applying that rule, suite rentals under Agreements A and B are taxable admissions, computed event-by-event based on the price of a similar seat elsewhere in the venue for each event the suite is used or reserved for -- not on the flat annual suite fee itself. Agreement C works differently: because the suiteholder only gets the suite when it buys a ticket (at a price equivalent to a nearby regular seat), the suite rental itself isn't separately taxable, but the tickets the suiteholder buys to use it are taxed under the standard admissions rule that applies to any patron. Across all three agreement types, the separate advertising charges (dioramas, plaques, program listings, scoreboard mentions) are excluded from sales tax entirely, since advertising services aren't a taxable enumerated service.

What this means for you

Arena and venue operators selling luxury suites or private boxes

How you structure suite access changes the tax result. A "permanent exclusive use regardless of tickets purchased" structure (like Agreements A and B) makes the suite rental itself taxable, computed per-event against a comparable seat price. A "suite access only with a ticket purchase" structure (like Agreement C) instead makes the ticket purchase the taxable event, leaving the suite rental itself untaxed. Either way, keep suite-related advertising charges separately stated -- they aren't taxable regardless of the suite structure.

Corporations and individuals leasing luxury suites at sports or entertainment venues

Understand which type of agreement you're signing: a true "permanent use" suite lease carries its own periodic admissions-tax exposure tied to events you use or reserve the suite for, while a ticket-based suite access arrangement instead taxes you the same way as any other ticket buyer.

Accountants and tax professionals

The computation method here directly imports the pre-1955 Federal admissions tax regulatory approach: tax on a permanent box/seat is based on the price of a comparable single seat for each performance the box is used or reserved for (not the box's actual rental price), falling back to the nearest similarly located or seated ticket price if no directly comparable seat exists.

Common questions

Q: Is a luxury suite's flat annual rental fee itself taxed as an admission charge?
A: Only under a "permanent exclusive use" structure, and even then the tax is computed using a comparable single-seat ticket price per event, not the flat suite fee.

Q: Are suite-related advertising charges (dioramas, plaques, scoreboard mentions) taxable?
A: No, in any of the three agreement structures -- advertising isn't an enumerated taxable service.

Q: How is admissions tax calculated for a "permanent use" suite?
A: By multiplying the price of the nearest comparable single seat in the same part of the venue by the number of seats in the suite, for each event the suite is used or reserved for.

Q: Does this ruling apply to my venue's suite-leasing program?
A: Not automatically. An Advisory Opinion binds the Department only for the taxpayer and facts it was issued to, and it can't be relied on by anyone else. Your own agreement structure would need independent review.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1998.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a98_7s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-98-(7)S
Sales Tax

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S950307A

On March 7, 1995, a Petition for Advisory Opinion was received from
Spectacor Management Group, 51 South Pearl Street, Albany, New York 12205.
The issue raised by Petitioner, Spectacor Management Group, is whether
certain charges for a private enclosed suite at the Albany County Civic Center
are subject to the tax on admissions imposed under section 1105(f)(1) of the Tax
Law.
Petitioner submits the following statement of facts.
The Albany County Civic Center ("the Civic Center") has hosted athletic,
musical and dramatic events, circuses, ice shows, trade shows and high school and
college graduations. Petitioner manages the Civic Center for Albany County ("the
County") pursuant to a management contract. Seating in the Civic Center includes
private enclosed suites. The County and Petitioner have entered into agreements
with individuals, corporations and other entities for the lease of private
enclosed suites and for advertising services. Suiteholders were offered three
different options for acquiring the lease and advertising services, “Agreement
A,”“Agreement B” and “Agreement C".
Agreement A. Agreement A was for a period of five years, commencing on
September 1, 1989 and ending on August 31, 1994. Agreement A provided that the
suiteholder pay to the County $20,000 annually during the term of the Agreement
for the rental of a specific suite. A suiteholder was entitled to the sole and
exclusive use of the Suite during all events held in the Civic Center. No other
person or entity was permitted to use the suite for any purpose at any time
during the term of Agreement A without the suiteholder’s consent.
Upon
expiration of the term, the suiteholder had no right or interest in the suite.
During the term of Agreement A, a suiteholder received sixteen (16) tickets
and four (4) reserved parking places in the adjoining parking garage for:

1. All regular season and playoff games of the Albany Patroons played at
   the Civic Center;
   2.
   All regular season games played by another professional sports
   franchise at the Civic Center if such franchise were secured as a tenant;
2. Twenty (20) other events which were chosen by the suiteholder. If
   another sports franchise were not secured, a credit equivalent to the value of
   the sport franchise’s tickets was provided to the suiteholder and could be used
   toward the purchase of other special event tickets.
   A suiteholder also had the right of first refusal to purchase at comparable
   prices suite tickets for all other events and sports playoffs. A “comparable”
   price ticket was defined in Agreement A as the equivalent of the ticket price for
   seats directly in front of the suite for the particular event in question.

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Agreement A also provided that a suite holder pay to the County during the
five-year term $30,000 annually for “advertising within the Civic Center.”
Advertising consisted of the following:

1. A 3 foot by 3 foot illuminated diorama with the Suiteholder’s name and
   logo prominently displayed in the Civic Center. The County reserved the right
   to approve a diorama for form and style and to select a location.
2. A commemorative plaque containing the suiteholder’s name located at the
   main entrance.
3. Listing of suiteholders in all operator-prepared event programs except
   when in conflict with the sponsored event.
   4.
   Recognition of the suiteholder during all events on an electronic
   message board which is part of a centrally located scoreboard.
   5.

Preference on other advertising packages in the Civic Center.

Agreement B. Agreement B was for a term of three years, commencing on
September 1, 1992 and ending on August 31, 1995. Agreement B provides that the
suiteholder pay to the County $16,000 annually during the term of the Agreement
for the rental of a specific suite. A suiteholder is entitled to the sole and
exclusive use of the suite during all events held in the Civic Center.
A suiteholder received (16) tickets and four (4) parking places in the
adjoining parking garage for each event held at the Civic Center.
Agreement B also provides that a suiteholder pay to the County during the
three-year term $24,000 annually “for advertising within the Civic Center.”
Advertising consisted of the following:

1. A 3 foot by 3 foot illuminated diorama with the suiteholder’s name and
   logo prominently displayed in the Civic Center. The County reserved the right
   to approve a diorama for form and style and to select a location.
2. A commemorative plaque containing the suiteholder’s name located at the
   main entrance.
3. Listing of suiteholders in all operated-prepared event programs except
   when in conflict with the sponsored event.
   4.
   Recognition of the suiteholder during all events on an electronic
   message board which is part of a centrally located scoreboard.
   5.

Preference on other advertising packages in the Civic Center.

Agreement C. Agreement C was for a term of three years, commencing on
September 1, 1992 and ending on August 31, 1995. Agreement C provides that the
suiteholder pay to the County during the three-year term $10,000 annually for the
rental of a specific suite. A suiteholder is entitled to the sole and exclusive

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use of the suite during any event for which the suiteholder purchases at least
one ticket. A suiteholder or a guest of a suiteholder is not entitled to use of
the suite unless a ticket is purchased. The price of such tickets is the price
set for the seats in the row directly in front of the suite.
The County retained the right to sublease the suite to another person or
entity for any event where the suiteholder fails to purchase at least one event
ticket 48 hours in advance of the event, without obtaining the consent of the
suiteholder.
Agreement C also provides that a suiteholder pay to the County during the
three-year term $15,000 annually “for advertising within the Civic Center.”
Advertising consisted of the following:

1. A 3 foot by 3 foot illuminated diorama with the suiteholder’s name and
   logo prominently displayed in the Civic Center. The County reserved the right
   to approve a diorama for form and style and to select a location.
2. A commemorative plaque containing the suiteholder’s name located at the
   main entrance.
3. Listing of suiteholders in all operator-prepared event programs except
   when in conflict with the sponsored event.
   4.
   Recognition of the suiteholder during all events on an electronic
   message board which is part of a centrally located scoreboard.
   5.

Preference on other advertising packages in the Civic Center.

Many of the advertising services provided for in the Agreements were
available to non-suiteholders.
In addition, advertising via the electronic
scoreboard was sold to non-suiteholders, usually as part of an advertising
packaging that consisted of dioramas, signs and scoreboard messages. Advertising
in the Knickerbocker Arena Magazine also was sold to non-suiteholders.
Section 3.03(C) of the management contract between Petitioner and Albany
County provides that Petitioner "Negotiate licenses, sublicenses, use agreements,
bookings, and advertising agreements for the said Facility. Such licenses, use
agreements, bookings, advertising agreements and any other agreements pertaining
to the use, operation and occupancy of the Facility will be executed by Spectacor
Management in its own name.
. . ." (Emphasis supplied)
The license agreement for the use of the Civic Center is entered into by
Petitioner and the licensee, not Albany County. Section 14 of the agreement
provides in part,

14. Licensee acknowledges that [sic] importance of a prompt and
    accurate accounting of gross ticket sales for purposes of allocating
    funds to Licensor, Licensee and others at the settlement for any
    events to be produced hereunder. Licensee also acknowledges that
    errors in ticketing may cause significant disruptions of any such
    event(s) and expose the parties to potential liability. Licensee

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agrees that to enhance ticket sales for each event covered by this
license, the manner of distribution and sale of tickets must be
controlled. For the foregoing reason, this license does not grant
or convey any right or privilege to distribute or sell tickets to
any event in the Arena and/or Exhibition Hall, which right shall
remain solely that of Licensor except as expressly herein set forth.
To these ends, Licensor and Licensee agree as follows:
(a) Licensor shall act as the custodial of all revenues for the sale
of tickets and shall not release such monies to Licensee until time
of settlement, at which time Licensor shall provide Licensee with
all monies due it, if any, after deduction of rent and expenses.
(b) Admission to events shall be by ticket only. All tickets shall
be priced at prices mutually agreed upon from time to time between
the parties. Licensor shall retain, for its own use, complimentary
tickets in the highest price category numbering one (1%) percent of
the total available tickets for sale.
*

*

*

Applicable Law and Regulations
Section 1101(d)(2) of the Tax Law defines the term admission charge as "The
amount paid for admission, including any service charge and any charge for
entertainment or amusement or for the use of facilities therefor."
Section 1105(f)(1) of the Tax Law imposes a tax upon :
Any admission charge where such admission charge is in excess of ten
cents to or for the use of any place of amusement in this state,
except charges for admission to race tracks, boxing, sparing or
wrestling matches or exhibitions which charges are taxed under any
other law of this state, or dramatic or musical arts performances,
or motion picture theaters, and except charges to a patron for
admission to, or
use of, facilities for sporting activities in
which such patron is to be a participant, such as bowling alleys and
swimming pools.
For any person having the permanent use or
possession of a box or seat or a lease or a license, other than a
season ticket, for the use of a box or seat at a place of amusement,
the tax shall be upon the amount for which a similar box or seat is
sold for each performance or exhibition at which the box or seat is
used or reserved by the holder, licensee or lessee, and shall be
paid by the holder, licensee or lessee. (Emphasis supplied)
Sections 527.10(b)(3) and (4) of the Sales and Use Tax Regulations provide
the following definitions:
(3) Place of amusement.
Any place where any facilities for
entertainment, amusement, or sports are provided.
Such places
include without limitation (i) a theater of any kind, concert hall,

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opera house, or other place where a performance is given; (ii)
fairground or exhibition hall or grounds, (iii) golf course,
athletic field, sporting, gymnasium, bowling alley, shooting
gallery, swimming pool, bathing beach, skating rink, tennis court,
handball court, billiard hall or other place for athletic exhibits;
*
*
*
(4) The following definitions apply to all taxes imposed under
subdivision (f) of section 1105 of the Tax Law, the regulations for
which appear in this Part, and in sections 527.11 and 527.12 of this
Part.
(i) Amusement charge. Any admission charge, dues or charge of a
roof garden, cabaret or other similar place.
(ii) Patron. Any person who pays an amusement charge or who is
admitted without payment and who is required to pay the tax imposed
under subdivision (f) of section 1105 of the Tax Law.
(iii) Lessor. Any person who is the owner, licensee, or lessee of
any place of amusement which he leases, subleases or grants a
license to use to other persons who make amusement charges or
admission charges.
(iv) Recipient. Any person who collects or receives or is under a
duty to collect an amusement charge.
Section 527.10(c)(2) of the Sales and Use Tax Regulations provides:
The tax imposed with respect to the permanent use or possession of
a box or seat or a lease or a license other than a season ticket, of
a box or seat is computed on the amount for which a similar box or
seat is sold for each performance or exhibition at which the box or
seat is used or reserved for an event which is subject to tax.
Opinion
The Civic Center is a place of amusement as defined in section 1101 of the
Tax Law, “[A]ny place where facilities for entertainment, amusement, or sports
are provided.”
The Civic Center is used by professional sports teams,
entertainers of all kinds, circuses, home shows, and for a variety of other uses.
Section 1105(f)(1) of the Tax Law imposes tax on admissions “[f]or any
person having the permanent use of a box or seat or a lease or a license, . . .
for the use of a box or seat at a place of amusement. . . .”
Section
527.10(c)(2) of the Sales and Use Tax Regulations provides that the tax imposed
with respect to the permanent use or possession of a box or seat or a lease or
a license other than a season ticket, of a box or seat is computed on the amount
for which a similar box or seat is sold for each performance or exhibition at
which the box or seat is used or reserved for an event which is subject to tax.

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The sales tax on admissions was derived from the Federal Tax on admissions
imposed pursuant to the Internal Revenue Code of 1938 and 1954. The Federal
regulations relating to the Federal tax on admission charges to a place of
amusement disregarded the amounts paid for the lease of boxes or seats and
interpreted the measure of tax to be based on the amount for which a similar box
or seat is sold for each performance or exhibition at which the box or seat is
used or reserved or could be used by or for the lessee or holder. The tax was
not on those amounts actually paid for a particular box or seat. It was based
on the amount that would be paid at the established price for a comparable seat,
for admission to all performances given (whether or not the lessee purchased
tickets to attend). In addition, the 1955 Federal regulations provided that in
the case where there is no comparable box for which single occasion admission
charges were sold, the tax was to be computed by determining the amount for which
a single box seat, similar to the "leased" box, located in the same part of the
place of amusement is sold. If there were no similarly located boxes, the tax
was to be computed by determining the amount the nearest single seat in the same
part of the place of amusement is sold.
The Management Contract between the County and Petitioner provides that
Petitioner and not the County controls the use of the facility. Section 3.03 of
this contract provides that, "Such licenses, use agreements, bookings,
advertising agreements and any other agreements pertaining to the use, operation
and occupancy of the Facility will be executed by Spectacor Management in its own
name." Petitioner's typical contract with entertainers, etc. provides that,
"Licensor [Petitioner] shall act as the custodial of all revenues for the sale
of tickets. . ."
The tax is not based upon the lease arrangements, to which the County of
Albany is a party, but upon the admissions to taxable events where the seats are
used or reserved.
Petitioner is responsible for the event admissions.
Petitioner is the recipient of amusement charges at the Civic Center and it is
required to collect sales tax on taxable admissions there, including the tax to
be collected on the use of the suites. The sales tax is not due until the box
or seat is "used or reserved."
Where the agreement to lease a box or seat
includes taxable admissions which are reserved by the lessee at the inception of
the lease the tax is due at such time. However, where the taxable admissions are
unknown at the inception of the lease, the sales tax is not due until the time
that the lessee reserves or uses the box or seat for particular events. The
amount subject to tax for each event, may be calculated by multiplying the price
of the nearest single seat in the same part of the arena by the number of seats
in the suite being used or reserved.
Agreements A and B were for a right to use a corporate suite and to receive
certain advertising services. No taxable use of any property occurs under these
contracts except under certain circumstances (when the box or seat is used or
reserved for a taxable event). Thus, suite rentals under Agreements A and B are

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subject to sales tax based upon the admission charges to certain taxable events
for which the suites are used or reserved, as described above. Since advertising
is excluded from the sales tax imposed under section 1105 (c)(1) of the Tax Law,
payments for advertising services under these agreements are not subject to sales
tax.
Suite rentals under Agreement C are not subject to sales tax.
Under
Agreement C, a suiteholder is not entitled to use a suite for a particular event
unless it purchases a ticket. The price of these tickets is the price set for
the seats in the row directly in front of the rented suite. Sales tax is due on
suiteholders' purchase of tickets to those events which are subject to the
Section 1105(f)(1) tax on admissions. Payments for advertising services under
Agreement C are not subject to sales tax.

DATED: February 25, 1998

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau
The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.