When were bicycle-race entry fees nontaxable, and were practice admissions and annual track memberships taxable in Texas?

Plain-English summary

The Texas Comptroller gave a test for when a bicycle-race entry fee was not taxable as an amusement.

The fee was nontaxable if it substantially exceeded normal facility-use cost, the person paid to compete in a contest, and part of the fee paid contest and prize costs. It was also nontaxable if the individual normally could not use the facility without paying the entry fee.

An admission charge merely to practice racing, without an actual race or contest, was taxable. The annual track membership fee became taxable effective October 2, 1984.

What this means for you

Race and tournament operators

The label “entry fee” did not control. The purpose, amount, competition, prizes, and ordinary facility access mattered.

Track operators

Practice access and annual membership were taxable under the historical answers even though qualifying contest entry could be nontaxable.

Accountants and tax professionals

Document how fees are calculated and used. Verify current amusement, membership, and contest rules.

Common questions

Q: When did the three-part contest test apply?
A: When the fee substantially exceeded normal use, paid for competition, and partly funded the contest and prizes.

Q: Was practice-track admission taxable?
A: Yes, when no race or contest occurred.

Q: Was the annual membership taxable?
A: Yes, effective October 2, 1984.

Citations and references

• The letter cites no statute or administrative rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8409L0590A06

Original ruling text

September 19, 1984

Dear **:

Your business associate, **, has requested that I provide, in
writing, the answers to his phone questions to me today regarding the
taxation of sales and fees associated with the bicycle race track that
you own.

I had tentatively informed ** that the ($7 and $20) fees charged
at your bicycle race track would be subject to the state sales tax as
admissions to amusements. However, since speaking with **, the
following policy has been implemented and will be the test for determining
if any entry fee is taxable

Entry fees will not be taxable as amusements if:

1. a. the fee substantially exceeds what would normally be paid for
   using the facility, AND

b. a person is paying to compete in a contest, AND

c. part of the fee goes towards the cost of the contest and for prizes,
OR

2. an individual would not normally be able to use the facility without
   payment of the entry fee.

Sales tax is due on an admission fee charged to simply practice racing on
the track, when there is not an actual race or contest taking place. The
($21) membership fee charged annually will be subject to state sales tax
as of October 2, 1984.

This opinion is based upon the facts you presented. If there are
additional or different facts, this opinion may change.

Please feel free to contact me if you have additional questions. You may
write me, call toll free 1-800-252-5555 from anywhere in Texas or phone
512/475-1931.

Sincerely,

Miss Jeannon Kralj
Tax Policy Section
Tax Administration Division