When were scuba excursions, crewed boat charters, and lump-sum diving travel packages taxable?

Plain-English summary

The January 28 clarification separated three transactions. A standalone scuba-diving excursion was a taxable amusement service, and the full customer charge was subject to the historical state and applicable city and MTA taxes.

A boat supplied with a crew was a charter rather than an equipment rental. When chartered simply for transportation, it was not taxable.

A single price for the described Gulf, Florida, or Mexico travel package covered pretrip meetings, escorts, transportation, lodging or meals, a chartered boat, air fills, and dive supervision. Because the package appeared to consist mostly of nontaxable items and services, the entire lump-sum customer charge was not taxable. The operator still paid sales tax when purchasing taxable inputs used to provide the tour.

Earlier attached letters had broadly called diving tours taxable amusements and had taxed both the customer excursion charge and the boat payment. The January 28 letter supplies the more detailed operative distinctions within this record.

STAR adds a 2015 alert changing the definition of a place of business, so the letter's historical local-tax sourcing language should not be treated as current without checking later law.

Common questions

Was every scuba-related charge taxable? No. Standalone excursions were taxable, transportation-only crewed charters were not, and the described mostly nontaxable lump-sum travel packages were not. Did the operator avoid all tax on a nontaxable package? No; it paid tax on taxable purchases used to provide it. Are the local-rate rules current? STAR flags a later definitional change.

Citations and references

The reproduced letters and STAR alert cite no numbered statute or 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/8501L0610A01

Original ruling text

Alert: As of 01/15/2015, a place of business is defined as "an established outlet, office, or location operated by a seller for the purpose of selling taxable items to those other than employees, independent contractors, and individual persons affiliated with the seller."

January 28, 1985

Dear ***:

I am writing to clarify our position regarding written and phone inquiries you have recently made regarding the taxability of your charges to customers for scuba diving tours.

Example 1: (from your letter of 11-21-84)

"I charge a retail price of $*** to a scuba diver for a trip offshore. I then pay the boat $**. Does the boat charge $*, plus 4.125% or do I charge $****, plus 6.125%? Is the transaction even taxable?"

Answer: A scuba diving excursion is a taxable amusement service. The entire charge, $***, is subject to state (4 1/8%) and applicable city (1%) and Metropolitan Transit Authority (CITY M.T.A. 1%) taxes.

You indicated to me in our phone conversation of January 16, that the $*** charge was for a boat with crew. This is a boat charter rather than a rental. The chartering of a boat simply for transportation purposes is not a taxable transaction.

Example 2: (from your letter of 12-19-84)

You give three examples of scuba diving tours you provide; to the Gulf of Mexico, Florida and Mexico. The tour charge to each customer covers pretrip meetings, trip escorts, chartered boat, lunch, air fills, on-board supervision of the dive, round-trip bus or air transportation and motel.

Answer: The lump-sum charge for your travel package made to each customer is not taxable. Whenever a charge for a "package", such as those described for your business, covers taxable as well as nontaxable services, a taxability

decision is based on what is regarded to be the essential nature of the transaction. If the tour package appears to be in most part made up of nontaxable items/services, the entire charge to your customer is not taxable. Sales tax is due at the time of purchase on any taxable purchases you may make in order to provide the tour.

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

You may write to the Tax Administration Division.

Sincerely,

Tax Policy Section

Tax Administration Division

January 11, 1985

Dear ***:

Thank you for your recent letter to *** giving more detail on your scuba tours. I have been asked to respond.

The examples you give appear to be scuba excursions and not basically classes. Scuba diving is an amusement and selling an admission to a scuba diving excursion is taxable.

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

You may write to the Tax Administration Division.

Sincerely,

Tax Policy Section

Tax Administration Division

December 19, 1984

Tax Policy Section

Tax Administration Division

Comptroller of Public Accounts

State of Texas

Austin, TX 78774

Dear ***:

Thank you for trying to help define what is or is not taxable for me. Your sincere approach is appreciated. In follow up to our conversation I will rephrase my questions as follows:

I run several types of Scuba diving tours. Every tour includes several services. A description of these tours follows. Please tell me what the tax status of each tour is.

Tour To Gulf of Mexico

Service provided to the customer.

1. Pre trip meeting, explanation, and instruction.

2. Trip escorts to meet customers the morning of the trip in CITY and escort them to CITY B.

3. Use of boat, lunch, air fills on board and on board supervision of the dive.

Tour To Florida

1. Pre trip meeting, explanation, and instruction.

2. Trip leaders to escort and supervise throughout the trip.

3. Boat out of Florida.

4. Bus round trip.

5. Motel in Florida.

6. Entrance fee to springs.

Tour To Mexico

1. Pre trip meeting, explanation and instruction.

2. Trip leaders to escort and supervise throughout the trip.

3. Boat out of Mexico.

4. Motel in Mexico.

5. Round trip airfare.

6. Transfers

7. Post trip meeting.

COMPTROLLER OF PUBLIC ACCOUNTS

STATE OF TEXAS

AUSTIN, TEXAS 78774

BOB BULLOCK

December 12, 1984

Dear ***:

Thank you for your November 21, 1984, letter concerning your sales tax responsibilities under the new changes to the sales tax law.

Diving tours are taxable as amusements. The $*** charge made to a scuba diver for a diving tour is taxable at 6.125%. The $***** you pay for the boat is also taxable. The tax rate on the boat would be 4.125% if the boat owner's place of business is located outside any taxing city and the CITY Metropolitan Transit Authority (MTA).

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.

Sincerely,

Tax Policy Section

Tax Administration Division

November 21, 1984

Bob Bullock

Comptroller of Public Accounts

Capitol Station

Austin, TX 78774

Comptroller:

Please define the taxable status of this situation:

I charge a retail price of $*** to a scuba diver for a trip offshore. I then pay the boat $**. Does the boat charge me $* plus 4.125% or does my store charge $**** plus

6.125%? Is the transaction even taxable? According to the CITY Comptroller office diving tours are not taxable.