Were passenger-train tickets taxable when the train only transported riders between two cities and offered no sightseeing or amusement?

Plain-English summary

The Comptroller said tickets for the passenger train were not subject to sales tax because the train only transported passengers from one city to another and back. It offered no sightseeing or other amusement during the trip.

The ticket seller could seek a refund of tax it had wrongly collected and remitted, but first had to return the tax to the customer or extend a credit to a customer who authorized that credit in writing.

What this means for you

Passenger carriers

Transportation alone received nontaxable treatment on these facts. Adding sightseeing or another amusement service could change the classification.

Ticket sellers

Do not keep a state refund of tax economically borne by customers. The letter required a customer refund or authorized credit first.

Common questions

Were the train tickets taxable? No.

Why? The service was transportation only, with no sightseeing or amusement.

Could the seller recover tax already remitted? Yes, after refunding customers or giving properly authorized credits.

Citations and references

• 34 Tex. Admin. Code Rule 3.325 (refunds)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9201L1151E12

Original ruling text

January 22, 1992

Dear **:

Thank you for your recent letter. I apologize for the delay in responding. As I
understand it, you are the Chief Accountant for COMPANY A, in CITY A. According
to your facts, your company provides a passenger train that runs between CITY A
and CITY B solely for the purpose of transporting the passengers to CITY B and
back to CITY A. You provide no sight-seeing or other amusement services during
the trip. COMPANY B, which sells tickets for your train, has been taking sales
tax out of the price of those tickets.

Accepting your statement of facts as true and correct, you have been correctly
advised that COMPANY B is not required to take tax out of the price of your
train tickets. Transportation services are not subject to tax.

COMPANY B may obtain a refund of tax that was not due, but that was collected
and remitted to the state, if COMPANY B first refunds the tax to a customer
from whom it was collected, or extends credit to a customer who so authorizes
in writing. Please refer to enclosed Rule 3.325 for more on refunds.

This opinion is based on the facts presented. Different facts, though similar,
might lead to different answers. If you have further questions, feel free to
write or call me at 1-800-252-5555, ext. 3-3889.

Sincerely,

John Christian
Attorney
Tax Administration Division

cc: Carl Wiruscheske / Tax Assistance