Which archery-club dues, range fees, tournament entry fees, admissions, prizes, and concession sales were taxable in Texas?

Plain-English summary

A Section 501(c)(7) organization operated an archery range. Effective October 1, 1991, its membership fees, dues, assessments, and range fees charged to members or nonmembers were taxable amusement services because it provided recreational facilities.

Competitive-event entry fees could be nontaxable under Rule 3.298(c) when they substantially exceeded the normal facility-use price and part funded the match and prizes, or when a participant would not ordinarily use or pay for the facility except to compete.

The organizer had to pay tax on awards bought for prizes. Donated taxable items were taxable to the donor. Spectator admissions and sales of food, soft drinks, qualifying beer and wine, T-shirts, and similar merchandise were taxable.

The letter distinguished social organizations that did not provide amusement facilities, such as fraternities, sororities, and boy scouts; their membership dues and fees remained exempt under the stated law.

What this means for you

Sports clubs and tournament organizers

Separate ordinary facility access from true competition entry. The amount, use of proceeds, and participant's reason for attending mattered.

Accountants and tax professionals

Tournament status did not exempt every related transaction. Prizes, admissions, concessions, and merchandise required separate analysis.

Common questions

Were archery-club dues taxable? Yes.

Were ordinary archery-range fees taxable? Yes.

Could tournament entry fees be nontaxable? Yes, when the Rule 3.298(c) competition conditions described in the letter were met.

Were spectator admissions and concessions taxable? Yes.

Citations and references

• Internal Revenue Code § 501(c)(7) (social club status)
• 34 Tex. Admin. Code Rule 3.298(c) (competitive-event entry fees)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9201L1158C10

Original ruling text

January 31, 1992

Dear **:

Your letter concerning the taxability of clubs classified as
501(c)(7) by the IRS has been assigned to me for review and
response. You also requested information on the taxability of
entry fees for competitive events, concession sales at these
events, and raffles of donated hunts and archery products. I
appreciate your patience and apologize for the delay in
responding.

The tax bill passed in the recent special legislative session
removed the sales tax exemption for amusement services provided
by nonprofit organizations such as country clubs and other Section
501 (c)(7) organizations that provide recreational facilities for
members. The effective date of this change was October 1, 1991.
Nonprofit social organizations such as fraternities, sororities,
boy scouts, etc., that do not provide amusement facilities to
members continue to be exempt from sales tax on their membership
dues and fees.

From the context of your questions, it is apparent that your
organization provides an archery range for its members. As such,
effective October 1, 1991, membership fees, dues, and other
assessments required for membership will be taxable. Archery
range fees to members and non-members are also subject to sales
tax as amusement services.

You also questions whether entry fees charged for competitive
archery events are subject to sales tax.

Entry fees will not be taxable if the fees substantially exceed
what would normally be paid for using the archery range and a
person is paying to compete in a match, and part of the fee goes
toward the cost of conducting the match and for prizes; or an
individual would not normally use the facility, or pay a fee
except for the purpose of participating in the competitive event.
See section (c) of the enclosed Rule 3.298, Amusement services.

Sales tax should be paid on the purchase of awards given away as
prizes for these events. Donated taxable items are taxable to
the donor. An admission charge to view these events and the sale
of food, soft drinks (and beer and wine, if not required to be
reported to TABC), t-shirts, etc., are also subject to sales tax.

This opinion is based on the facts presented. Other facts though
similar may provide a different result.

If you have other questions or need more information, you may
call 512/463-4600, or 1-800-252-5555 from outside Austin. You
may write to Tax Administration Division.

Sincerely,

Gilbert Zamora
Tax Administration Division