Is a fee an ice skating rink charges to rent ice time ('patch ice') to skating instructors and coaches, for use in training their students, taxable as an amusement service, or is it exempt because the activity is instructional rather than recreational?

Subject

Skating Rink — Patch Ice Rentals By Operators To Ice Skating Instructors/Coaches Are Taxable Amusement Services

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9305L1240A13

Plain-English Summary

This is not a taxpayer-facing letter ruling — it is an internal May 1993 memo from Ron Del Vento, an attorney in the Office of the Attorney General's Collections Division, to Wanda Hutcheson in the Comptroller's Tax Administration, reporting the result of a bankruptcy court hearing on a sales tax audit dispute.

The taxpayer/debtor operated a large, free-standing ice skating rink. It rented "patch ice" — patches of ice roughly 10 x 30 feet — mainly to ice skating instructors and coaches who trained students in competitive skating (one witness at the hearing had competed for the United States in the 1980 Olympic Games and was now an instructor). These patches were rented between 4:00 and 6:00 a.m., when the rink was not otherwise open to the general public. The instructors arranged and paid for the ice rental, and the rink did not charge them sales tax.

The debtor argued in bankruptcy court that these patch ice charges should not be taxed because the ice was used for instruction and training — not "recreational" activity — and that the coaches, though not rink employees, were essentially providing personal services (instruction), not amusement services.

The attorney persuaded the bankruptcy judge that figure skating is a sport and therefore inherently recreational, and that the Comptroller's position draws a distinction between (1) taxing the rink operator for making the facility available to instructors, and (2) taxing the instructors themselves for the lessons they provide (the latter is not taxed). The attorney also urged the judge to defer to the Comptroller's interpretation of the state's amusement services rule. The judge agreed that the court could review the Comptroller's interpretation, but found no basis to conclude that interpretation was unsupported by the statute. The judge overruled the debtor's objection and upheld the audit liability.

What This Means For You

If you operate an amusement or recreational facility

Charging a fee for the use of your facility — here, ice rink time — can be a taxable amusement service even if the people renting the space are using it to provide instruction rather than for casual recreational play. The memo shows the Comptroller's position is that the tax falls on the operator providing the facility, not on the instructor providing the lesson.

If you are an instructor or coach who rents facility time

This memo indicates that instructors themselves were not being taxed on the lessons or coaching services they provided. The tax at issue applied to the rink operator's charge for the facility rental itself, not to the instructor's separate charge for instruction.

If you are in bankruptcy and disputing a sales tax audit liability

This memo illustrates that a bankruptcy court reviewing a Comptroller tax determination may still defer to the Comptroller's interpretation of state tax statutes and rules where that interpretation is reasonably supported, even though the court retains authority to review it.

If you are an accountant or tax professional advising on amusement services

The distinguishing line described here is between (a) taxable charges for providing the physical space/facility where an activity occurs, and (b) non-taxed charges by the person actually providing personal instructional services on that facility — even when the same underlying activity (here, ice skating) is involved.

Q&A

Q: Did the Comptroller ultimately prevail in this dispute?
A: Yes. According to the memo, the bankruptcy judge overruled the debtor's objection to the Comptroller's tax claim and upheld the audit liability.

Q: What was the rink operator's argument for why the patch ice rentals shouldn't be taxed?
A: The debtor argued the ice was rented for instructional and training purposes, not recreation, and that the activity amounted to personal services (coaching), not a taxable amusement service.

Q: How did the Comptroller's attorney respond to that argument?
A: The attorney argued that figure skating is a sport and therefore recreational, and that the tax applies to the rink operator providing the facility to the instructors — not to the instructors' own coaching services, which are not taxed.

Q: Were the instructors themselves charged sales tax on their coaching?
A: No. The memo indicates the Comptroller was "not imposing a sales tax on the instructors who provided the skating lessons but rather on the taxpayer that made the facility available to the instructors for their lessons."

Q: Did the bankruptcy judge have authority to second-guess the Comptroller's interpretation of the tax rule?
A: The judge ruled that the bankruptcy court did have authority to review the Comptroller's interpretation, but found no basis to conclude that the interpretation was unsupported by the statute, and deferred to it.

Q: Is this document a binding ruling I can rely on?
A: No. It is an internal attorney memo (an Office of the Attorney General attorney reporting to a Comptroller Tax Administration official) about the outcome of a specific bankruptcy hearing. It does not carry letter-ruling reliance protection under 34 Tex. Admin. Code Rules 3.1 and 3.10.

Original ruling text

TO: WANDA HUTCHESON
TAX ADMINISTRATION
COMPTROLLER OF PUBLIC ACCOUNTS

FROM: RON DEL VENTO
COLLECTIONS DIVISION
OFFICE OF THE ATTORNEY GENERAL

DATE: MAY 26, 1993

SUBJECT: **, TAXPAYER NUMBER: **

This is the case we discussed on the phone regarding the taxability of "patch
ice" rentals by the taxpayer/debtor which operates a large, free standing ice
skating rink in **, Texas.

The hearing lasted about 1 hour and involved several witnesses. The testimony
was that the taxpayer rents patches of ice approximately 10 x 30 feet wide
primarily to ice skating instructors who train their students in competitive
skating. In fact, one of the witnesses was an individual who competed for the
United States in the 1980 Olympic Games. He's now an instructor. The patches of
ice are rented between 4:00 - 6:00 a.m. when the general public is not
otherwise using the rink. As I understood the testimony, the instructors
arrange for the rental of the ice and were not charged sales tax by our
taxpayer.

The Debtor's argument was that the use of the ice was for the purpose of
instruction (by the coaches) and training. There was no "recreational"
activities occurring. Although the coaches and the other persons providing the
skating lessons were not employees of the rink, the taxpayer argued that the
activities occurring on the ice were primarily instructional in nature and, in
essence, personal services.

I persuaded Bankruptcy Judge ** that figure skating was a sport,
therefore recreational in nature, and that the Comptroller made a distinction
between providing the place where the instruction occurs vs. providing the
instruction itself. I pointed out that the Comptroller was not imposing a sales
tax on the instructors who provided the skating lessons but rather on the
taxpayer that made the facility available to the instructors for their lessons.
I also suggested to the Judge that he should defer to the Comptroller's
interpretation of a State taxing statute particularly where the Comptroller had
promulgated a rule describing what activities constituted amusement services.
Although Judge ** ruled that the bankruptcy court nonetheless had
authority to review that interpretation, he found no basis on which to conclude
that the Comptroller's interpretation was not supported by the statute.
Consequently, he overruled the Debtor's objection to the claim and upheld the
audit liability.

NOTE: Previous Accession Number 9305035L