Can a racetrack buy simulcast horse/dog racing signals tax-free with a resale certificate, or does it owe sales/use tax on the simulcasting fee?

Plain-English summary

A racetrack asked the Comptroller's office whether it could buy simulcast horse/dog racing signals tax-free by giving the sending track a resale certificate, instead of paying sales or use tax on the simulcasting fee. Earlier in 1994, the Comptroller had already told the taxpayer that simulcasting fees are taxable — the compensation a receiving track pays a sending track for the simulcast signal is subject to sales and/or use tax, effective July 1, 1993.

The answer to the resale-certificate question turns on whether the receiving track charges an admission fee to watch the live or simulcast races. Charges by a racetrack to watch live or simulcast racing are themselves a taxable amusement service. Because the simulcast signal is being resold as part of that taxable amusement service, a track that charges admission can buy the simulcast service tax-free using a resale certificate.

If the receiving track does not charge an admission fee, it cannot use a resale certificate for the simulcast purchase. In that case, the track must either pay sales tax directly to the sending track or accrue use tax itself and report it to the Comptroller.

The letter also addresses tracks that already paid tax on simulcast services that were, in fact, resold: the track can give the sending track a resale certificate after the fact, and the sending track can then refund the tax and take a credit for it on its own next return, or instead assign its right to a refund to the receiving track, which then submits the assignment with a refund request to the Comptroller.

What this means for you

Racetrack operators who charge admission

If your track charges an admission fee to view live or simulcast racing, you can purchase incoming simulcast signals tax-free by furnishing the sending track a resale certificate, because you are reselling that signal as part of your own taxable amusement service.

Racetrack operators who do not charge admission

If you don't charge admission to watch the races, you cannot use a resale certificate for simulcast purchases. You must either pay sales tax to the sending track at the time of purchase or self-accrue use tax and report it on your own return.

Tracks that already paid tax on resold simulcast services

If you paid tax on simulcast services that were actually resold (i.e., you did charge admission), you can still fix the tax treatment after the fact: provide the sending track a resale certificate, and either have the sending track refund the tax and claim a credit on its next return, or have it assign its refund right to you so you can request the refund directly from the Comptroller.

Common questions

Q: Are simulcasting fees subject to Texas sales or use tax?
A: Yes. The compensation a receiving track pays a sending track for simulcasting is subject to sales and/or use tax, effective July 1, 1993.

Q: Can a racetrack avoid tax on simulcast fees by using a resale certificate?
A: Only if the receiving track charges an admission fee to see the live or simulcast races. In that case the simulcast signal is resold as part of a taxable amusement service and can be purchased under a resale certificate. If no admission fee is charged, a resale certificate cannot be used.

Q: What must a track do if it does not charge admission?
A: It must pay sales tax to the sending track or accrue use tax itself and report it to the Comptroller.

Q: Can a track get a refund if it already paid tax on simulcast services that were actually resold?
A: Yes. It can give the sending track a resale certificate, and the sending track can then refund the tax (crediting itself on its next return) or assign its refund right to the receiving track, which submits the assignment with a refund request to the Comptroller.

Citations and references

No specific statutes or administrative rules are cited in the text of this letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9411L1322A14

Original ruling text

November 10, 1994

Dear *****:

Earlier this year, we advised you that simulcasting fees were considered
taxable services. The letter stated "that the compensation (i.e., fees or
commission) the receiving track(s) pays to the sending track is subject to
sales and/or use tax." The effective date for collecting and accruing any
sales or use taxes on the simulcasting fee was July 1, 1993.

Since then, we have been asked if the simulcasting services could be purchased
tax free by giving the sending track a resale certificate. The answer depends
upon whether the receiving track charges an admission fee to see the races
and/or the simulcast. As you know, charges by the race track to see live or
simulcast racing are considered taxable amusement services. Because they are
being resold as part of a taxable amusement service, the simulcast services may
be purchased under a resale certificate.

On the other hand, if the track does not charge an admission fee, the simulcast
may not be purchased under a resale certificate, and the track must either pay
the sales tax to the sending track or accrue use tax and report it to the
Comptroller.

If your track paid tax for simulcast services which were resold, you may give a
resale certificate to the sending track. The track can then refund you the tax
and take credit for the refunded tax on its next return. Alternatively, it may
issue you an assignment of its right to receive a refund. Send the assignment
along with your request for refund to the Comptroller's offIce.

If you ave any additional questions, please write Nancy Wilkins in my Audit
Division at 111 East 17th Street, Austin, Texas 78774, or call her at
1-800-531-5441, extension 5-0245.

Sincerely,

JOHN SHARP
Comptroller of Public Accounts

NOTE: Previous Accession Number 9411673L