Is the electricity my golf club charges to recharge members' own golf carts, stored in the club's cart barn, taxable?

Subject

Golf Cart Rental — Battery Recharging

Plain-English summary

A golf club rented storage spaces in its "cart barn" to members so they could store their own personal golf carts. Each space had its own electric meter so members' carts could be recharged there. The club collected sales tax on the rent for the storage space and remitted it to the Comptroller, but had been told (incorrectly, as it turned out) that it shouldn't have to pay sales tax to its electricity provider (ABC ELECTRIC) for the power measured through those meters.

The Comptroller's answer: the electricity is taxable, and the utility was right to charge tax on it. The letter explains there are two different situations that can get confused:

• Exempt: electricity used to charge golf carts that the club itself owns and rents out to members (the club is the one providing the taxable rental service on the cart itself, and the electricity used in that service is exempt).
• Taxable: electricity used to charge golf carts that belong to someone else -- here, the members -- is not exempt.

Because the club's business is selling club/course memberships (an amusement service, which is a taxable service), and the cart-barn storage space is sold as part of that membership, the rental of the storage space is itself taxable. Since there's no sales tax exemption for electricity used by a business providing a taxable service, the electricity run through those meters to recharge members' own carts is taxable, and the club owed tax to ABC ELECTRIC on it.

What this means for you

Golf clubs and courses renting cart-storage space to members

If you rent storage/charging spaces in a cart barn to members for their own carts, and that rental is bundled into a taxable club membership, the electricity used there is taxable -- you can't treat it as exempt just because it's technically used to "recharge a golf cart." Your utility is correct to charge you sales tax on it.

Golf clubs that own and rent out their own golf carts

The exemption applies only when the club owns the cart being charged and is renting out the cart itself as a taxable rental. Electricity used in that specific scenario is exempt. Don't extend that exemption to electricity used for members' own privately owned carts -- the letter draws that line explicitly.

Accountants and tax professionals advising clubs

Watch for this exact point of confusion: "electricity used to charge a golf cart" is not, by itself, enough information to determine taxability. What matters is who owns the cart and whether the underlying charge to the customer (rental of the cart vs. rental of storage space as part of a membership) is itself taxable.

Common questions

Q: Is electricity used to recharge members' own golf carts stored at a club's cart barn taxable?
A: Yes. The letter states plainly that this electricity is taxable and that the utility was correct to charge sales tax on it.

Q: Is there ever a situation where charging golf carts is tax-exempt?
A: Yes -- when the club itself owns the golf carts and rents them out to members, the electricity used to charge those club-owned carts held for rental is exempt.

Q: Why is the storage space rental taxable in the first place?
A: Because selling club/course memberships is providing an amusement service (a taxable service), and the cart barn storage space is part of that membership, so the storage rental itself is taxable.

Q: Is there a general exemption for electricity used by businesses providing taxable services?
A: No. The letter states the sales tax law does not provide an exemption for electricity used by persons providing taxable services.

Citations and references

Statutes and rules:

• 34 Tex. Admin. Code Rule 3.298(a)(1)(G) and (b) (taxability of electricity used to provide 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/9612991L

Original ruling text

December 4, 1996

Dear **:

Thank you for your letter of November 15, 1996,
asking about the taxation of electricity used in a cart barn where you rent
spaces to members to store their personal golf carts.

The cart barn has a separate electricity meter.
Each rental space has an electrical meter for charging golf carts. You collect
sales tax on the rent and remit it to the State Comptroller's Office. You
state you were told by this office that you should not have to pay sales tax to
ABC ELECTRIC for the electricity measured through this meter. You are
requesting a letter confirming what you have been told.

Response: We are sorry to inform you that you have
been given incorrect information. The electricity used at the cart barn to
charge members' golf carts is taxable. ABC ELECTRIC is correctly charging you
sales tax.

There appears to be some confusion between the
electricity that a club uses to charge club-owned golf carts that are rented
and your rental of spaces where members store and charge their golf carts. The
use of electricity to charge golf carts held for rental is exempt, but the
electricity used to charge golf carts belonging to others is not exempt.

You provide an amusement service when you sell
memberships to the golf club or golf course. The rental of the storage space
in the cart barn is part of that membership and is taxable. Amusement services
are a taxable service. The sales tax law does not provide an exemption for
electricity used by persons providing taxable services.

See the enclosed Rule 3.298(a)(1)(G) and (b).

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

You may call me toll free 1-800-531-5441, extension 3-4683 if you have any
questions or need more information. The direct line is 512/463-4683. You may
also write to Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Eddie C. Washington
Tax Policy Division