Is renting a race track to a professional driving school (to instruct drivers) or to race teams for practice sessions taxable as an amusement service?

Plain-English summary

A race track operator asked the Comptroller to clarify the taxability of renting its track to a professional driving school (which uses the track to instruct drivers, with an ambulance and security present, and fueling handled by a third-party fuel company) and to race teams needing practice time. This is a follow-up, corrective letter: an earlier letter from the same office (October 29, 1997) had compared these track rentals to an ice rink's "patch ice" rentals and concluded they were taxable amusement services — the Comptroller now says that comparison was wrong.

The Comptroller drew a distinction between two different things a race track can sell: (1) admissions to spectators to watch races — that's a taxable amusement service (an admission to a spectator sport), and (2) renting the track itself to a driving school or to race teams for practice — that is NOT the provision of amusement, entertainment, or recreation under Tex. Tax Code Sec. 151.0028's definition of amusement services, so it's not taxable. The Comptroller also distinguished this from participatory-amusement facilities like go-cart tracks or ice skating rinks, which sell admission for people to actively participate in a recreational activity themselves — nothing in these facts showed the race track engaging in that kind of participatory amusement business. The track operator was told to disregard the taxable conclusion in the October 29 letter and not collect sales tax on rentals to driving schools or practicing race teams.

What this means for you

Race track operators

Renting your track to a driving school for instruction, or to race teams for practice sessions, is not taxable as an amusement service. Selling admission tickets to spectators who come to watch races remains taxable. The key distinction is whether you're providing amusement/entertainment/recreation (spectator admissions, participatory recreation like go-carts or skating) versus simply renting facility access for a non-recreational purpose like driver training or practice.

Driving schools and race teams renting track time

Track rental fees for instruction or practice sessions should not have sales tax added, per this letter's conclusion.

Accountants and tax professionals

This letter is a good illustration that "amusement services" under Sec. 151.0028 turns on whether the customer is being provided amusement/entertainment/recreation — not simply on what kind of facility is involved. The same race track can have both taxable (spectator admissions) and nontaxable (driving-school/practice rentals) revenue streams.

Common questions

Q: Is track rental to a driving school for instruction taxable in Texas?
A: No — this letter concludes it's not the provision of amusement, entertainment, or recreation under Sec. 151.0028, so it's not a taxable amusement service.

Q: Is track rental to race teams for practice taxable?
A: No, for the same reason.

Q: Are spectator admissions to watch races at the same track taxable?
A: Yes — the letter distinguishes this: selling admission for spectators to watch and enjoy races is a taxable amusement service (an admission to a spectator sport).

Q: Does this conclusion apply to participatory-amusement facilities like go-cart tracks or ice rinks?
A: No — the letter specifically distinguishes facilities that sell admission for people to actively participate in a recreational activity (go-carts, ice skating), which remains taxable amusement service, from the driving-school/practice track rentals addressed here.

Citations and references

• Tex. Tax Code Sec. 151.0028 (defines "amusement services" as the provision of amusement, entertainment, or recreation — track rentals to a driving school or race teams for practice were found not to meet this definition)

Subject

Racetracks — Rented To Driving Schools Or To Race Teams For Practice Sessions — Not Taxable As 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/9711947L

Original ruling text

November 18, 1997

Dear *****:

Thank you for your follow-up letter concerning the taxability of track rentals
at your facility. My recent phone conversation with ***** regarding the
rental of the track to SCHOOL was very helpful.

As I understand it, SCHOOL is a professional driving school that desires the
use of your track in order to instruct drivers. In addition to the use of the
track, TRACK has an ambulance and security at the track during the instruction.
Any fueling of vehicles is provided by a third-party fuel company.

In my letter of October 29th, I compared the rental of your race track with the
charge an ice skating rink might charge for "patch ice" rentals. However, I
was incorrect because the situations are not analogous.

Obviously, your race track sells admissions to amusement services when it sells
tickets to spectators to watch and enjoy races at the track (i.e., an admission
for a spectator sport). This is not the quite the same as a go cart facility
that sells amusement services by allowing people to drive go carts around a
track or an ice skating facility that allows people to skate (i.e., an
admission to a participatory sport) at the rink. None of the facts indicate
that your track engages in that type of participatory amusement services.
Therefore, there is a inherent difference between what your track provides when
renting your track to driving schools and for practice sessions and what an ice
rink provides when renting "patch ice."

With that in mind, I have reviewed the definition of "amusement services" in
Texas Tax Code Sec. 151.0028. Amusement services are defined as the provision
of amusement, entertainment, or recreation. Your track rentals to the driving
school or to race teams needing to practice are not the provision of amusement,
entertainment, or recreation and you are not selling admissions to amusement
services in those situations. Do not collect sales tax on track rentals to
driving schools or to teams for practices. Please disregard that portion of my
October 29, 1997 letter in which I stated that such track rentals are taxable
as amusement services.

This opinion is based on the facts you submitted. Other facts, though similar,
may yield different results.

You may call me toll free at 1-800-531-5441, ext. 5-0030. The direct line is
512/475-0030. You may also write to Tax Policy, Comptroller of Public
Accounts.

Sincerely,

David Somerville
Tax Policy Division