Were fees to enter and use a children's fitness and play facility subject to Utah sales tax?

Plain-English summary

Utah Private Letter Ruling 91-018 addressed a proposed children's fitness and play business.

The Commission treated the facility as a health club for children.

Fees paid to enter and use the facility were not subject to sales tax, but that result did not extend to the business's other taxable transactions.

Entry and facility-use fees

Utah sales tax applied to admissions to places of amusement, recreation, or entertainment.

The Commission contrasted those admissions with membership dues or fees paid to enter health clubs, which it said were not subject to sales tax.

Because the proposed business appeared to be a children's health club, its entry and facility-use fees were not taxable.

Snack bar and merchandise

The business still had to collect and remit sales tax on items sold through a snack bar.

The same applied to other merchandise and apparel.

Business purchases

The Commission also required the operator to pay use tax on tangible personal property purchased for the business.

Its examples included equipment, signage, decorations, furnishings, and computer software.

Holding

Under the described program:

• The facility appeared to be a health club for children.
• Fees paid to enter and use the facilities were not subject to sales tax.
• Snack-bar items, merchandise, and apparel were taxable sales.
• Equipment and other tangible property bought for business use were subject to use tax.

What this means for you

Children's fitness and indoor-play businesses

The nature of the facility and the activity being sold matters. This ruling treated the described program as a health club, not as a taxable amusement or entertainment admission.

Health clubs

A nontaxable entry or membership fee does not make retail sales at the facility nontaxable.

Accountants and tax professionals

Separate facility-use fees from food, apparel, merchandise, and the operator's own taxable purchases, and verify the current law for the actual program offered.

Common questions

Q: Were the children's facility-use fees taxable?

A: No.

Q: Why not?

A: The Commission treated the facility as a health club for children.

Q: Were snack-bar and merchandise sales taxable?

A: Yes.

Q: Did the business owe tax on equipment and furnishings it bought?

A: Yes. The Commission said use tax applied to those purchases.

Key source language

• Facility classification: “XXXXX appears to be a health club for children.”
• Entry-fee result: “Fees paid to enter and use the facilities are not subject to sales tax.”
• Retail sales: the business was required to collect and remit tax on “items from a snack bar or other merchandise or apparel.”
• Business purchases: use tax applied to “equipment, signage, decorations, furnishings, computer software or other items” bought for use by the business.

Citations and references

• The official response cites the Utah sales tax law generally but gives no numbered statute or administrative rule.

Source

• Landing page: Utah Private Letter Rulings
• Official ruling: Utah PLR 91-018
• Scope note: the requester described admission to fitness play areas as similar in service, intent, and concept to health clubs and spas.
• Fetch note: the exact official URL returned HTTP 404 to a direct request and was then retrieved through Sofya.

Original ruling text

September
20, 1991 Response from Tax Commission

September
4, 1991 Letter from XXXXX

XXXXX

Re:XXXXX
Program

Dear
Sir/Madam:

This
letter is in response to your recent request for a Tax Commission ruling on whether amounts paid for participation in your XXXXX program are subject to sales tax. It is your opinion that the activities are much the same as those in health spas.

The
Tax Commission policy is to refer such requests to the division most qualified to analyze the request and make recommendations concerning it. As such, your request was referred to the Tax Commission's Auditing Division for their analysis and recommendations. The division's recommendation is as follows:

The
Utah sales tax law imposes tax on admissions to places of amusement, recreation or entertainment. Such places generally provide tables or seats for patrons. Membership dues or fees paid to enter health clubs are not subject to sales tax. XXXXX appears to be a health club for children. Fees paid to enter and use the facilities are not subject to sales tax.

XXXXX
will be required to collect and remit tax on the sale of items from a snack bar or other merchandise or apparel. Use tax must also be paid on the purchase of equipment, signage, decorations, furnishings, computer software or other items or tangible personal property purchased for use by XXXXX.

For
the Commission,

Joe
B. Pacheco

Commissioner

Dear
Mr. XXXXX

I
am starting a new business called XXXXX db as XXXXX. I am planning on opening the business in early November, 1991.

Enclosed
is some information on the services provided.
I would like an advisory opinion on whether a portion or all of these services would be subject to Utah State sales tax. I understand admission fees to health clubs and spas is not subject to state sales tax. I consider our admission to our fitness play areas similar in services and intent and concept.

If
you need further information or have a question on the materials provided please call me at XXXXX.

I
would appreciate receiving your opinion within 30 days if possible.

Sincerely,

XXXXX