I run a zipline and whitewater-rafting outfitter — do I owe Virginia sales tax on guided tours, or only on unguided equipment rentals?

Plain-English summary

An outdoor recreation business asked the Department for advance guidance — not an audit appeal, but a request for ruling — on how Virginia sales tax applies to guided whitewater rafting, guided scenic river tours, guided zipline rides, and unguided rentals of river rafts, kayaks, canoes, and inner tubes. It also wanted guidance on how to show taxable and exempt charges on customer receipts.

Renting bare equipment is taxable. Virginia Code § 58.1-603 taxes the gross proceeds from the lease or rental of tangible personal property. When a customer just rents a raft, kayak, canoe, or inner tube with no guide, that's a straightforward taxable rental — the operator must charge, collect, and remit sales tax.

Guided activities turn on the "true object" test. Under 23 VAC 10-210-4040, a transaction mixing tangible property and services is generally taxed (or exempt) on the FULL charge based on the transaction's "true object" — what the customer is really paying for. The regulation draws a specific line for equipment rentals: rentals WITH an operator are exempt (23 VAC 10-210-4040 D 2), while bare rentals are taxable (D 1).

The operator/attendant distinction is the whole ballgame. The Department has consistently drawn this line by asking how much SKILL the person accompanying the equipment needs to exercise:

• Exempt "operator" precedents: a crane rental WITH an operator (P.D. 91-19) — the operator's skill and control over the crane was the true object; a rock-climbing wall or mechanical bull WITH an attendant maintaining safety and control (P.D. 07-128).
• Taxable "attendant" precedents: hot-air parade balloon rentals with mere supervision, not true operation (P.D. 01-56); inflatable moonwalks, slides, and obstacle courses, where the attendant's technical expertise isn't required for the amusement to run (P.D. 04-194, P.D. 06-87, P.D. 23-9).

Because this operator's guides exercise genuine, safety-critical skill in navigating rafting, ziplining, and river-touring equipment — much closer to the crane operator or climbing-wall attendant than to a moonwalk attendant — the Department found the true object of guided activities is the service, making them exempt from sales tax, even though the same equipment could also be rented unguided.

Bundling can undo the exemption. The operator sometimes includes food, drinks, or transportation in its package price. Meals are taxable retail sales (23 VAC 10-210-930); separately stated transportation is exempt (§ 58.1-609.5 3, 23 VAC 10-210-6000). But Virginia's long-standing policy is that when taxable and exempt charges are bundled into one price without itemization, the ENTIRE charge becomes taxable — the true-object analysis for the guided activity doesn't matter if the meal charge isn't broken out. If meals and other tangible items are separately stated, only those items are taxed and the guided service (with its connected equipment) stays exempt. The same rule applies to transportation: it's exempt only if separately stated from everything else.

What this means for you

Outdoor recreation and adventure-tour businesses

Your guided tours and lessons — rafting, ziplining, guided kayaking, and similar activities requiring real safety expertise from your staff — can be exempt services, while bare equipment rentals with no guide stay taxable. The dividing line is whether your staff member is genuinely "operating" the experience (skill, control, safety responsibility) or just an "attendant" whose presence isn't technically necessary.

Itemize every receipt

If you bundle a meal, snack, drink, or any other taxable item into a package price with a guided (exempt) activity, itemize it separately on the invoice or receipt. Failing to do so makes the WHOLE package — including your otherwise-exempt guided service — subject to sales tax.

Accountants and tax professionals advising recreation/amusement businesses

This ruling sits alongside a body of "operator vs. attendant" precedent (cranes, climbing walls, mechanical bulls vs. moonwalks and parade balloons) that's directly transferable to any business renting equipment with accompanying staff. It also echoes the lump-sum bundling rule seen elsewhere in Virginia's rulings on venue rentals: any unitemized combination of taxable and exempt charges taxes the whole transaction.

Common questions

Q: Is a guided rafting or zipline tour taxable in Virginia?
A: No — the Department found the true object of these guided activities is the guide's skill and safety expertise, making them exempt services, distinct from a bare equipment rental.

Q: What about renting a kayak or raft with no guide?
A: That's a straightforward taxable rental of tangible personal property; sales tax must be charged, collected, and remitted.

Q: If I include lunch in my rafting package price, does that make the whole trip taxable?
A: Yes, unless the meal charge is separately stated from the guided-activity charge. Unitemized bundling of a taxable item with an exempt service taxes the entire transaction.

Q: Does this ruling bind other outdoor recreation companies?
A: No — it's an advisory ruling binding the Department only as to the taxpayer and facts presented. Other businesses can look to it for how the Department reasons, but can't rely on it directly for their own operations.

Citations and references

Statutes and regulations:

• Va. Code § 58.1-603 — tax on gross proceeds from lease/rental of tangible personal property
• Va. Code § 58.1-609.5 1 — exemption for personal service transactions with inconsequential sales elements
• Va. Code § 58.1-609.5 3 — exemption for separately stated transportation charges
• 23 VAC 10-210-4040 A, D — mixed service/property transactions and the true object test
• 23 VAC 10-210-4040 D 1, D 2 — bare equipment rentals taxable; rentals with an operator exempt
• 23 VAC 10-210-930 — retail sales of food/meals taxable
• 23 VAC 10-210-6000 — separately stated transportation charges exempt

Prior rulings the Department relied on (described here, not linked): P.D. 91-19 (2/21/1991, crane with operator, exempt); P.D. 01-56 (5/14/2001, hot-air parade balloons, taxable); P.D. 07-128 (8/17/2007, mechanical bull/rock-climbing wall with attendant, exempt); P.D. 04-194 (10/29/2004), P.D. 06-87 (9/19/2006), and P.D. 23-9 (1/18/2023) (inflatable amusements, taxable); P.D. 02-77 (5/2/2002), P.D. 08-76 (6/6/2008), P.D. 08-74 (6/6/2008), P.D. 14-41 (3/20/2014), and P.D. 22-68 (4/13/2022) (itemization requirement for mixed taxable/exempt charges).

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 25-22

Original ruling text

February 17, 2025

Re: Request for Ruling: Retail Sales & Use Tax

Dear *:

This will reply to your letter on behalf of * (collectively the “Taxpayer”), requesting a ruling on the sales tax implications to outdoor recreational equipment and service transactions.

This response is based on the facts provided as summarized below. Any change in facts or the introduction of new facts may lead to a different result.

FACTS

The Taxpayer provides access to various outdoor recreational equipment and services. The Taxpayer requests guidance on the proper application of Virginia’s retail sales tax to 1) guided whitewater rafting, 2) guided scenic river tours, 3) guided zipline rides, and 4) unguided river raft, kayak, canoe, or inner tube rentals. The Taxpayer also seeks guidance on how to display the taxable and non-taxable components of a transaction on customer receipts.

RULING

Mixed Service Transactions

Virginia Code § 58.1-603 imposes the sales tax on the gross proceeds derived from the lease or rental of tangible personal property in the Commonwealth. Virginia Code § 58.1-609.5 1 provides an exemption from the tax for “… personal service transactions which involve sales as inconsequential elements for which no separate charges are made.” Transactions involving the rental of tangible personal property and the provision of services are generally subject to Title 23 of the Virginia Administrative Code (VAC) 10-210-4040 A, which provides:

Charges for services generally are exempt from the retail sales and use tax. However, services provided in connection with sales of tangible personal property are taxable.

Transactions involving both the sale of tangible personal property and the provision of services generally are either taxable or exempt on the full amount charged, regardless of whether the charges for the service and property components are separately stated. As explained in subsection D of this section, the “true object” test is used to determine the taxability of these transactions.

The “true object” test first determines the critical element of the transaction. If the object of the transaction is to secure a service and the tangible personal property transferred to the customer is not critical to the transaction, then the transaction may constitute an exempt service. However, if the object of the transaction is to secure the property produced, then the entire charge, including the charge for any services provided, is taxable.

For transactions in which both the services rendered and the property transferred are critical elements, the degree of customization, uniqueness, or specific services provided in connection with the product must be considered in determining their appropriate tax status. Equipment rentals are taxable as specifically enumerated under Title 23 VAC 10-210-4040 D 1, while equipment rentals with operators are deemed exempt pursuant to Title 23 VAC 10-210-4040 D 2.

Attendant verses Operator

Transactions involving both tangible property and services have been further distinguished between those with operators (exempt) and those with attendants (taxable) based on the degree of skill or expertise needed to perform the services. In Public Document (P.D.) 91-19 (2/21/1991), the Department considered the rental of a crane with an operator a non-taxable service because the “true object” of the transaction was to obtain the operator’s skills in using the crane to complete a job. The Department reasoned that the operator exerts certain skills and maintains complete control over the crane during its operation. Conversely, in P.D. 01-56 (5/14/2001), the Department considered the rental of hot air parade balloons to be a taxable rental even though the rental company provided supervision and assistance while the balloons were in use. In this case, the personnel were not considered to be operating the balloon.

The Department has made a similar distinction when considering transactions for various types of property used in recreational amusement activities. In P.D. 07-128 (8/17/2007), the Department found that rentals of a mechanical bull and rock-climbing wall were exempt services requiring an operator with certain skills to maintain safety and control over the amusements during their operation. However, in P.D. 04-194 (10/29/2004), P.D. 06-87 (9/19/2006), and P.D. 23-9 (1/18/2023), the Department found rentals of inflatable amusement games such as moonwalks, slides, and obstacle courses were taxable because the true object of the transaction was the rental of the game and not the skills of the attendant whose technical expertise was not required in order for the amusements to operate. Based on these regulations and policies, the Department can opine as to the taxability of the Taxpayer’s operations.

Equipment Rentals

Transactions involving various outdoor recreational equipment without the provision of a guide constitutes the lease or rental of tangible personal property. The Taxpayer must charge, collect, and remit sales tax on the gross proceeds from such transactions.

Guided Activities

The outdoor recreational activities for which the Taxpayer requests guidance, such as ziplining, kayaking, and whitewater rafting, can involve significant risks that require certain skills or expertise to perform safely. For these types of activities, consideration must be given as to why a participant chooses to engage in a particular activity.

Experienced individuals may be comfortable simply renting equipment to navigate a river or climb trees or mountains. In such cases, as stated above, the rental of such equipment is taxable.

On the other hand, many individuals likely choose activities in large part because of a guide’s skills and expertise in safely operating the equipment and navigating the surroundings. Although the equipment at issue can operate with or without the guide, the skills required to maintain safety more closely resemble the operators of the rock-climbing wall, mechanical bull, or crane rather than the attendants overseeing the inflatable amusements. For this reason, the true object of transactions for activities that include the provision of guides is the provision of a service. Such transaction would be exempt from the sales tax.

Lump Sum Charges

The Taxpayer states that charges for food, drinks, and transportation are sometimes included in the price of its transactions. Retail sales of food or meals are taxable because they can, generally, be consumed without the help of an expert service provider. See Title 23 VAC 10-210-930. Separately stated charges for transportation are exempt. See Virginia Code § 58.1-609.5 3 and Title 23 VAC 10-210-6000. However, the Department’s longstanding policy is that transactions involving both exempt and taxable charges must be itemized or the entire transaction becomes taxable. See P.D. 02-77 (5/2/2002), P.D. 08-76 (6/6/2008), and P.D. 22-68 (4/13/2022). The true object of the total charge is not relevant if taxable (i.e. meals) and nontaxable (i.e. guided outdoor adventures) charges are not itemized.

As such, if the Taxpayer includes a meal in the price for a guided transaction, and if the taxable charge for such meal is not separately stated from the exempt charges, the entire transaction is subject to tax. See P.D. 14-41 (3/20/2014). If meals and other tangible personal property are separately stated, only the tangible personal property is taxable while the guided services including any connected equipment would be exempt.

Similarly, the Taxpayer’s separately stated charges for transportation are exempt, but if the Taxpayer does not itemize the exempt charge for transportation from other taxable sales, the entire transaction is subject to tax. See P.D. 08-74 (6/6/2008). As such, transportation must be separately stated to be exempt.

In summation, the Taxpayer’s rentals of outdoor equipment and sales of meals would be subject to Virginia retails sales and use tax. The Taxpayer must collect, report, and remit all collected taxes to the Department.

The Taxpayer would not be required to collect sales and use tax on guided outdoor activities. However, if the guided activities are bundled with taxable tangible personal property for which a lumped sum amount is charged, the gross amount is taxable and the tax must be collected and remitted.

The Code of Virginia sections and regulations cited are available online at law.lis.virginia.gov. The public documents cited are available at tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. If you have any questions regarding this ruling, you may contact * in the Office of Tax Policy and Legal Affairs, Tax Adjudication and Resolution Division, at or **.

Sincerely,

James J. Alex

Tax Commissioner

Commonwealth of Virginia

AR/4136.B

Related Documents

91-19

01-56

02-77

04-194

06-87

07-128

08-74

08-76

13-205

14-1

14-41

14-150

16-64

20-177

21-141

22-68

23-9