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Policy letter; government instrumentality; July29,1997
Topic Code: G091Government Instrumentality (ST) Document Reference: 97300059July 29, 1997Recently, the Department received your letter regarding the taxability of many sales and services that will be provided by the City of at the city owned pool and fitness center that is currently under construction and is scheduled to open in November of this year. The activities listed, range from pool and/or facility passes to tournament fees, lessons and concessions.Iowa Code section 422.45 and Department rule 701 IAC 18.39 provide an exemption from Iowa sales and use tax for certain sales or services rendered, furnished or performed by a county or city. This rule specifically sets forth the taxability or exemption status of many of activities listed in your letter. As a result, this rule states the following:
The gross receipts from the sales, furnishing, or service of gas, electricity, water, heat, and communication service rendered, furnished, or performed by a county or city are subject to the tax. On and after July 1, 1985, the gross receipts from fees paid to cities and counties for the privilege of participating in any athletic sports are also subject to tax. On or after July 1, 1991, the gross receipts from any municipally owned pay television service are taxable as well. On and after April 1, 1992, the gross receipts from a county or municipality furnishing sewage service or solid waste collection and disposal service to nonresidential commercial operations are taxable (see rules 701—26.71(422,423) and 26.72(422,423) for more information).
Any other sales or services rendered, furnished, or performed by a county or city are not subject to the tax.A "sport" is any activity or experience which involves some movement of the human body and gives enjoyment or recreation. An "athletic" sport is any sport which requires physical strength, skill, speed, or training in its performance. The following activities are nonexclusive examples of athletic sports: baseball, football, basketball, softball, volleyball, golf, tennis, racquetball, swimming, wrestling, and foot racing. The following is a list of various fees which would be considered fees paid to a city or county for the privilege of participating in any athletic sport, and thus subject to tax under this rule. The list is not exhaustive. 1. Fees paid for the privilege of using any facility specifically designed for use by those playing an athletic sport: fees for use of a golf course, ball diamond, tennis court, swimming pool, or ice skating rink are subject to tax. These fees are subject to tax whether they allow use of the facility for a brief or extended period of time, e.g., a daily fee or season ticket for use of a swimming pool or golf course would be subject to tax. Group rental of facilities designed for playing an athletic sport would also be subject to tax. 2. Fees paid to enter any tournament or league which involves playing an athletic sport would be subject to tax. Both team and individual entry fees are taxable. Fees paid to enter any marathon or foot race of shorter duration would be subject to tax under this rule.Not subject to tax as fees paid to a city or county for the privilege of participating in any athletic sport under this rule are the following charges. The list is not intended to be exhaustive. 1. Fees paid for lesson or instruction in how to play or to improve one's ability to play an athletic sport are not subject to tax. Golf and swimming lesson fees are specific examples of such nontaxable charges. The fees are excluded from tax regardless of whether the person receiving the instruction is a child or an adult. Fees charged for equipment rental, regardless of whether this equipment is helpful or necessary to participation in an athletic sport, are not subject to tax. The rental of a golf cart or moveable duck blind would not be subject to tax. The rental of a recreational boat is a transportation service, the gross receipts of which are not subject to tax if provided by a city or county. 2. Sales of merchandise, e.g., food or drink, to persons watching or participating in any athletic sport are not subject to tax. 3. Fees charged to improve any facility where any athletic sport is played are not subject to tax, unless such a fee must be paid to participate in an athletic sport which can be played within the facility. 4. Fees paid by any person or organization to rent any county or city facility or any portion of any county or city park shall not be subject to tax unless the portion of the park or facility is specifically designed for the playing of an athletic sport. Example: A local bridge club pays a fee to use a shelter house and the surrounding grounds at a county park for a picnic. During the course of the picnic, the club members set up a net and use the surrounding grounds to play volleyball. They also improvise a softball field and play a softball game there. The fee which the bridge club has paid to rent the shelter house and surrounding grounds would not be subject to tax. 5. Fees paid for the use of a campground or hiking trail are not subject to tax.
This rule is intended to implement Iowa Code sections 422.43 and 422.45. (emphasis added)
Individual and team fees paid to enter league and tournament participation for the purpose of playing an athletic sport are also subject to tax. As a result, the league volleyball and basketball team fees should be subject to tax. In addition, the tournament team fees for volleyball, basketball and wrestling would be subject to tax. However, in your letter you have indicated that the facility will also charge admission fees for watching certain tournament and league play. Department rule 701 IAC 16.26(3) governs the taxability of registration or entry fees for participation in an athletic event when an admission fee is charged. The relevant portion of this rule states the following:
Beginning July 1, 1993, an entry fee at a place of amusement, fair, or athletic event is not subject to tax when the sales of tickets or admission charges for observing the activity are taxable. If there is no admission but only an entry fee, the entry fee is subject to sales tax whether or not the entry fee is used for prizes. A fee shall mean and include, but not be limited to, entry fees, registration fees, or other charges made by the operator or sponsor of a game or other form of amusement for the right to participate in such game or amusement. Game or other form of amusement shall mean and include, but not be limited to, such events as golf tournaments, bowling tournaments, car races, motorcycle races, bridge tournaments, rodeos, animal shows, fishing contests, balloon races, and trap shoots. (emphasis added)
Based on this rule, if a taxable admission fee is not charged, then the entry or registration fee is taxable. However, if an admission fee is charged, and such a fee is taxed, then the gross receipts from the registration/entry fees are not subject to tax. As a result, the taxability of the league
In addition, in your letter you also have listed that boys and girls basketball and volleyball programs are offered, for what I assume to be either a fee for team or individual participation. If this program is offered merely for organizing participants to play in these sports and not for instruction, then such fees would be subject to tax. However, if these programs are for instructional purposes to assist the participant's in improving their ability to play by lesson or instruction, then such fees would not be subject to Iowa sales tax. In turn, the private and public swimming lessons to be offered at this facility would also not be subject to tax. However, the water aerobics classes, step aerobics classes and private fitness training would be subject to tax. These types of activities do not fall within the definition of "athletic sport" as set forth in Department rule 701 IAC 18.39, unless the private fitness trainer is for an athletic sport such as boxing, gymnastics or weightlifting.
The City of Cresco facility will also provide the service of gym, swimming pool and meeting room rental. In essence, Department rule 701 IAC 18.39 provides that fees paid by any person or organization to rent any county or city facility or any portion of such a facility, shall not be subject to tax, unless the portion of the facility is specifically designed for the playing of an athletic sport. Based on this provision, the rental of a meeting room in the facility would not be subject to tax, assuming the meeting room was not a portion of the facility designed for playing athletic sports. However, rental of the gym and swimming pool would be subject to Iowa sales tax.
The facility will also receive revenue from the operation of concession. Since the majority of food at these concessions will be sold to either participants in athletic sports or persons watching such events, the revenues received from the sales from these concessions would not be subject to Iowa sales tax pursuant to Department rule 701 IAC 18.39.
Furthermore, in your letter you also indicate that the facility will also provide many other types of sales and services such as locker rental, towel cleaning, sale of a bucket of balls for golf practice, and the sale of T-shirts and sports items. As 701 IAC 18.39 states, any other sales or services rendered, furnished or performed by a county or city are not subject to tax. As a result, the fees imposed for the sale of these types of items or services would not be subject to Iowa sales tax.Sincerely,Jerri M.K. DeVriesPolicy SectionOffice: (515) 281-3194Fax: (515) 281-3756