Declaratory ruling; SOCCER AND SPORTS CENTER P.C. (1997) (DR) (ST)
Topic Code: G156Gross Receipts (ST) Document Reference: 97300004
BEFORE THE IOWA DEPARTMENT OF REVENUE AND FINANCEHOOVER STATE OFFICE BUILDINGDES MOINES, IOWA _____________________________________________________________________________ )IN THE MATTER OF: ) )THE PETITION OF SOCCER AND )SPORTS CENTER L.C. ) DECLARATORY RULING )DECLARATORY RULING )REGARDING SALES TAX EXEMPTION )IOWA CODE SECTION 422.43 ) DOCKET NO. 97-30-6-0153 _____________________________________________________________________________Pursuant to a petition for Declaratory Ruling submitted to the Iowa Department of Revenue and Finance (hereinafter referred to as the "Department"), by Soccer and Sports Center L.C. (hereinafter referred to as the "Petitioner") on September 16, 1997 and in accordance with Iowa Code section 17A.9 and Department rule 701-x.1(17A) "Petition for Declaratory Ruling", Iowa Administrative Code, the Department hereby issues its Declaratory Ruling.The following is stated by the Petitioner: The Petitioner is an indoor sports and recreation facility located in Johnston, Iowa. One source of the Petitioner's income is generated through the rental of arenas for the purpose of teams or organizations conducting team sports practice. The practice may be for any of the following sports: baseball, soccer, or roller hockey. Rental is on an hourly basis. Instruction and equipment is not provided by the Petitioner. The renter has exclusive use of the defined area for the designated period of time. The Petitioner also states that the Petitioner is currently a party to three proceedings. All three were filed simultaneously and returned for non-compliance by the Hearing Officer section of the Department. This Petition for Declaratory Ruling represents one of those proceedings that has been subsequently filed by the Petitioner and accepted by the Department as being in compliance with the filing requirements for such a petition. The function of a declaratory ruling is to provide "reliable advice from an agency as to the applicability of unclear law" Bonfield, The Iowa Administrative Procedure Act: Background, Construction, Applicability, Public Access to Agency Law, The Rulemaking Process, 60 Iowa Law Rev. 731, 805, (1975). Iowa Code section 17A.9 (1997) contemplates declaratory rulings by administrative agencies on a disclosed set of facts. City of Des Moines v. P.E.R.B., 275 N.W.2d 753, 758 (Iowa 1979). A declaratory ruling enables the public to secure definitive binding advice as to the applicability of agency-enforced law to a particular set of facts. Bonfield, at 822-823.It is not the function of a declaratory ruling to resolve issues involving factual analysis "too complicated to handle outside of an actual adjudication." Bonfield, at 807. A declaratory ruling is not a "contested case" as defined in Iowa Code section 17A.2(2) (1997); namely, it is not an evidentiary hearing which is also an administrative remedy set forth in Iowa Code chapter 17A (1997) and in the Department's rules, see 702 IAC 7.17. Consequently, for the purposes of this declaratory ruling, the Director views the issue raised in the petition for declaratory ruling as questions of law applicable to the factual situation disclosed by the Petitioner in the petition. This view is consistent with Department rule 701 IAC 7.25, concerning the issuance of declaratory rulings.Department rule 701 IAC 26.24 imposes Iowa sales tax on golf and country clubs and all commercial recreation. The portion of this rule that is applicable to general commercial recreation states, "Persons providing facilities for recreation for a charge are rendering, furnishing or performing a service the gross receipts from which are for pleasure, including sports, games and activities which promote physical fitness, but shall not include admission otherwise taxed under Iowa Code section 422.43."The Petitioner is providing for a fee a batting cage so renters may practice the batting component of the sport of baseball. The Petitioner has stated in its Petition for Declaratory Ruling, Docket Number. 97-30-6-0172, that the Petitioner does not charge admission fees. As a result, the Petitioner is providing facilities for recreation for a fee and, therefore, is performing a taxable enumerated service from which the gross receipts are subject to Iowa sales tax.The Petition states that the gross receipts from the practice rental of the arena area should be exempt pursuant to Department rule 701 IAC 26.18(2)"b" as the rental of real property. The rental of the arena for practice is not the rental of real property. One who rents an arena is not simply renting an area of the Petitioner's real property. Instead, the renter is paying a fee to rent the arena, which is a portion of the Petitioner's facility designed for the purpose of playing or the practicing a designated sport. Neither the Petitioner nor the renter would consider renting an area without the designation and protection of the arena for this type of activity, due to the lack of amenities to play the sport and due to risk of injury to others within the facility. Consequently, the arena is the true item that is being rented. In essence, the rental of the arena is not the rental of real property, but is the taxable service of renting an area of a facility for commercial recreation.THEREFORE, based on the facts presented by the Petitioner, the foregoing reasoning and applicable provisions of law, it is the Director's ruling that Iowa sales tax shall be imposed on the rental arenas within the Petitioner's facility for the practice or playing of sports Done at Des Moines, Iowa, this day of _____________, 1997. IOWA DEPARTMENT OF REVENUE AND FINANCE ___________________________________________ G. D. Bair, Director