Policy letter; government instrumentality; July13,1999
Topic Code: G091Government Instrumentality (ST) Document Reference: 99300111
July 13, 1999
City AttorneyLegal DepartmentP. O. Box 447 Sioux City, IA 51102 Your recent letter to the Policy Section of the Iowa Department of Revenue and Finance has been given to me for reply. Please allow me to introduce myself. My name is Darwin Clupper. I am a technical tax specialist with the Department's Policy Section. My particular area of concentration is Iowa sales and use tax law. Your letter asks, in essence, if Iowa sales tax should have been collected on the gross receipts from tickets sold for a rock concert featuring Pat Benatar which was held on June 25, 1999. My answer to your question is yes; the remainder of this letter is an explanation for that answer. The gross receipts from sales of the tickets are subject to Iowa sales tax, in the initial instance, by virtue of § 422.43(1) of the Code which subjects to tax "the gross receipts from all sales of tickets or admissions to places of amusement, fairs, and athletic events". Section 422.48 imposes on the "Retailer" of the tickets the obligation to collect the tax imposed on their gross receipts; section 422.52 imposes on a retailer the obliga- tion to pay over the tax collected to the Department of Revenue and Finance. There is one exemption potentially applicable. Subsection 422.45(20) of the Code excludes from Iowa sales tax: 20. The gross receipts from sales or services rendered, furnished, or performed by a county or city. This exemption does not apply to the tax specifically imposed under section 422.43 on the gross receipts from the sales, furnishing, or service of gas, electricity, water, heat, pay television service, and communication service to the public by a municipal corporation in its proprietary capacity; does not apply to the sales, furnishing, or service of solid waste collection and disposal service to nonresidential commercial operations; does not apply to the sales, furnishing, or service of sewage service for nonresidential commercial operations; and does not apply to fees paid to cities and counties for the privilege of participating in any athletic sports. The exemption is not applicable because, as evidenced by the documents included with your letter, the retailer of these tickets is not Sioux City, but a partnership of which Sioux City is only one member. The memo from Mr. Gann to Mr. Bernstein, Mr. Johnson, and Mr. Utrip establishes this clearly. And, when one combines the elementary propositions of law that a partnership is a different legal entity from its partners and exemptions from tax are strictly construed against those claiming their benefit, (see Ballstadt v. Iowa Department of Revenue, 368 N.W.2d 147 (Iowa 1985) and cases cited therein) it is clear that the partnership is not protected by the provisions of § 422.45(20). In reply to the questions set out in the last paragraph of your letter, my opinion would not be different if the contract for the event were signed by the co-promotors as well as the City's representative. So long as the partnership rather than the City is the retailer of the tickets, the exemption is not applicable, no matter who signs the contract on the partnership's behalf. The same principle applies, generally, to the manner in which profit and loss are divided among the partners. Matters of who signed a contract and how profit and loss are divided can be important if there is a question of whether or not a partnership actually exists, but that is not the situation described in your letter. In closing, I must issue my usual warning. The opinions which I have expressed in this letter are informal only. Because of this, the Department could, in the future, take a position contrary to them. Sincerely, Darwin D. Clupper Tax Specialist, Policy Section Compliance Division 515-281-3670