Texas – Taxability of Stadium Luxury Suites and Skyboxes

SALT Report 2824 – The Texas Comptroller issued guidance regarding the application of sales and use tax to luxury suites and skyboxes in stadiums.  Generally, a license to use a stadium luxury suite or a skybox to watch various events is subject to sales and use tax as an admission to a taxable amusement service.

However, certain leases of luxury suites or skyboxes are treated as nontaxable leases of real property based on whether the stadium owner has entered into a license agreement for the use of the suite or skybox. Or, if the contract states that the stadium owner has entered into a lease of real property for the luxury suite or skybox.

Taxable License Agreement

A license agreement gives the user the non-exclusive right to use the luxury suite or skybox, but does not give the user exclusive dominion or control over them. Under this type of license, the owner maintains control of such things as decor, cleaning, and the opening and closing of the premises.  License agreements will generally use the terms license to name the agreement and licensor or licensee to refer to the parties in the agreement.

For this type of license, tax is due on the total amount billed by the licensor to the licensee. In addition, the licensor will owe tax on all taxable items used to provide the taxable amusement service, such as cable or satellite television service in the suite or skybox.

However, a resale certificate may be provided by the licensor to its suppliers for its purchases of taxable items that will be resold to the licensee only if the care, custody, and control of the taxable item will be transferred to the licensee.

Non-taxable Lease Agreement

A lease agreement is a contract that gives the lessee the exclusive right to use, occupy, and control the premises for a certain period of time.  In essence, this type of agreement creates a landlord-tenant relationship.  Agreements of this type usually contain the terms lessee or landlord and lessor or tenant.

In order to qualify as a nontaxable lease of real property, rather than the sales of an amusement service, the contract must state that the lessee has access to the suite or skybox 24 hours per day, seven days a week. This does not apply to situations in which the stadium is hosting ticketed events.

Sales tax is not due on the lease amount charged by the lessor to the lessee.  However, the lessor is responsible for accruing sales or use tax on the cost of all the taxable items provided to the lessee. In this type of agreement, a resale certificate cannot be used for any items provided by the lessor to the lessee under the terms of the lease contract.

Additionally, charges for items sold outside of the lease agreement are treated as normal sales and taxed accordingly. This includes admission tickets to other amusement events not covered in the lease.

If the lessee has the option of purchasing catered meals that are sold outside of the lease agreement, the lessor may provide the caterer with a resale certificate for the cost of the catered meal. However, the lessor must then collect and remit tax from the lessee on the charge for the catered meal.

For Further Information

Texas Comptroller of Public Accounts – Letter No. 201307728L