DOR Ruling:
Kristine Rompa, Tax Policy Specialist, our new point of contact at DOR who is taking over league fees and issues and determinations on how charges for various amusement and recreational activities are taxable is asking for your feedback. Please send comments to her directly at kristineR@DOR.WA.US.
League Fees Meeting Results
Friday July 13, 2012 Metro Parks Tacoma
Over 60 people from over 38 agencies met with Kristine Rompa, Tax Policy Specialist, Patti Wilson, Local Government Liaison from the Department of Revenue for the discussion regarding league fees and issues and determinations on how charges for various amusement and recreational activities. Click here to listen to the meeting
May 2012: The Department of Revenue released this response to league fee questions.
Thank you for your letter in which you ask the Department to confirm how charges for various amusement and recreational activities are taxable. Your members said they were confused and concerned after reading the Departments Excise Tax Advisory 3167.2011, “Taxability of Fees Charged for Amusement and Recreation Services.” Each municipal agency administers their programs and events differently, has unique relationships with nonprofit entities and special arrangements for use of facilities and would like the Department to clarify how certain activities are taxable. You provided the following questions and scenarios and ask for official guidance. We apologize for the delay in our response. View letter
September 30, 2011
DOR sends a call for comments on Rule 183, due by October 21, 2011.
We are at the beginning of the formal ruling making process on WAC 458-20-183 (Rule 183) "Amusement, recreation, and physical fitness services" and are seeking written comments. We will be considering all comments when amending the Rule. We anticipate a draft on Rule 183 and conducting a CR101 hearing within the next couple months.
The purpose of this notice is to inform you about recent rule actions taken in September 2011.
WAC 458-20-183 (Rule 183) Amusement, recreation, and physical fitness services.
Why Rule making is being proposed: The Department is considering an amendment to WAC 458-20-183 to clarify the tax-reporting responsibilities of persons providing amusement and recreations services. In particular, the Department considering additional guidance on the following:
- 1.When charges for sport activities and sporting events are and are not subject to retail sales tax;
- 2. How tax applies to charges for the use of facilities and fields;
- 3.The conditions under which a charge is considered a nontaxable charge (for sales tax purposes) for "lessons" between nontaxable lessons and taxable amusement and recreation services; and
- 4.When an event put on by a nonprofit entity is considered a nontaxable fundraising activity.
The Department is at this time asking for written comments and suggestions for these issues and other issues stakeholders believe should be addressed in an updated Rule 183. If you would like to provide written comments, please submit comments by October 21, 2011 to Bridget McBryde at bridgetm@dor.wa.gov.
To obtain a copy of the filed CR form: See the Department's online Rule Making Agenda
For your convenience, a copy of Rule 183 can be accessed at: http://apps.leg.wa.gov/wac/default.aspx?cite=458-20-183
WAC 458-20-19401 (Rule 19401) Minimum nexus thresholds for apportionable activities.
DOR WAC on B&O tax for amusement, recreation, and physical fitness services
Over June 16 and 17, 2011 the Department hosted three meetings for interested parties to comment on the draft Excise Tax Advisory— “Taxability of Fees Charged for Amusement and Recreation Services.” (Draft Excise Tax Advisory 3167.2011) More than 100 people attended the meetings.
A primary concern of those in attendance was the issue date of the Advisory. After due consideration, the Department offers this response:
The Department of Revenue appreciates the participation and discussion at the June 16 and 17 stakeholder meetings regarding the collection of retail sales tax on fees charged for participating in a sports activity or event.
As was discussed at these meetings, the Department intends to issue an Excise Tax Advisory (ETA) on July 1. The Advisory will provide tax collection and reporting guidance on this issue.
A number of organizations were concerned they would not be able to make the system changes necessary to implement the new requirements by July 1. Many also expressed concerns that the July 1 date does not provide enough lead time to explain the change to participants. The Department was asked to reconsider the July 1 deadline.
The Department continues to believe all parties must move forward on this issue, and still intends to issue the ETA on July 1. The Department does, however, recognize the challenges this transition has for stakeholders. For that reason, full compliance with the ETA is expected no later than October 1, 2011.
The Department will work with taxpayers that make a good faith effort to comply during the July 1 – September 31 interim period; finding a fair resolution of the taxes they were not able to collect. To receive such consideration, the taxpayer must document that efforts were made to make necessary changes.
After reading the ETA, if you need clarification about your particular business/organization, you may request a private letter ruling. These responses, written for a specific taxpayer, are binding on both the Department and the taxpayer based on the facts presented.
This page will be updated periodically.
Questions or comments can be directed to Bridget McBryde, Tax Policy Specialist, at (360) 534-1579 or BridgetM@dor.wa.gov
ETA 3167.2011 Taxability of Fees Charged for Amusement and Recreation Services (pdf)
Departmet of Revenue (DOR) Meeting:
On Thursday June 16, 2011 our lobbyist, Doug Levy, convened the clarification meeting which was well attended with over 30 agencies both in person and on conference call. DOR provided this handout on site titled "Taxability of Fees Charged for Amusement and Recreation Services." You can also find it on the DOR home page.
The bottom line is that legislators did not act on legislation that could have exempted these fees. The folks at the DOR are working with us to help clarify definitions so that we are all speaking the same language. There is still some confusion on terms. They have listened to us and are considering our request to move back the date (July 1, 2011) so that we can make adjustments to our program guides and internal operating systems to adjust for this collection.
Important WAC's are:
WAC 458-20-189: Sales to and by the state of Washington, counties, cities, towns, school districts, and fire districts.
WAC 458-20-183: Amusement, recreation, and physical fitness services. **This WAC is currently under review for clarification.
WAC 458-20-169: Nonprofit organizations.
Attention, Parks & Recreation Officials: Start Gearing Up to Collect a Sales Tax on the Fees You Charge Participants for the Adult and Youth Leagues You Run – and to Pay State B&O Tax on Them As Well
With this Bulletin, we at WRPA are urging all parks and recreation departments to gear up as soon as possible to begin collecting sales taxes on the fees you charge to teams to participate in the various adult and youth leagues you operate. We also are urging that you begin gearing up as soon as possible to pay a state B&O tax since this will be viewed as an enterprise activity by the state.
As a reminder, the WRPA and others sought a legislative remedy during the 2011 Session (Senate Bill 5422/House Bill 1452) to clarify that the league fees we charge to teams are exempt from sales tax. The legislation also would have exempted any imposition of a state B&O tax upon those operating the leagues (in our case, parks and recreation). A Proposed Substitute Senate Bill 5422 would have actually clarified that the exemptions applied to government-run, non-profit run, and privately-run leagues.
While SB 5422/PSSB 5422 and companion HB 1452 remain technically eligible for consideration during the 2012 Session, the Legislature’s failure to enact a measure in 2011 has led the Department of Revenue to determine that it will begin to enforce state law and state regulations that require the collection of sales tax and the payment of state B&O tax in connection with the leagues run by governmental and private entities as well as many non-profit entities. The DOR has indicated that governmental, many non-profit, and private entities running leagues have technically been subject to the sales tax and B&O tax requirements for two-plus decades under Washington Administrative Code (WAC) 458-20-183 (“Rule 183”), but has freely acknowledges there has been significant confusion on this issue and an extremely low collection rate with respect to these taxes over the years.
The DOR formally notified us of its intentions during a stakeholder meeting with us on Thursday, June 16 at the DOR offices in Olympia. We at WRPA thank the nearly 30 parks and recreation agencies that were in attendance by person or via a telephone conference line for this meeting – and the dozens of local government finance and legal department staff who participated as well. Here is a summary of key points you need to know going forward:
- DOR ETA & Rule-Making: The Department of Revenue will be publishing an “Excise Tax Advisory” related to the WAC 458-20-183 (“Rule 183”) requirements and shared with us a draft of the Excise Tax Advisory (ETA). Here is a link to the Rule 183 and Draft ETA. DOR also will be developing a formal Rule on this issue and wants to engage parks and recreation professionals in the Rule-Making. We are providing a link to WAC 458-20-189, regulating sales to and by the state, cities and counties, etc.
- Likely Prospective: Because Rule 183 has been in place over the years, it is difficult for DOR to flat-out guarantee that the sales tax collection and B&O tax payment obligations are prospective only – but, the DOR has given us repeated indications that they are viewing this as a compliance issue going forward, not backward. As a DOR official said at the June 16 meeting: “We’ve been confused, and so you’ve been confused … July 1 is when we are really moving forward
- Start Date?: As for what specific date the DOR uses to begin more formally enforcing the sales tax collection and B&O tax payment obligations for leagues, the July 1 date came up at our meeting. Parks and recreation officials, however, noted that we already have published and announced summer league schedules and in many cases are at or near deadlines for fall league schedules and publications. We urged the DOR to look more at Jan. 1, 2012 as a more formal “going-forward” date – this will be taken under consideration and the DOR will be discussing it amongst an “Executive Group” that is reviewing this issue to develop numerous “scenario” questions for “Letter of RulingField Rental question – waiting to hear back: At our June 16 meeting with DOR, a key question came up: What if we as parks and recreation agencies are not running a league, but rather simply providing our fields to those who are running the league? What is the obligation in that case, if any. Please know that the DOR does not have a ready-made answer for how we deal with this scenario, and is reviewing it, and has pledged to get back to us.
- Questions? Confusion? Seek a “Letter of Ruling”!: The DOR is also recommending that, as we gear up to begin collecting sales tax from league teams and participants, and pay the B&O on these league activities, that we contact them with ANY questions we may have. Parks and recreation agencies may seek to have questions answered and ambiguities cleared up through a “Letter of Ruling” from the DOR, which the agency will strive to turn around within two weeks. The Letter of Ruling interpretation from DOR is then binding on BOTH the local agency and the Department of Revenue. “Letter of Ruling” inquiries should go to Bridget McBryde, a tax policy specialist with DOR, at BridgetM@dor.wa.gov More
- Qualifying non-profit youth leagues can be exempted from paying sales tax: The DOR indicated that qualifying, 501(c)3, non-profit youth leagues can present a “certification of exemption” from any sales tax obligation. For more detail on this question, please see WAC 458-20-169 related to non-profit organizations, which we have linked to here.
- Be Pro-Active – Begin Gearing up NOW: As we wait to hear back from DOR on whether July 1, 2011, or Jan. 1, 2012, is a formal ‘go-forward’ date, we are urging all of you to be pro-active and to swing into action. Please begin to gear up now to put your agency in position to collect league fees sales tax and pay the state B&O. Meet with your recreation staff, as well as finance and legal staff and IT folks which will have to initiate the systems to both collect the sales tax and pay the B&O tax (a .471% tax on retailing of amusement/recreation activities). And, as appropriately recommended by the Association of Washington Cities, please document every step you are taking in preparation for thiis.
- WRPA”: At the request of our members, the WRPA is also going to develop a number of “template” questions and scenarios to transmit to the DOR for a Letter of Ruling. Look for these to be developed, in cooperation with many of you, in the near future.
- Instructional lessons et al – not subject to sales tax, but are subject to B&O tax: At the June 16 meeting, we also differentiated things such as instructional lessons from leagues. These instructional lessons do not count as something that will be subject to sales tax, but would be subject to B&O tax as one of the enterprise activities we operate.
- Education and outreach – start now!: We recommend you begin NOW in talking to groups and leagues that typically participate in your programs, use your fields, etc. The DOR will be seeking to get information out to the various leagues and associations around the state as well, but they will not necessarily catch all of them. While our first responsibility is to gear up internally to ensure we are meeting tax collection and tax payment obligations, those leagues and participants are our ‘customers’ and we want them to be informed. Let these folks know of the obligation we will be incurring, and let them know HOW it came about – this was not your decision, but rather something that arose as a result of inaction at the state level.
- Structure fees and programs to cover your costs: We at WRPA are also advising member agencies to structure their recreation league fees in a way that covers your costs. You will actually receive a little bit of local sales tax revenue on the sales tax on league fees, but you will have administrative setup costs and state B&O tax responsibilities. Think about a cost-recovery approach to your fees. You may also wish to consider restructuring your leagues in a way that has others running them, and your agency simply supplying the fields – however, this is a local jurisdiction policy call best left to all of you!
- Questions? Please contact us! We at WRPA know this will be a learning process for all. We will be looking for venues and forums to continue to get the word out on this and discuss it. Also, if you have questions, please do not hesitate to contact us – Brit Kramer at 360-459-9396 or britk@wrpatoday.org; Doug Levy at 425-922-3999 or levy4@msn.com
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