Ruling 2017-2, Admissions Tax - Golf Course Greens Fees

FACTS:

An organization that the United States Treasury Department has determined, by letter, to be an organization described in Section 501(c)(3) of the Internal Revenue Code (the “Organization”) has formed a single-member limited liability company (the “Company”). The Company has not sought or received a determination of exemption by the United States Treasury Department. The Company owns and operates a golf course that is open to the public. Members of the public pay greens fees to the Company to play golf at the golf course, with payments made on either a daily or a seasonal basis.

ISSUES:

1. Are the daily greens fees subject to admissions tax?

2. Are the seasonal greens fees subject to admissions tax?

RULINGS:

1. The daily greens fees are exempt from admissions tax under Conn. Gen. Stat. § 12-541(2) as daily admission charges that entitle patrons to participate in an athletic or sporting activity.

2. The seasonal greens fees are subject to tax because the exemption set forth in Conn. Gen. Stat. § 12-541(3) does not apply to the Company. 

DISCUSSION:

Admissions tax is imposed on charges for admission to any place of amusement, entertainment or recreation. Conn. Gen. Stat. § 12-541(a).

There is an exemption from admissions tax for daily charges entitling patrons to participate in an athletic or sporting activity. Conn. Gen. Stat. § 12-541(2). Charges that qualify for this exemption include but are not limited to daily or hourly charges for daily greens fees at commercially operated golf courses. Informational Publication 2008(11), Exemptions from Admissions Tax. Therefore, the daily greens fees charged by the Company that entitle patrons to play rounds of golf on a specific day are exempt from admissions tax. This exemption, however, does not apply to seasonal greens fees.

With respect to seasonal greens fees, the Company has inquired whether the exemption for admissions to an event for which all of the proceeds inure exclusively to an entity that is exempt from federal income tax under the Internal Revenue Code would be applicable even though the Company is the entity actively engaged in and assuming the financial risk associated with the event. Conn. Gen. Stat. § 12-541(a)(3). In Special Notice 92(22), Charges for Participation in Athletic or Sporting Activities Provided by Exempt Entities, the Department states that “seasonal charges for playing golf at a municipally owned and operated golf course are . . . exempt from the admissions tax.”[1] Therefore, if the Organization owned and operated the golf course, the seasonal greens fees would qualify for exemption under Conn. Gen. Stat. § 12-541(a)(3).

However, under the facts set forth above, the Company owns and operates the golf course, not the exempt Organization. The Department recognizes the separate legal existence of a single-member limited liability company (SMLLC) from its sole member:

For purposes of the sales and use tax, the separate existence of an SMLLC will be recognized. See Conn. Gen. Stat. § 12-407(1) [now Conn. Gen. Stat. § 12-407(a)(1)] (definition of person) and SFA Folio Collections, Inc. v. Timothy F. Bannon, Commissioner of Revenue Services, 217 Conn. 220, 585 A.2d 666 (1991). In general, therefore, the sales and use tax laws apply to SMLLCs as they would to any other person as that term is defined in Conn. Gen. Stat. § 12-407(1).

Special Notice 99(3), Effect of Recent Federal Tax Law Changes on the Taxation of Limited Liability Companies and S Corporations and their Shareholders (emphasis in original).

The definition of person for purposes of the admissions tax in Conn. Gen. Stat. § 12-540(1)[2] is essentially the same as the definition of the term for purposes of sales and use taxes in Conn. Gen. Stat. § 12-407(a)(1).[3] Therefore, as is the case for sales and use taxes, the admissions tax laws apply to SMLLCs as they would to any other person as the term is defined in Conn. Gen. Stat. § 12-540(1). Because the United States Treasury Department has not determined, by letter, that the Company is an organization described in Section 501(c)(3) of the Internal Revenue Code, the exemption of Conn. Gen. Stat. § 12-541(3) does not apply to seasonal greens fees collected by the Company.