Sports complexes

Sports complexes encompass a wide range of athletics. These facilities provide areas to play, compete, train, practice, receive coaching, and other activities that support the athlete.

The following sports are frequently found at a sports complex:

• Baseball/softball.
• Soccer.
• Hockey.
• Basketball.
• Volleyball.
• Gymnastics.
• Martial arts.

These sports and activities are not within the definition of an athletic or fitness facility (AFF). Therefore, most sports complexes are not generally considered an AFF as a whole. Other sports defined as AFF activities or recreational activities, are discussed elsewhere in this guide.

The following information is intended to provide guidance on the taxability of activities that occur at sports complexes.

Sports complexes – general taxability

The taxability of a sports complex is largely based on whether:

• The entire sports complex is an AFF – all charges are subject to retail sales tax.
• A portion of the sports complex is an AFF – charges for the area of the sports complex that is an AFF are subject to retail sales tax.
• No portion of the sports complex is an AFF – charges are not subject to retail sales tax, unless they are retail recreational services.

Entire sports complex is an AFF

An entire sports complex is an AFF if it is primarily (more than 50%) used for AFF activities.

The department will presume that the entire facility is an AFF when more than 50% of the revenues received by the facility are from activities listed in the definition for an AFF. Typically, this would occur when a facility contains a substantial fitness center and/or racquet center.

When the entire sports complex is an AFF, all charges for activities listed within the definition for an AFF and physical fitness activities are subject to sales tax.

Note: A sports complex is not considered an AFF based on the availability of a ball used to participate in sports, such as soccer, baseball, softball, volleyball, football, or basketball.

A portion of the sports complex is an AFF

If an entire sports complex is not considered an AFF, then you must determine whether any portion of the facility is an AFF. Typically, this test must be performed whenever there is a significant change in activities that could cause a portion of a facility to become an AFF.

To determine if any portion of the facility is an AFF, answer the following questions:

1. Is there a separate area or room that is primarily used for activities included in the definition of an AFF?

• If yes, then go to Question 2.
• If no, then the facility or portion of the facility is not considered an AFF.

2. Is there a separate charge for using the room or area?

• If yes, then the separate area is considered an AFF, and any charges to use the area are subject to retail sales tax.
• If no, then the separate area is not an AFF.

The department makes the following presumptions in determining if a room/area is an AFF:

1. In buildings, we will look at the entire room or area to determine if it should be considered an AFF, and we will not split up rooms.

Example 1: Galaxy Martial Arts is not an AFF as a whole. One room in the facility has a few free weights in a corner. There is no charge for the use of the free weights. The remainder of the room has no exercise equipment and is primarily used for martial arts lessons and training. The department will not view this room as an AFF when there is no separate charge for using the exercise equipment.

Example 2: Super Gymnastics House is not an AFF as a whole. It has a multipurpose room that is used as a break/lunchroom for staff during the week and for birthday parties on weekends. Super Gymnastics House charges a flat $150 fee to hold birthday parties for up to 15 kids. Super Gymnastics House provides the following for the fee:

• Use of the tumbling mats, ball pit, a low-level balance beam, and some group activities on the tumbling mats.
• Use of the multipurpose room for the party room for birthday cake, games, and presents, provided by the customer.

The multipurpose room is not an AFF. The activities that take place in the room are not AFF activities. Although the activities taking place at the sports complex may be physical fitness activities, they do not occur at an AFF. Thus, the birthday party is subject to B&O tax under the Service and Other Activities classification. Retail sales tax does not apply.

For outdoor areas, the department will look at the primary activity performed to determine if the area qualifies as an AFF.

Example 3: Super Soccer Sports has multiple soccer fields, an outdoor pickleball court, and an outdoor basketball court. The use of any of the outdoor areas requires payment of a fee. In this situation, each court/field is a distinct area, and the determination is made separately. The pickleball court is an AFF because it is within the definition of an AFF, while the basketball court and soccer fields are not.

2. The department presumes the following rooms within a sports complex are not AFFs when the sports complex as a whole is not an AFF:

• Gymnasiums.
• Multi-purpose rooms.
• Practice areas.
• Meeting rooms.
• Pools.
• Outdoor basketball courts.
• Outdoor ball fields (soccer, football, baseball, etc.).

The sports complex is not required to retain records showing that these rooms are used 50% or less in AFF activities.

3. To determine if a room or area is primarily used as an AFF, the schedule of room use for a charge will determine whether a room or area is primarily used as an AFF. Idle or unscheduled time will not be part of the calculation.

Application of sales tax when a portion of a sports complex is an AFF

When a room or area at a facility is determined to be an AFF then any charges to engage in or receive instruction in physical fitness activities in that room or area are retail sales. See below for information on uses of such spaces that are excluded from retail sales when separately stated.

“Physical fitness activities” means activities that involve physical exertion for the purpose of improving or maintaining the general fitness, strength, flexibility, conditioning, or health of the participant. Examples of physical fitness activities include, but are not limited to:

• Exercise classes.
• Strength and conditioning programs.
• Personal training services.

No Portion of the sports complex is an AFF

When no portion of the facility is an AFF:

• Charges by the sports complex for retail recreational services are subject to retail sales tax, and the income from such charges is subject to business and occupation (B&O) tax under the Retailing classification.
• Income received by the sports complex for non-retail recreational services is subject to B&O tax under the Service and Other Activities classification and retail sales tax does not apply. This includes charges for activities that would otherwise be considered physical fitness activities.

Exclusions from retail sales

Separately stated charges for the following activities that take place within an AFF or a portion of the facility that is an AFF are subject to B&O tax under the Service and Other Activities classification and are not retail sales:

• Use of an AFF for advertising, massage, or nutritional consulting that does not require the customer to engage in physical fitness activities to receive the service.
  • Note: This does not include personal training services or instruction in a physical fitness activity.
• Physical therapy provided by a licensed physical therapist when prescribed by an authorized health care practitioner.

Rental of rooms and facilities to third-party contractors

When a sports complex or a portion of a sports complex is an AFF, they must collect retail sales tax from a third-party contractor who rents the room or portion of the facility to provide physical fitness activities to their clients.

The following examples assume that the entire sports complex is an AFF.

• Example 1: A tennis coach not employed by the sports complex reserves three hours each day on the tennis courts for practice. The sports complex is required to collect retail sales tax from the coach because tennis is a physical fitness activity and is taking place at an AFF.
• Example 2: A pitching coach not employed by the sports complex reserves two hours each week at the facility to teach students about pitching. The sports complex is required to collect retail sales tax from the coach because pitching is considered a physical fitness activity and is taking place at an AFF.

When a third-party rents a room or facility that is not an AFF, the sports complex does not have to collect sales tax unless it is providing a retail recreational service.

The following examples assume that the room or facility rented is not an AFF and a separate charge is imposed for rental of the area used for the activity:

• Example 3: A pitching coach not employed by the sports complex reserves two hours each week at the facility to teach students about pitching. The sports complex is not required to collect retail sales tax from the coach, even though the class is considered a physical fitness activity, since the part of the facility used is not an AFF.
• Example 4: A volleyball coach rents a volleyball court from a sports complex for team practice. The sports complex is not required to collect retail sales tax from the coach because volleyball is not a retail recreation service and the court is not an AFF.
• Example 5: A wrestling coach reserves two hours each week on the sports complex’s climbing wall for wrestlers to work on strength. The sports complex’s climbing wall is not an AFF. However, climbing walls are considered a retail recreation service. Therefore, the sports complex must collect retail sales tax from the wrestling coach.