Taxation of Fees for Classes With Skill-Based Lesson Plans
November 30, 2016
This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated September 20, 2016.
The facts as presented on your website and in your letter ruling request are summarized as follows:
Applicant operates a facility that offers classes with skill-based lesson plans including: Pre-School Gymnastics, Developmental Gymnastics, Competitive Gymnastics, Dance, Tumbling, Parkour, and Competitive Cheerleading. These activities are led by members of Applicant's staff. Open fun play on the equipment and hosting birthday parties are also offered
Are Applicant's fees for classes including (a) gymnastics, (b) dance, (c) Parkour, (d) tumbling and (e) competitive cheerleading subject to sales tax?
No. Applicant's fees for classes including (a) gymnastics, (b) dance, (c) Parkour, (d) tumbling and (e) competitive cheerleading are not subject to sales tax.
Section 144.020.1, RSMo, levies and imposes a sales tax "upon all sellers for the privilege of engaging in the business of selling tangible personal property or rendering taxable service at retail in this state." Subsection (2) of Section 144.020.1, RSMo, subjects to sales tax as a taxable service rendered at retail the amounts "paid for admission and seating accommodations, or fees paid to, or in any place of amusement, entertainment or recreation, games and athletic events, except amounts paid for any instructional class[.]" "Instructional class" is defined by Section 144.010.1(5), RSMo, as including "any class, lesson, or instruction intended or used for teaching[.]"
The term "teaching" is not defined. "Absent statutory definition, words used in statutes are given their plain and ordinary meaning with help, as needed, from the dictionary." Am. Healthcare Mgmt., Inc. v. Dir. of Revenue, 984 S.W.2d 496, 498 (Mo. banc 1999).
If used as a noun, the term teaching is a "gerund of techen to teach." Webster's Third New International Dictionary 2346 (1993). Teach is defined in relevant part as: "1 obs : SHOW, GUIDE, DIRECT 2 a : to cause to know a subject <all children are taught the three R's> <taught his son a trade>b : to cause to know how to do something: show how <my father is Ì´ing me to drive>. . . . 5 a : to direct, instruct, or train by precept., example, or experience." Webster's Third New International Dictionary 2346 (1993).
Applicant's fees are for (a) gymnastics classes, (b) dance, (c) Parkour, (d) tumbling, and (e) competitive cheerleading involve recreation. Based upon the facts provided, members of Applicant's staff lead these activities and show, guide, or direct, i.e. teach, Applicant's attendees. Therefore, the fees are excluded from Section 144.020.1, RSMo, because they are amounts paid for instructional classes.
Are Applicant's charges for open fun play on the equipment and hosting birthday parties subject to sales tax?
Yes. Applicant's charges for open fun play on the equipment and hosting birthday parties are subject to sales tax.
See Response 1. Based upon the facts provided, Applicant's open fun play on the equipment and birthday parties do not include guidance or instruction on these particular activities. Therefore, these activities are subject to sales tax.
This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals. If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change. For this reason, the interpretation set forth above should be reviewed on a regular basis. Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.
Should additional information be needed, please contact Managing Counsel Roger L. Freudenberg, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475 (phone 573-751-0961), or me.