Pivotal Law Group

206-340-2008
Toll Free 866-884-2417
Español 866-802-9832

Washington DOR Finalizes League and Entry Fee ETA

Posted Wednesday, July 6, 2011 by Ronald L. Bueing

alt text On July 1, 2011 the Washington Department of Revenue finalized Excise Tax Advisory Number 3167.2011 (ETA 3167). ETA 3167 states that league fees and entry fees are subject to retail sales tax if they provide the person with the right to participate in the underlying activity. The Department attempts to present the ETA as a clarification, but there is little doubt that this is a distinct change in the sales tax treatment of entry fees and league fees. Granted, there had been some inconsistent application of retail sales tax to league fees, but there has never been any application of retail sales tax to tournament entry fees until this ETA.

Interestingly, WAC 458-20-183 (Rule 183) could not be more clear with respect to the application of sales tax to entry fees. Rule 183 clearly states, “The term ‘sale at retail’ or ‘retail sale’ does not include: … league fees and/or entry fees.” Further, entry fees are defined as, “those amounts paid solely to allow a person the privilege of entering a tournament or other type of competition. The term does not include any amounts charged for the underlying activity.”

The Department has determined that the proviso language, “the term does not include any amounts charged for the underlying activity,” excludes from the Department’s definition of entry fees, any entry fees that allow a person to participate in the activity. However, as we can see from the above definition, an entry fee is an amount paid to allow a person the privilege of entering a tournament or other type of competition. As such, under the Department’s interpretation, an entry fee is only exempt from sales tax if it allows you to enter a competition, but not to compete in that competition. This makes no sense.

This absurd interpretation puts taxpayers that relied on the clear language of the rule in danger of assessments for prior periods. While it should be noted that the DOR website indicates that “full compliance with the ETA is expected no later than October 1, 2011,” there is nothing in the ETA that provides for prospective application. Even worse, the Department has not indicated that Rule 183 will be amended anytime soon, allowing this rule to continue misinforming taxpayers that are unaware of the ETA.

In the meantime, any organization that charges an entry fee to a participative sporting event, such as a tennis tournament, soccer tournament, softball tournament, fun run, etc. should consider whether ETA 3167 requires they must collect retail sales tax on the entry fees that are charged. If you have any questions, regarding the application of this ETA call Ron Bueing at (206) 805-1490.

Pivotal Law Group, PLLC Pivotal Law Group, PLLC
47.6084840 -122.3330190
piv·ot·al
of vital or central importance; crucial