Overview
A sales tax assessment issued against the taxpayer for initiation fees and membership dues charged to customers for use of the taxpayer’s recreational facilities, including access to hunting lands, was upheld.
Legal Basis for Taxability
The membership dues and initiation fees qualified as fees for access to amusement, entertainment, athletic, or recreational facilities within the meaning of:
- Ark. Code Ann. §26-52-301(5)
- Ark. Regs. §GR-11(A)
Therefore, these charges were deemed taxable.
Findings Supporting Taxability
- The record did not support a finding that the facilities failed to provide refreshment, pleasure, or amusement to members.
- The taxpayer’s advertisements on social media clearly attributed such benefits, despite later attempts to disown those statements.
- There was no sufficient evidence to conclude that the assessed charges were solely for the privilege of membership.
Conclusion
Consequently, the initiation and membership charges were subject to Arkansas sales tax.
(Arkansas Administrative Hearing Decision, Dkt. Nos. 22-342, 22-343, 22-344, 05/17/2022.)
Frequently Asked Questions
What types of fees were considered taxable in this case?
Initiation fees and membership dues charged for access to recreational facilities were considered taxable under Arkansas law. These fees were treated as charges for access to amusement or recreational services.
Why were the initiation and membership fees taxable under Arkansas law?
The fees fell under Ark. Code Ann. §26-52-301(5) and Ark. Regs. §GR-11(A), which classify charges for access to entertainment, athletic, and recreational facilities as subject to sales tax.
Did the taxpayer’s promotional materials influence the decision?
Yes. Social media advertisements highlighting the recreational and pleasurable aspects of the facilities undermined the taxpayer’s argument that the fees were not for amusement purposes, supporting the assessment.
Was there any evidence that the fees were only for membership privileges?
No sufficient evidence was presented to show that the charges were strictly for membership privileges. The decision found that the services offered provided recreational enjoyment.
What was the final ruling on the sales tax assessment?
The assessment was upheld, and the taxpayer’s initiation and membership charges were deemed subject to Arkansas sales tax as outlined in the referenced statutes and regulations.