Artisan Q&A: Sales Taxes on Performances

Dear Rex,
We’re both an arts studio (teaching classes) and theatre company (putting on performances) and were wondering if we were subject to Texas state sales tax with these two things?
-Windy

Dear Windy,

When you sell tickets to performances, those sales are clearly taxable as “amusement services” under Texas Administrative Code Rule §3.298(a)(1)(A). You, rather than the venue, would be responsible for remitting the sales tax to the Comptroller’s office under §3.298(i)(2) unless the venue specifically agreed in writing to be responsible for remitting taxes on your behalf.

If you are a non-profit, however, there is an exemption that may apply to you. Rule §3.298(g)(1)(A) says that sales tax is not due on an amusement service if the service is provided exclusively by a nonprofit organization, corporation, or association, including those exempt under Internal Revenue Code of 1986, §501(c)(3), so long as the proceeds do not go to the benefit of an individual.

However, the classes you teach are not taxable. When the activities are “primarily instructional in nature” they are are considered “nonamusement services” and exempt from sales tax under Rule §3.298(a)(2).