Missouri Supreme Court Rules Club Fees Taxable Charges for Recreation, Addresses Use of Letter Rulings

The Missouri Supreme Court ruled unanimously against a horse-riding club in Kansas City, Missouri in its petition for review of a prior ruling on a refund of sales tax remitted on membership fees. The Club, which is a nonprofit, argued that its fees did not qualify under the state’s tax on admission to places of amusement or recreation, as the memberships also provided voting rights on the club’s board. The Administrative Hearing Commission addressed former letter rulings issued by the department where membership fees that granted voting rights were determined to be nontaxable and argued that in this case that the voting rights could not be the primary value of the memberships, as the voting members did not have an equity stake in the club. The Court also agreed that, as the portion of the fee responsible for the voting rights could not be distinguished from the portion paid for recreation, the entire fee was taxable.

In a footnote, the Court also rejected the Club’s argument that the Director of the Missouri Department of Revenue’s denial of their refund claim was a change in Department policy. The Court clarified that letter rulings only apply to the specific fact pattern they address, and do not apply to the department’s interpretation of the same law in cases with different fact patterns.

Though published letter rulings can provide additional context for how your situation may fit into the tax laws of a state where you are doing business, relying on how a state classified a different business’s activities can only provide you with limited guidance. This case illustrates the importance of applying a state’s laws to your own specific business practices and applying for your own letter ruling when ambiguity could lead to you incorrectly applying the state’s laws. (Saddle & Sirloin Club of Kansas City v. Director of Revenue, Missouri Supreme Court SC99453, November 1, 2022)

Posted on November 9, 2022