Rhode Island has issued a declaratory ruling regarding the taxability of entertainment services in response to a company’s request for ruling. The company operates a location where customers engage in challenge-based entertainment services and may also purchase food and beverages. The charges for the entertainment services are separately stated from the purchases of food and beverages. Customers may purchase food and beverages regardless of whether they access the entertainment facility. The company acknowledged that it plans to collect all applicable state sales and use taxes and local meals and beverages taxes on the separately stated food and beverage charges.
In each of the entertainment challenges, players can earn points which can be redeemed for in-game upgrades and other rewards. The company separately accrues use tax on the value of taxable items for which points are redeemed.
Based on the facts provided, the Division of Taxation stated that all standard charges for the entertainment services alone are not taxable since they are separately stated from any food and beverage charges. If any ticket price included food or beverages, the total ticket price would be subject to both the 7% sales tax and the 1% meals and beverages tax.
The sale of food and beverages is subject to the 7% sales tax and the 1% meals and beverages tax. Events such as birthday parties where the event would include food and game tickets would subject the entire package to the 7% sales tax and the 1% meals and beverages tax, regardless of whether the meals were separately stated.
The redemption of digital points for upgrades and rewards is taxable to the extent that the upgrade or reward is taxable. If digital points are redeemed for prepared food, the redemption of the points is taxable. If digital points are redeemed for a non-taxable item such as VIP e-mail access, the redemption of the points would not be taxable. (Ruling Request No. 2024-01; Declaratory Order 2024-01, Rhode Island Division of Taxation, February 1, 2024)