Admissions to University Basketball Games Not Taxable in Connecticut

Monday, September 16th, 2013


The Connecticut Department of Revenue Services (Department) recently ruled that admissions to a university's basketball games were exempt.

Connecticut generally taxes admissions to places of amusement, including spectator sports events. However, Connecticut exempts admissions to an event if all the proceeds from the event go exclusively to an entity that is exempt from federal income tax. That entity must actively engage in and assume the financial risk associated with presenting the event.

Here, a university had an agreement with a venue to use that venue for the university's basketball games. The university was exempt from federal income tax. The university was responsible, at its own expense, for presenting the basketball games, maintaining and paying for worker's compensation insurance, paying relevant taxes and the local fee on admissions charges, and advertising and marketing the games. The venue sold tickets to the games. From the box office receipts, the venue took the amount the university owed it for rent and other charges. If the receipts were not enough to pay these charges, the university paid the deficiency. If there were any proceeds left after payments to the venue, the university was entitled to receive them. In practice, however, the games did not make enough money for the university to receive proceeds from them.

The Department held that the admissions were exempt because the university (1) was exempt from federal income tax, (2) actively engaged in presenting the games, and (2) assumed the financial risk from presenting the games. The university "actively engaged" by presenting the games, paying relevant taxes and fees, and advertising the games. Because the university did this at its own expense and because any potential proceeds would go to the university, the university assumed the financial risk. It did not matter that, in practice, the university did not receive proceeds from the games. Admissions to the university's basketball games were therefore exempt.

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