The owner of a Youngsville sports facility has offered a public response to a recent opinion of the 3rd Circuit Court of Appeal that sided with the Lafayette Parish School System in its demand that Topshelf Sports fork over nearly $43,000 in back sales taxes. The LPSS argued — and both the state Board of Tax Appeal and, later, the 3rd Circuit agreed — that Topshelf’s facility, which includes a skating rink and basketball goals among other amenities, is not “immovable property” shielded from sales tax collections.
Typically, privately owned venues like reception halls are not subject to sales tax collections on income earned through leasing or renting the space to a third party. Jimmy Greco, owner of Topshelf, wonders why his business is any different. He tells ABiz he will file a writ with the Louisiana Supreme Court in an effort to have the 3rd Circuit’s ruling overturned. He makes his case in an email he sent to ABiz (the original report on the 3rd Circuit opinion follows Greco’s commentary):
The crux of this case is all about how my business is operated. I do own the business and the building. We are in business of renting the building for events. When I opened the business, it was mainly for sporting events. If AAU, USA Hockey or just a local basketball team wanted to have an event here, we would lease the building to them. When an event was scheduled, the party leasing the building had the right to charge admission or not to their event. As the company leasing the building, we made sure that the premises was in clean and safe condition.
During the event, we had absolutely no part in putting on the event. Top Shelf never charged admission to an event. When the promoter did an MMA event, they charged admission, sold liquor and sold merchandise. Our revenue was the lease of the building, and ONLY the lease of the building. That is the way every event is at Top Shelf. We don’t care what the event is, as long as it is legal and safe.
The LPSS audited Top Shelf under the idea that we were charging admission fees for the privilege of watching a sporting event. When Biddy Basketball holds games here, Biddy Basketball charges admission fees. It is the same for the indoor soccer league, trade shows, parties, etc. The entity leasing the building has the right to allow people in, not let individuals in, use the bathrooms, sit in the bleachers, etc. We do not get a percentage of the admission fees.
Part of the opinion from the courts is that we never relinquished complete control of the building, saying that I kept my office, employees offices, storage rooms, meeting rooms, etc. Our argument is this: When a musical group (concerts) leases the Cajundome, does Greg Davis turn over the keys to his office? Do the Icegators, ULL basketball, Cajundome administrative secretaries or any other staff member say, “Here’s the keys to my office, go ahead and use all my personal things”? Of course not. Does Greg Davis ever give the concert promoter the keys to the Cajundome? Of course not. When a couple rents a wedding reception hall for their daughter’s wedding, do they have to go to the reception hall and clean it, put out the tables and chairs, mop the floor, and do they have to stay after the reception and clean up, take out the trash, fix the air conditioner if it breaks? No, the owner of the reception hall does all that so that the premises is safe and operational and customers will want to continue to rent the building.
When you rent a reception hall for such an event, sales tax is not applicable because they are renting an immovable. What a reception hall does and what Top Shelf does are exactly the same. If oil service company A doesn’t need a building anymore and decides to lease the building to oil company B, is the lease subject to sales tax? No. Once again it is rent or lease of an immovable. If the oil company building has heaters, ACs, bathrooms, lights, water fountains or over head cranes, does that change the building from an immovable item to a entertainment venue? No it does not.
What makes Top Shelf any different than a reception hall or oil company building? The answer is NOTHING. This is a very far-reaching issue. If this stands, every reception hall, park pavilion, baseball field, club house, etc. in the area will be subject to the broad interpretation that we have going on now. Is the LPSS going to go to every church and tell them that their gathering hall that they rent out for Bingo is now subject to sales tax? Interesting and disturbing.
Here’s the original report posted March 23:
Topshelf Sports in Youngsville has been ordered by the 3rd Circuit Court of Appeal to pony up almost $43,000 in back taxes owed to the Lafayette Parish School System. The 32,000-square foot facility includes a skating rink, locker rooms, basketball goals and other amenities.
It was notified by the LPSS Sales Tax Division in September of 2014 that it owed just over $40,000 in back taxes on sales for 2011 through 2013. The facility appealed to the state Board of Tax Appeals, which sided with the school system. (The final amount Topshelf is being held liable for — $42,944.19 — includes interest and penalties.)
Topshelf claimed in its appeal that “the arrangements it had with its customers were non-taxable rental income” on immovable property, according to the 3rd Circuit opinion released Wednesday. “In essence,” the opinion clarifies, “Topshelf argued that it provided leases of immovable property which were not subject to sales tax, or alternatively, sales for resale that are excluded from tax. The BTA disagreed and found that Topshelf was operating an entertainment, athletic, or recreational facility ... subject to tax.”
In a six-page opinion — short by appellate standards — authored by Judge Shannon Gremillion, the 3rd Circuit enumerated reasons why Topshelf’s argument that its facility wasn’t subject to sales tax because it was “rented” by outside groups was in error:
Topshelf never relinquished possession of the building, as would occur in a lease. Topshelf employees were present at all times, and, at their discretion, sold food and beverages. Topshelf employees opened and closed the building and set up for events and activities. Topshelf cleaned up after activities concluded. Many of the events held at Topshelf were very limited in nature and duration, such as two-hour birthday parties.
...It is a mischaracterization to call the fees paid “rent.” Topshelf retained ultimate control over the facility. That fact that Topshelf’s patrons were given the privilege of access to the facility in return for a fee cannot be transformed by designating it as a “lease” in which its patrons paid “rent.”
Simply, this is not the kind of a lease envisioned by the legislature as being tax-free.