The Alabama Tax Tribunal recently addressed whether the taxpayer, a tailgating business at the University of Alabama, was subject to rental tax. The taxpayer, Game Day Tents, LLC, had an exclusive contract with the University of Alabama for operating a tailgating business on campus for paying customers. The taxpayer’s customers could choose from various tailgate packages offered at different prices. In general, however, customers were allotted a specific location for tailgating and were provided a variety of items based on the package chosen, such as tents, tables, chairs, coolers, ice, and televisions with satellite service. The items provided by the taxpayer to customers could be substituted at the taxpayer’s discretion. Regardless of the package chosen, the taxpayer set up tents and other items for its customers and was on site during the games to address any needs (more ice, restoring satellite service if there was an outage). More importantly, it was the taxpayer’s job to clean up and pack up the items after the games ended. Customers were subject to a number of rules regarding use of the items provided and were also expected to maintain a general level of decorum while tailgating in one of the taxpayer’s spaces. For example, the taxpayer prevented customers from sharing ice and moving chairs to other tailgates; it also monitored customers’ alcohol use and noise levels. Customers were prohibited from displaying names of businesses, charities, churches, or political parties or candidates (or the name/logo of the opposing team) on the tents. The taxpayer’s packages were not inexpensive—the “First Down” package for all seven home games was $20,000 in 2015. Following an audit, the taxpayer was assessed rental tax on its receipts from tailgate packages. The taxpayer eventually protested the assessment to the Alabama Tax Tribunal.
Under Alabama law, rental tax is levied on persons renting and leasing tangible personal property. “Lease or rental” is defined as “[a] transaction whereunder the person who owns or controls the possession of tangible personal property permits another person to have the possession or use thereof.” Relying on prior Alabama case law, the Tribunal held that that the tailgating transactions were not subject to the rental tax because the customers lacked “control or dominion” over the items provided by the taxpayer. Particularly, the Tribunal noted that the taxpayer had the ability to substitute items provided to customer, restricted its customers’ use of items and overall behavior, and closely monitored usage of the items. Furthermore, customers lacked the ability to set up and take down the taxpayer’s equipment. In addition to the lack of control, the Tribunal held that the rental tax did not apply because the essence of the tailgating transaction was the provision of services. Although tangible personal property was provided to customers, the Tribunal noted that the taxpayer was providing services when it arranged to set up and clean up, arranged television service providers and caterers, and when it enforced certain rules with regards to behavior and use of equipment. Furthermore, the Tribunal noted that the taxpayer’s owner testified that the purpose of the business was to provide “hassle-free tailgating on the campus’s premium tailgating locations.” Please contact Scott Jackson at 404-614-8688 with questions on Game Day Tents, LLC v. Ala. Dept. of Revenue.