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December 2019

(Tee) Time is Money


By Jared Williams
Managing Director

The old adage has always been that time is money. Time is one of the most valuable commodities, largely because we all have a finite amount of it. The same can be said of golf courses. In fact, it’s probably a bit hackneyed now to reiterate that your tee times have actual value in a dollar amount – real money.

As such, we’ve constantly advocated that golf courses analyze the opportunity costs associated with any barter agreement, where the actual value you give (in tee times) and receive in return (software and services) may not be equitable.

Aside from the equitability factors, which we have discussed ad nauseam, lay the questions around taxability of barter sales and transactions. Which party bears the responsibility of reporting the sales data?

Back in the early part of 2017, we sought to tackle this question and provide the industry with an in-depth analysis of the tax obligations each party has when entering into a barter agreement. After spending a good bit of time – and money – we were left only more perplexed. Largely because no state or federal tax authority had even broached the issue.

That changed on Sept. 16, when the Texas Comptroller of Public Accounts’ three-year audit of an online tee time agency resulted in an administrative law judge finding that the OTTA was not entitled to a sales tax waiver on reservation fees because those taxes were never assessed.

Additionally, the court found the barter transactions made by the OTTA are taxable as data processing services. The OTTA did not collect any sales tax on the reservation fees from the barter transactions that took place during the audit period (April 1, 2011 to September 30, 2014).

There’s certainly a lot to unpack in this 11-page opinion. But rest assured we are working diligently to help you understand exactly what this means for you and your facility.
Two things have always worried me about this.

If the industry as a whole is unsure about the tax obligations for those entering into barter transactions, how will tax authorities view this?

Even if golf courses have an obligation to report some of the barter sales data, realistically, how can they? The major OTTAs aren’t going to disclose full and transparent barter sales data (number of times sold and rate at which each sold). It’d be too much like the right thing to do. And it would allow for courses to more easily determine whether a barter agreement is sensible for their facility.

And the actual dollar amount in green fees the OTTA charged golfers was indeed the tax basis for which the auditor found barter transactions as taxable data processing. The result: a $1 million assessment liability for the OTTA and a 10 percent penalty for late filing periods and interest.

In Texas, taxable items include services, and here the court identified a golf green fee as a taxable amusement service (sale price of an amusement service includes fee charged for admission – in this case, green fees).

Every state is different and you need  to find out what the relevant law is in your state. But one statement in the court’s opinion should stick with all of us:

“The business records petitioner provided were scant and did not establish details about what golf courses received in the barter transaction. Based on the evidence presented, it does not appear that petitioner gave any thought to sales tax consideration when it was characterizing the revenue at issue.”



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