Tennessee Rules that Horse-Drawn Carriage Rides are Taxable as Amusements

By: Camille Adams, SALT Senior Associate

At a glance

• The main takeaway: A recent Tennessee Court of Appeals opinion concluded that a taxpayer’s charges for horse-drawn carriage rides constituted a taxable admission to a “place of amusement” and not a non-taxable transportation service.
• Assess the impact: It’s important to understand the taxability of your services as each state has its own rules regarding the definition and taxability of admissions, amusement, and other services, and some may be quite broad. 
• Take the next step: Aprio’s State and Local Tax (SALT) team can advise your company on a wide range of sales and use tax matters to ensure your business complies with its sales tax obligations. 

Schedule a free consultation today to learn more!

The full story:

Recently, the Tennessee Court of Appeals (Court) issued an opinion upholding an assessment from the Department of Revenue (Department) concluding that the charge for a horse-drawn carriage ride is subject to sales and use tax as an admission to a place of amusement.¹

A closer look at the case

In this case, the taxpayer charges customers for rides in themed horse-drawn carriages around downtown Nashville, often taking customers to major tourist attractions. Customers are charged for the ride based on time, not length of travel. If a customer has requested a specific drop-off location and time runs out before the carriage reaches that location, the customer is not dropped off at the requested location. Rather, the customer is asked to disembark at whatever location the carriage has reached when the time runs out.

Tennessee’s amusement tax is an extension of the state’s sales and use tax, and it imposes tax on:

Sales of tickets, fees or other charges made for admission to or voluntary contributions made to places of amusement, sports, entertainment, exhibition, display or other recreational events or activities, including free or complimentary admissions when made in connection with a valuable contribution to any organization or establishment holding or sponsoring such activities which shall have the value equivalent to the charge that would have otherwise been made.²

The Court reviewed two issues to analyze whether the taxpayer is subject to tax. First, the Court reviewed whether the taxpayer’s carriage rides are an admission to a place of amusement. The taxpayer argued that it was not subject to amusement tax because horse-drawn carriage rides are not an actual “place” to be classified as a place of amusement. The Court disagreed and concluded that the definition of “place” is not limited to a fixed location but includes physical environments or space.

The ruling explained

To reach that conclusion, the Court explained that the plain and ordinary meaning of the language in the statute encompasses a broad range of amusement and recreational activities, which include the taxpayer’s horse-drawn carriage tours. Specifically, the Court looked to the state’s regulation that defines places of amusement subject to tax as establishments listed or described in Major Group 79 of the Standard Industrial Classification Manual.³ Specifically, subcategory 7999 titled “Amusement and Recreation Services, Not Elsewhere Classified” lists numerous amusement and recreational activities such as canoe rentals, fireworks display services, houseboat rentals, motorcycle rentals, and other activities that don’t necessarily operate from a fixed place. The Court determined that the taxpayer’s activity was included under this section.

The Court also gave deference to the Department’s interpretation of the statute as set forth in Sales and Use Tax Notice #16-09 (issued September 2016). The notice stated that “Tours conducted for amusement within the state for a fee, whether the tour is on foot or in a vehicle, are subject to the Tennessee sales tax as an amusement.”

Second, the Court examined whether the taxpayer’s carriage rides are a nontaxable transportation service rather than an amusement. The taxpayer argued that although its carriage rides may be entertaining, their primary purpose is transportation. The taxpayer compared its carriage rides to taxis and other hired vehicles because, like those businesses, horse-drawn carriages are regulated by various state laws relating to motor vehicles.

The Court disagreed with the taxpayer’s reasoning and concluded that carriage rides are amusement, not transportation. The Court noted that:

1. The carriage rides do not travel far enough to be considered transportation because they are restricted by the Metropolitan Transportation Licensing Commission to a small, one mile radius of downtown.
2. Since customers pay for rides based on time, the taxpayer does not guarantee that the carriage will drop them off at the requested location.
3. The carriage rides are not priced as transportation. Carriage rides can range from $75 to $500 for an hour, making carriage rides an impractical means of transportation.

The bottom line

Each state has its own rules regarding the definition and taxability of admissions and amusement, and some may be quite broad to include charges for playing games online.

Aprio’s SALT team has experience advising clients on a wide range of sales and use tax matters, and we can assist your business to ensure that it complies with its sales tax obligations. We constantly monitor these and other important state tax topics, and we will include any significant developments in future issues of the Aprio SALT Newsletter.

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¹ Brenda Smith d/b/a Sugar Creek Carriages v. Tennessee DOR, No. M2022-00941-COA-R3-CV (Ct. App. Tenn., Sept. 28, 2023).

² Tenn. Code Ann § 67-6-212(a)(2).

³ Tenn. Comp. R. & Regs. 1320-05-01-.117. Major Group 79 is determined by the US Dept of Labor and is divided into several subcategories detailing amusement and recreation services.