Was a private club's equity-member assessment for Hurricane Wilma capital repairs taxable as an admission?

Plain-English summary

A private club imposed a separately stated assessment on its equity owners to repair and renovate facilities damaged by Hurricane Wilma. The assessment did not change membership dues, grant access to facilities, or fund operating expenses, and the club accounted for it separately as capital funding.

Florida treated the charge as a capital assessment, not a taxable due, user fee, or admission. Although the rule's examples did not specifically address natural-disaster repairs, capitalized repairs and improvements could qualify when the assessment met the rule's criteria.

The club had already collected and remitted sales tax. It could seek a refund or take a credit only after first refunding or crediting the affected equity members, and the ruling specified a three-year filing period.

What this means for you

The use and accounting of a club assessment matter. Capital treatment is supported when equity owners fund capital improvements, the charge is separate from dues, and the money does not buy access or pay operations.

Common questions

Why was the assessment not an admission? Capital assessments on equity owners were not treated as dues or user fees, and payment did not entitle members to use facilities.

Did hurricane damage prevent capital treatment? No. The examples were not exhaustive, and qualifying capital repairs could meet the rule.

Could the club immediately recover the remitted tax? No. It first had to refund or credit the members who paid it.

Citations and references

• Fla. Stat. § 212.02(1) (admissions, dues, and fees)
• Fla. Stat. § 212.04(1) (tax on admissions)
• Fla. Admin. Code r. 12A-1.005(4) (membership-club capital assessments)
• Fla. Stat. §§ 213.756(1) and 215.26 (refund prerequisites and taxes paid in error)
• Fla. Admin. Code r. 12A-1.014 (sales-tax refunds and credits)
• Department of Revenue v. John's Island Club, 680 So. 2d 475 (Fla. 1st DCA 1996)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 06A-015

Original ruling text

SUMMARY
QUESTION 1: (1) Whether sales tax is due on the extraordinary assessment levied on Taxpayer's equity members for
capital expenditures to repair/renovate damages to Taxpayer's facilities caused by Hurricane Wilma.
QUESTION 2: (2) Whether the Taxpayer can file a refund claim for sales taxes billed to members and remitted to the
Department of Revenue if it is determined that sales tax should not be levied on such an assessment.
ANSWER 1 - Based on Facts Below: Sales tax should not be charged on the hurricane assessment levied on a
club's equity owners. In accordance with Florida case law and Rule 12A-1.005(4)(a)1.c., F.A.C., such an assessment
does not constitute a "due" or "fee" for purposes of section 212.02(1), F.S., which defined "admissions."
Consequently, the hurricane assessment is not taxable as an admission under section 212.04(1), F.S. Although Rule
12A-1.005(b)2.b., F.A.C., does not contemplate assessments levied for repairs and renovations following natural
disasters, the fact that the hurricane assessment will be used for capital expenditures and improvements to the
facilities in accordance with the examples of capital expenditures provided in 12A-1.005(4)(a)1.b., F.A.C., would
qualify the assessment as a capital assessment.
ANSWER 2 - Based on Facts Below: Taxpayer may apply for a refund with the Department or take a credit on its
sales and use tax return after Taxpayer has refunded or credited the accounts of its equity members with respect to
the erroneously charged sales tax.

June 14, 2006

Re: Technical Assistance Advisement 06A-015
XXX, Petitioner
FEIN: XX
Capital assessments due to hurricane damage
Sales and Use Tax
Sections 212.02 and 212.04, Florida Statutes ("F.S.")
Rules 12A-1.005(4), 12A-1.014, and 12-26.008, Florida Administrative Code ("F.A.C.")
Dear :
This response is in reply to your letter dated April 18, 2006, requesting the Department's issuance of a Technical
Assistance Advisement ("TAA") pursuant to Section 213.22, F.S., and Rule Chapter 12-11, F.A.C., regarding the
Department's position on the issue whether the 6% sales tax should be charged on a special assessment for
hurricane damages levied by a private country club (Taxpayer) on its equity members. An examination of your letter
has established that you have complied with the statutory and regulatory requirements for issuance of a TAA.
Therefore, the Department is hereby granting your request for issuance of a TAA.

ISSUE I
The first issue is whether sales tax is due on the extraordinary assessment levied on Taxpayer's equity members for
capital expenditures to repair/renovate damages to Taxpayer's facilities caused by Hurricane Wilma.
FACTS AS STATED
Your letter provides in part the following information:
Taxpayer is a not-for-profit corporation that owns and operates a XXX for the recreation, pleasure, and benefit of its
members and their guests. Taxpayer is administered by a XXX. Each Board member must be an equity member of
Taxpayer.
Taxpayer memberships are primarily equity memberships. Non-equity memberships are only offered in limited
circumstances and would only provide for use of the Athletics Center to persons who are both non-owners and nonresidents of Taxpayer. Capital assessments are not applied to non-equity members.
Equity members consist of XXX Memberships and XXX Memberships. XXX memberships allow members to select
either full or limited annual memberships. The type of membership selected determines the extent of fees that must be
paid for use of XXX amenities. Club memberships allow members to select either annual tennis memberships or
social memberships. Tennis members are entitled to use tennis facilities without paying court fees, while social
members are not.
Accepted equity members of Taxpayer who have paid their full membership obligations receive a membership
certificate. Equity members are also entitled to voting rights in proportion to their level of membership. XXX members
have greater voting power than other equity members. XXX members are entitled to XXX votes per membership
certificate, while all other members are entitled to XXX per membership certificate.
Annual dues for members are for a XXX-month period. All dues and fees are applied towards Taxpayer’s XXX.
Members may pay dues in one lump sum or in installments. It is the policy of the club that the annual dues and other
receipts are sufficient to meet the annual operating needs of Taxpayer.
Taxpayer sustained substantial damage to its facilities during Hurricane Wilma (XX 2005). Taxpayer suffered damage
to its structures in the form of leaks, the XXX sustained significant damage requiring removal of trees and stumps and
repairs to the XXX, and the tennis area lost canopies and awnings.
Although Taxpayer was insured against hurricane damage, Taxpayer had to meet a XXX out-of-pocket deductible in
order to completely restore its facilities. Taxpayer recently notified its equity members that the Board agreed to issue a
capital assessment to cover the hurricane damages incurred. Assessments for capital expenditures are approved by a
majority vote of those members entitled to vote. Only those members affected by the assessment are entitled to vote.
Assessments automatically become a XXX... of the member who owns the equity at the time the assessment is levied
and remains XXX until it has been paid in full.

The assessment will consist of a monthly charge for one year. The assessment amount may be adjusted once the
actual cost of repairs is determined. The assessment does not affect the amount of payments for membership dues.
The capital assessment charge related to Hurricane Wilma is separately stated from membership dues and any other
charges that may appear on member invoices. Taxpayer also created a separate General Ledger Account for the
assessment. This account is separate from operating income and will not be recorded in an operating revenue
account.
Taxpayer has been charging sales tax on the assessment and seeks to clarify whether it should continue to do so,
and if it should not whether it can file a refund claim for the sales tax billed to its members thus far.
TAXPAYER'S POSITION
Taxpayer asserts that the capital assessment imposed on its members is not a taxable due or user fee. Taxpayer
contends that the extraordinary assessment that it levied on its equity members coincides with the examples of capital
expenditures or capital improvements provided in Rule 12A-1.005(4)(a)1.b., F.A.C. The examples that Taxpayer cited
as relevant include: amounts expended for rebuilding and/or replacing the XXX, planting of additional trees;
resurfacing and/or construction of tennis courts; amounts expended for new furniture, fixtures, and equipment;
amounts expended for clubhouse renovations; and amounts expended for acquiring maintenance equipment.
Taxpayer contends that the extraordinary capital assessment it imposed on its members is for the cost to make
repairs and necessary replacements to the XXX and surrounding areas, therefore, the expenditures should be
considered capital in nature as opposed to normal operating expenses. Thus, because the assessment qualifies as a
capital assessment under Rule 12A-1.005(4)(a)1.c., F.A.C., it is not taxable as a due or user fee.
Taxpayer further asserts that because the assessment is a capital assessment which meets the four requirements set
out in Rule 12A-1.005(4)a.2., F.A.C., it should be exempt from the Florida sales tax. Taxpayer claims to have met the
first requirement of separately accounting for the payments and not recording them in an operating revenue account
by creating a separate General Ledger Account for the payments received from the assessment. Taxpayer claims to
have met the second requirement by not allowing access to the facilities as a result of payment of the assessment, but
rather requiring that members pay annual dues in order to have the right to utilize the facilities. The third requirement
of not using the assessment to effect a decrease in user fees or membership dues was presumably met, since the
assessment does not affect the amount of annual dues associated with each type of membership. Lastly, the fourth
requirement of not using the assessment funds to pay for operating expenses has been met according to Taxpayer. In
accordance with Taxpayer's by-laws, the projected annual dues and other receipts are sufficient to meet the annual
operating needs of the club. Taxpayer asserts that it currently has sufficient funds in its operating budget to meet the
annual operating needs of the club.
Taxpayer also relates the similarities between its circumstances and those of In re XXX, DOR 04-1-DS, Division of
Administrative Hearings, May 10, 2004, where it claims that the Department concluded, pursuant to Rule 12A1.005(4)(a), F.A.C., that fees collected by a XXX to make capital improvements qualified as capital assessments and
were not subject to Florida sales and use tax if treated in accordance with Rule 12A-1.005(4)a.2., F.A.C.

Taxpayer further refers to two technical assistance advisements, No. 03A-022, May 5, 2003, and No. 03A-044,
September 3, 2003, both of which concluded that a capital assessment is exempt from sales taxation if it meets the
following eight criteria:

1. The equity assessment/payment will not entitle the members to use the Club's facilities or equipment.
2. The assessment is intended as an investment to maintain or enhance the value of the member's interest in the
   Club.
3. The assessment is a specific involuntary demand made by the Club on its equity membership for a certain sum of
   money.
4. The payments of the assessment must be separately accounted for on the Club's books and record and not
   reflected as an operating revenue account.
5. The assessment must be separately stated on each member's bill.
6. The assessment must not be used to effect a decrease in member fees or periodic membership dues.
7. The assessment must not be used to pay for the operating expenses of the Club.
8. The assessments must be paid by members with an "equitable ownership interest" in the Club as evidenced by
   issuance of stock, a membership certificate, or similar instrument.
   Taxpayer contends that it meets all of the above requirements.
   APPLICABLE STATUTES AND RULES
   Section 212.02(1), F.S., provides:
   (1) The term "admissions" means and includes the net sum of money after deduction of any federal taxes for admitting
   a person or vehicle or persons to any place of amusement, sport, or recreation or for the privilege of entering or
   staying in any place of amusement, sport, or recreation, including, but not limited to, theaters, outdoor theaters,
   shows, exhibitions, games, races, or any place where charge is made by way of sale of tickets, gate charges, seat
   charges, box charges, season pass charges, cover charges, greens fees, participation fees, entrance fees, or other
   fees or receipts of anything of value measured on an admission or entrance or length of stay or seat box
   accommodations in any place where there is any exhibition, amusement, sport, or recreation, and all dues and fees
   paid to private clubs and membership clubs providing recreational or physical fitness facilities, including, but not
   limited to, golf, tennis, swimming, yachting, boating, athletic, exercise, and fitness facilities, except physical fitness
   facilities owned or operated by any hospital licensed under chapter 395.
   Section 212.04(1), F.S., provides in part:

(1)(a) It is hereby declared to be the legislative intent that every person is exercising a taxable privilege who sells or
receives anything of value by way of admissions....
(b) For the exercise of such privilege, a tax is levied at the rate of 6 percent of sales price, or the actual value received
from such admissions, which 6 percent shall be added to and collected with all such admissions from the purchaser
thereof, and such tax shall be paid for the exercise of the privilege as defined in the preceding paragraph.
Rule 12A-1.005(4), F.A.C., provides in part:
(4) DUES AND INITIATION FEES, EQUITY AND NONEQUITY MEMBERSHIPS, CAPITAL CONTRIBUTIONS AND
ASSESSMENTS, REFUNDABLE DEPOSITS, AND USER FEES.
(a)1. Dues and user fees paid to any organization, including athletic clubs, health spas, civic, fraternal, and
religious clubs, and organizations that provide physical fitness facilities or recreational facilities, such as golf courses,
tennis courts, swimming pools, yachting, boating, athletic, exercise, and fitness facilities, are subject to tax. Dues and
user fees do not include:...
b. Additional charges paid by an equity member when joining an organization that are used by the organization
solely for capital expenditures, capital improvements to the organization's facilities, or for debt servicing such
expenditures and improvements by the organization. Examples of these types of payments and the use of such
amounts include amounts expended for rebuilding and/or replacing the grass on greens or fairways; rebuilding and/or
replacing bunkers; planting of additional trees; resurfacing and/or construction of tennis courts; resurfacing and/or
construction of swimming pools; amounts expended for new furniture, fixtures and equipment; amounts expended for
clubhouse renovations; amounts expended for kitchen equipment and utensils; amounts expended to improve the
irrigation system; amounts expended to acquire assets to enable the club to comply with environmental laws; amounts
expended for acquiring maintenance equipment; amounts expended for new golf carts; and amounts expended for the
installation of equipment on golf carts. Repairs to, or maintenance of, existing capital assets that do not materially add
to the value or appreciably prolong the useful life of a capital asset are not deemed to be capital expenditures or
capital improvements by the organization.
c. Capital assessments levied by an organization against persons who are, or seek to become, members of the
organization....
(b) For purposes of this rule:...
2.b. The phrase "capital assessments" means payments made by members of an organization that by themselves
do not entitle an individual to use the facilities or equipment of an organization and that are used solely for capital
expenditures, for capital improvements to the organization's facilities, or for direct allocation to debt servicing such
expenditures and improvements by the organization.
DISCUSSION
Taxpayer inquires whether the 6% sales tax should be charged on an assessment levied on equity members of

Taxpayer's private club. The assessments consist of $XX for XXX members, $XX for tennis members, and $XX for
social members. The first determination to be made is whether the capital assessment levied on the equity members
would qualify as "dues" or "fees" for purposes of section 212.02(1), F.S., which defines "admissions." If the
assessment were deemed a "due" or "fee" under section 212.02(1), F.S., the assessment would be an admission and
would potentially be subject to the 6% tax levied under section 212.04(1), F.S. However, in the present case,
Taxpayer would not be subject to sales tax on the hurricane assessment because capital assessments are not
deemed "dues" or "user fees" and, therefore, cannot be taxed as an admission.
According to Florida case law, the terms "dues" and "fees" would not include such an assessment. The decision in
Department of Revenue v. John's Island Club, 680 So.2d 475 (Fla. 1st DCA 1996) (appeal from Division of
Administrative Hearings; Case #95-1179RX, 1995), affirmed the order by the administrative hearing officer that the
terms "dues" and "fees" provided by section 212.02(1), F.S., do not include "capital assessments." The order relied on
the decisions in Thompson v. Wyandach Club, 127 N.Y.S. 195, 200 (N.Y. 1911), and Garden City Golf Club v. Corwin
, 57 F.2d 283, 286 (E.D.N.Y. 1932), in deciding what constitutes a "capital assessment." Those decisions in part
related to capital assessments made against the shareholders and owners for the purpose of maintaining the owner's
capital (equity) account balances or to maintain the stock's par price to prevent insolvency. The assessments to pay
hurricane related expenses that are levied against Taxpayer's owners are essentially similar in substance in that the
owner's capital or equity in the club is impacted similarly.
In light of the above cited decisions, Rule 12A-1.005(4), F.A.C., which specifically addresses the extent to which dues
and fees paid to membership clubs are taxed, was amended. Rule 12A-1.005(4)(a)1.c., F.A.C., now provides that
capital assessments levied by an organization against persons who are, or seek to become, members of the
organization are not dues or user fees and, therefore, are not subject to tax as an admission.
Rule 12A-1.005(4)(a)1.b., F.A.C. provides a variety of examples of repairs and renovations that would constitute a
capital contribution or capital assessment. The definition of "capital assessment" in Rule 12A-1.005(4)(b)2.b.,as
provided by the amendments to the Rule, did not contemplate extraordinary expenditures due to an Act of God, such
as a hurricane. The Rule contemplated expenditures normally anticipated, both operating and of a capital nature,
unlike the sort in this instance. The Rule provides examples of capital expenditures; but it is not meant to be an
exhaustive list, and other types of expenditures may be considered of a capital nature. Although a review of the facts
is necessary in each instance, those expenditures that are for Generally Accepted Accounting Procedures required to
be capitalized typically would meet the Rule criteria regarding the use of funds for capital expenditures and not for
operating expenses. To the extent that these expenditures are accounted for as capital expenditures as to the Rule
criteria, the payments are capital assessments for purposes of Rule 12A-1.005(4), F.A.C., and are not subject to the
tax. Consequently, the hurricane assessment would constitute a capital assessment levied on club members and
would not be subject to tax as an admission, because capital assessments are not considered dues or user fees as
per the above referenced portions of the Florida Statutes and the Florida Administrative Code.
CONCLUSION
Taxpayer should not be charging sales tax on the hurricane assessment assessed on its equity owners. In
accordance with Florida case law and Rule 12A-1.005(4)(a)1.c., F.A.C., such an assessment does not constitute a

"due" or "fee" and is therefore not taxable as an admission. Although Rule 12A-1.005(b)2.b., F.A.C., does not
contemplate assessments levied for repairs and renovations following natural disasters, the fact that the hurricane
assessment will be used for capital expenditures and improvements to the facilities in accordance with the examples
of capital expenditures provided in 12A-1.005(4)(a)1.b., F.A.C. would qualify the assessment as a capital assessment.
ISSUE II
The second issue concerns whether the Taxpayer can file a refund claim for sales taxes billed to members and
remitted to the Department of Revenue if it is determined that sales tax should not be levied on such an assessment.
APPLICABLE STATUTES AND RULES
Section 215.26, F.S., provides:
(1) The Chief Financial Officer may refund to the person who paid same, or his or her heirs, personal representatives,
or assigns, any moneys paid into the State Treasury which constitute:
(a) An overpayment of any tax, license, or account due;
(b) A payment where no tax, license, or account is due; and
(c) Any payment made into the State Treasury in error; and if any such payment has been credited to an
appropriation, such appropriation shall at the time of making any such refund, be charged therewith. There are
appropriated from the proper respective funds from time to time such sums as may be necessary for such refunds.
Section 213.756(1), F.S., provides:
(1) Funds collected from a purchaser under the representation that they are taxes provided for under the state
revenue laws are state funds from the moment of collection and are not subject to refund absent proof that such funds
have been refunded previously to the purchaser.
Rule 12A-1.014, F.A.C., provides in part:
(1) When a dealer refunds the sales, lease, or rental price of admissions, tangible personal property, transient rentals,
real property, or services upon which tax has been paid by the purchaser or lessee to the dealer and remitted by the
dealer to the state, the dealer shall also refund the tax paid by the purchaser. If, in lieu of a refund of the sale price,
the dealer credits such amount on the purchaser's account, a corresponding credit for sales tax previously paid by the
customer shall be made....
(3) Whenever a dealer credits a customer with tax on returned merchandise or for tax erroneously collected, the
dealer must refund such tax to the customer before the dealer's claim to the State for credit or refund will be
approved...

(5)(a) Any dealer entitled to a refund of tax paid to the Department of Revenue may seek a refund by filing an
Application for Refund-Sales and Use Tax (Form DR-26S, incorporated by reference in Rule 12-26.008, F.A.C.) with
the Department. Form DR-26S, must meet the requirements of s. 213.255(2) and (3), F.S., and Rule 12-26.003,
F.A.C.

2. Form DR-26S, Application for Refund-Sales and Use Tax, must be filed with the Department for tax paid on or
   after July 1, 1999, within 3 years after the date the tax was paid.
   (b) In lieu of a refund to which the dealer is entitled, the dealer may take a credit on the dealer's sales and use tax
   return within 3 years after the date the tax was paid in accordance with the timing provisions of s. 215.26(2), F.S.
   (6) Any dealer who takes a credit, or applies for a refund, for tax paid to the state is required to keep and preserve
   all information and documentation necessary to substantiate the dealer's entitlement to a refund or credit of tax paid
   until tax imposed under Chapter 212, F.S., may no longer be determined and assessed under s. 95.091, F.S.
   DISCUSSION
   Taxpayer's second inquiry involved whether it would be possible to file a refund claim if sales tax was erroneously
   charged to the equity members as part of the hurricane assessment. According to section 215.26, F.S, the Chief
   Financial Officer may refund any moneys paid to the State Treasury that constitute a payment where no tax is due, as
   in Taxpayer's case. The refund must be applied for within 3 years after the right to the refund has accrued, otherwise
   the right is barred. According to section 213.756, F.S., and Rule 12A-1.014(5), F.A.C., Taxpayer may receive a refund
   or credit for the sales tax collected and remitted to the Department of Revenue from the hurricane assessment. In
   order to be eligible for a refund or credit from the Department, Taxpayer must first refund or credit the accounts of its
   equity members with the amount of sales tax that was collected. Taxpayer may take a credit on its sales and use tax
   return or obtain a refund by filing an Application for Refund-Sales and Use Tax (Form DR-26S). Either method
   requires filing within 3 years after the date the tax was paid. Information on how to obtain Form DR-26S can be found
   in Rule 12-26.008, F.A.C.
   CONCLUSION
   Taxpayer may apply for a refund with the Department or take a credit on its sales and use tax return after Taxpayer
   has refunded or credited the accounts of its equity members with respect to the erroneously charged sales tax.
   This response constitutes a Technical Assistance Advisement under Section 213.22, F.S., which is binding on the
   Department only under the facts and circumstances described in the request for this advice as specified in Section
   213.22, F.S. Our response is predicated on those facts and the specific situation summarized above. You are advised
   that subsequent statutory or administrative rule changes, or judicial interpretations of the statutes or rules, upon which
   this advice is based, may subject similar future transactions to a different treatment than expressed in this response.
   You are further advised that this response, your request and related backup documents are public records under
   Chapter 119, F.S., and are subject to disclosure to the public under the conditions of Section 213.22, F.S. Confidential

information must be deleted before public disclosure. In an effort to protect confidentiality, we request you provide the
undersigned with an edited copy of your request for Technical Assistance Advisement, the backup material and this
response, deleting names, addresses and any other details which might lead to identification of the taxpayer. Your
response should be received by the Department within 15 days of the date of this letter.
Sincerely,
Melissa Soriano
Attorney
Technical Assistance and Dispute Resolution
(850) 922-4839

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