After a club merged into an HOA, were initiation fees, base membership dues, upgraded dues, and capital assessments taxable admissions?

Plain-English summary

Florida separated four types of charges after a private club's planned merger into a property owners' association.

• Initiation fees: exempt because members would receive certificates, voting rights, and dissolution rights establishing an equitable ownership interest.
• Mandatory Social Sports membership fees and annual assessments: exempt if the surviving entity became a licensed homeowners' association, payment remained a condition of property ownership, and the recreational facilities became common areas.
• Optional amounts for Premier Gold, Signature Golf, and Tennis tiers: taxable because the upgrade amounts bought additional recreational privileges and were not mandatory ownership charges.
• Capital assessments and contributions: unresolved. The taxpayer asserted that it would satisfy the separate-accounting and use restrictions, but supplied no particular assessment facts for the Department to verify.

What this means for you

HOAs and private clubs

Separate ownership-based mandatory charges from optional upgrades, and document the equity rights supporting any initiation-fee exemption.

Accountants and association managers

Capital charges require evidence that funds are separately accounted for and not used for operating expenses, dues reductions, or access without later periodic payments.

Common questions

Were initiation fees taxable? No, on the stated equity-ownership facts.

Were upgraded golf and tennis dues taxable? Yes, to the extent they exceeded the mandatory base membership amount.

Did Florida approve the capital-assessment exemption? No final determination was possible from the facts supplied.

Citations and references

• Fla. Stat. Sec. 212.02(1)
• Fla. Stat. Sec. 212.04(1)
• Fla. Admin. Code R. 12A-1.005(4)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 21A-008

Original ruling text

QUESTION(S)/ANSWER(S):

Whether, subsequent to a contemplated Merger between Club and POA, whereby the
surviving entity would be Master Association, initiation fees, membership fees and
assessments, and capital assessments and contributions relating to the use of Club
Facilities would be taxable to members of Master Association.

Post-merger, Florida sales tax will not be due on initiation fees charged to join Master
Association, the merged entity, because all the requirements of Rules 12A1.005(4)(a)1.a. and (b), Fla. Admin. Code, will have been met.

May 25, 2021

XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
Re:

Technical Assistance Advisement 21A-008
Sales and Use Tax – Admissions
Sections 212.02(1) and 212.04(1), Florida Statutes
Rule 12A-1.005(4), Florida Administrative Code
XXXXXXXXXX (the Taxpayer)
FEI#: XXXXXXXX
XXXXXXXXXX (the Taxpayer)
FEI#: XXXXXXXXX

Technical Assistance Advisement
Page #2

Dear XXXXXXXXX,
This is in response to your letter dated December 23, 2020 , requesting this Department’s
issuance of a Technical Assistance Advisement (“TAA”) pursuant to Section 213.22,
Florida Statutes (Fla. Stat.), and Chapter 12-11, Florida Administrative Code (Fla. Admin.
Code), as to the taxability of initiation fees, membership fees and assessments, and
capital assessments and contributions relating to the use of Club Facilities after a
contemplated Merger between XXXXXXXXX (“Club”) and the Property Owners’
Association, (“POA”), whereby the surviving entity would be the POA. Your request has
been carefully examined, and the Department finds it to be in compliance with the
requisite criteria set forth in Chapter 12-11, Fla. Admin. Code.
Please be advised that Technical Assistance Advisements shall have no precedential
value except to the taxpayer who requests the advisement, and then only for the specific
transaction addressed in the Technical Assistance Advisement, unless specifically stated
otherwise in the advisement.
This response to your request constitutes a TAA and is issued to you under the authority
of Section 213.22, Fla. Stat.
Issues
Whether, subsequent to a contemplated Merger between Club and POA, whereby the
surviving entity would be Master Association, initiation fees, membership fees and
assessments, and capital assessments and contributions relating to the use of Club
Facilities would be taxable to members of Master Association.

Facts Provided by Taxpayer
On December 23, 2020, you wrote to the Department, requesting the issuance of a TAA
in regard to the taxability of membership fees, initiation fees, and capital assessments as
they relate to the use of the Club’s Facilities subsequent to a contemplated Merger of the
Club and the POA on October 31, 2021, whereby the POA would be the surviving entity
and would change its name to XXXXXXXXX. (“Master Association”). You attached to
your request the following:
Second Amended and Restated Articles of Incorporation of the Club
at XXXXXXXXX.
Second Amended and Restated By-Laws of the Club at XXXXXXXXX.
Second Amended and Restated Declaration
Restrictions, and Easements for the XXXXXXXXX.

of

Covenants,

Technical Assistance Advisement
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Certificate of Amendment and Certificate of Filing Articles of Merger
and Plan of Merger Between XXXXXXXXX [sic] Association, Inc. (The
Surviving Corporation is renamed XXXXXXXXX.)
Club and POA conduct operations in Community in Palm Beach County. Club is a
member-owned, not-for-profit Florida Corporation, whose 1,646 members are property
owners within Community. Club is governed by Chapter 617, Fla. Stat., and by Club’s
Articles of Incorporation, By-Laws, and Equity Membership Plan. Club currently owns,
operates, and maintains certain recreational facilities within Community, including but not
limited to golf, tennis, swimming, fitness and social facilities, as well as a clubhouse and
restaurants.
POA, as a Master Homeowners’ Association, is governed by Chapter 720, Fla. Stat., and
incorporated as a not-for-profit corporation in accordance with Chapter 617, Fla. Stat.
POA consists of XXXXXXXXX residential homes and lots, which are registered
properties, and XXXXXXXXX vacant lots for proposed residential properties. POA
maintains Community’s private roadways, landscaping and pedestrian areas, entry
features, and signs erected to identify the Property or any portions thereof. POA further
maintains the gate houses, irrigation and sprinkler systems, internal signalization and
signage, areas surrounding canals or lakes, special design or landscaping features, offstreet parking areas, sidewalks, streetlights, walls, fountains, and entrance features.
Currently POA and Club are comprised of substantially the same memberships, except
for six (6) founding members who are not POA members, twelve (12) annual Club
Members who are not POA members (and who will not continue to be Club Members
after Merger), and 196 POA members who are not Club Members (“Resident NonMembers”). “Club Members” are those individuals who have purchased, become liable
for, or otherwise obtained a license to use Club Facilities corresponding with the
individual’s Club Membership category, as evidenced by a Club Membership Certificate
issued by POA. Any person who owns a lot or unit must become a Club Member when
title to real property or land in Community is acquired. See Article XI, Section 4 of the
Second Amended Declaration. The Club’s Equity Membership Description, within Part
C, Section 11, imposes mandatory Club Membership on POA owners who purchased or
contracted to purchase their homes subsequent to November 1, 2007.
Any person who is not a Club Member as of November 1, 2007, is a Resident NonMember and not required to become a Club Member. If any one of the XXXXXXXXX
Resident Non-Members sells their home or vacant lot, the buyer is required to become a
Club Member and must obtain, at a minimum, a Social Sports Equity Club Membership.
No Owner who acquires title to a lot or residence after November 1, 2007, may elect to
be a Non-Club Member. Pursuant to Article IX, Section A. of the Proposed Second
Amended and Restated Articles of Incorporation of the Club at XXXXXXXXX, every
person who is an Owner shall be a POA member.
Subsequent to Merger, Master Association, as the surviving corporation, will own and
control all property previously owned by Club. Master Association will retain an equity

Technical Assistance Advisement
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membership structure post-Merger, and accordingly, after Merger, all Club Members must
be Owners. Subsequent to Merger, Master Association will consist only of Equity
Owners; Non-Equity Club Memberships shall no longer be authorized Club Members, but
will instead become holders of irrevocable easement rights over and across Club
Facilities during normal operating hours. Club Members who are not owners of homes in
Community will not be allowed to renew their Club memberships. Club Members who are
not POA Members will not continue to be Club Members after Merger. Owners will have
a right and easement of enjoyment in and to the Common Areas; however, only Club
Members in good standing will also have access to Club Facilities, according to their
membership category. Club Members shall also be responsible for paying Club
Assessments corresponding with their chosen categories of Club Membership.
Following Merger, Club Memberships will consist of Premier Gold Equity Club
Memberships, Signature Golf Equity Club Memberships, Tennis Equity Club
Memberships, and Social Sports Equity Club Memberships. Each category of Club
Membership is entitled to a specific number of votes upon matters which exclusively
involve the maintenance or improvement of Club Facilities or exclusively involve Club
Assessments. The twenty-nine (29) Non-Equity Club members are not entitled to vote
on Club matters and do not pay Capital Dues or Assessments for club-related activities.
After Merger, and pursuant to the Merger Documents, the cost of owning and operating
the Common Areas other than Club Facilities will be based on an Annual Budget and
shared equally by all Club Members. Post-Merger payments required to be paid to Master
Association for the costs of owning and operating Club Facilities will also be shared
proportionately by all Club Members. Following Merger, Master Association may
require capital assessments for maintenance, repair, and replacement of Club
Facilities, which will require approval, as set forth in the governing documents.
Assessments levied pursuant to the annual budget or special assessment must
be in a member’s proportional share of expenses, as described in the governing
document, which share may be different among classes of membership.
Finally, post-Merger the obligation to pay all assessments, including Club Facilities dues
assessments, membership assessments, capital assessments, and capital reserve
assessments may be secured by a lien on an owner’s property if not paid.
You request guidance on the Post-Merger taxability of initiation fees, membership fees
and assessments, and capital assessments.

Technical Assistance Advisement
Page #5

Law and Discussion
Taxability of Initiation Fees
Section 212.04(1)(a), Fla. Stat., states that it is “. . . the legislative intent that every person
is exercising a taxable privilege who sells or receives anything of value by way of
admissions.” And Section 212.02(1), Fla. Stat., includes as admissions “…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….athletic, exercise, and
fitness facilities….”
Pursuant to the Florida Administrative Code, the term "dues and user fees" does not
include charges for initiation into, or for joining, an organization by persons who obtain an
"equitable ownership interest" in the organization. See Rule 12A-1.005(4)(a)1.a., Fla.
Admin. Code.
Rule 12A-1.005(4)(b), Fla. Admin. Code, defines the term "equitable ownership interest"
as follows:

1. An interest that entitles a person to receive from the organization
   evidence or indicia of such ownership (the ownership interest must
   be reflected by the issuance of stock, a membership certificate, or
   similar instrument evidencing an ownership interest in the
   organization);
2. The right to vote on decisions of the organization that are subject to
   determination by the organization's members or owners; and
3. The right to receive a proportionate share of the organization's assets
   upon its dissolution, unless all such net assets are distributable upon
   dissolution to an organization exempt from federal income taxation or
   to a qualifying common interest realty association.
   Based on the facts and documents you provided with your request, Florida sales tax is
   not due on initiation fees charged to join Master Association, the merged entity, because
   all the requirements of Rules 12A-1.005(4)(a)1.a. and (b), Fla. Admin. Code, have been
   met.
   Taxability of Membership Fees and Assessments
   You explain that because the Social Sports Membership would be the lowest membership
   level of the merged entity, the dues paid for this level of membership would constitute a
   mandatory payment to Master Association as a condition of property ownership and
   would accordingly constitute nontaxable admissions. You further point out that the dues
   paid for the three remaining levels of membership would be subject to sales tax to the

Technical Assistance Advisement
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extent that these payments are in excess of the mandatory fees imposed for a Social
Sports Equity Club Membership.
Rule 12A-1.005(4)(d)3., Fla. Admin. Code, provides an exclusion from the definition of
dues and fees that are subject to tax where the payment does not represent payment for
the right to use the recreational facilities. Examples of such fees include “[m]andatory
dues and fees paid to a condominium association, homeowners' association, or
cooperative association when they are required to be paid as a condition of ownership or
occupancy of real property and the club facilities are part of the common elements or
common areas of the real property.” Id. The definition of "common area" in reference to
homeowners' associations is provided by Section 720.301(2), Fla. Stat., and “…means
all real property within a community, which is owned or leased by an association or
dedicated for use or maintenance by the association or its members ....”
Section 720.301(9), Fla. Stat., defines a "homeowners' association" as "…a Florida
corporation responsible for the operation of a community or a mobile home subdivision in
which the voting membership is made up of parcel owners or their agents, or a
combination thereof, and in which membership is a mandatory condition of parcel
ownership, and which is authorized to impose assessments that, if unpaid, may become
a lien on the parcel."
After the merger is consummated, if Master Association is licensed by the Department of
Business and Professional Regulation (“DBPR”) as a homeowners' association, then
Master Association will qualify as a homeowners' association pursuant to Rule 12A1.005(4)(d)3., Fla. Admin. Code. As provided by Rule 12A-1.005(4)(d)3., Fla. Admin.
Code, mandatory dues and fees paid by members to Association will not be subject to
sales tax as long as the payments are made as a condition of ownership of the residential
property, and the Club Facilities are Master Association common areas of the residential
property owned by the member. In the instant case, in order to become a Club Member,
a mandatory payment must be made to Master Association. Further, Club Facilities are
part of the common areas. However, the exemption provided by the Rule does not apply
to optional amounts paid, such as the additional amounts paid by Premier Gold Equity
Club Members, Signature Golf Equity Club Members, and Tennis Equity Club Members
compared to the amount paid by a Social Sports Equity Club Member. As such, the
mandatory payment that needs to be made to become a Club Member by paying for a
Social Sports Equity Club Member, satisfies the requirements of Rule 12A-1.005(4)(d)3.,
Fla. Admin. Code, and does not constitute a taxable admission, as that term is defined in
Section 212.02(1), Fla. Stat.
As to assessments, again, assuming Master Association is licensed by DBPR as a
homeowners' association at the time of the merger, the annual assessments paid by all
Social Sports Equity Club Members satisfy the criteria established by Rule 12A1.005(4)(d)3., Fla. Admin. Code, because the annual payments by these members are
mandatory, and as a condition of home ownership and use of common areas, including
facilities previously owned by Club. The annual assessment amounts paid by Premier
Gold Equity Club Members, Signature Golf Equity Club Members, and Tennis Equity Club

Technical Assistance Advisement
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Members, in excess of the annual assessment amount paid by Social Sports Equity Club
Members, are optional and therefore subject to sales tax. This is so because the
requirement that payment of the assessment is mandatory is not satisfied in instances
in which members took the option of upgrading their club memberships. Accordingly, the
annual assessments paid by members or guests to use the golf and tennis facilities are
subject to sales tax; they do not constitute mandatory assessments based on ownership
of property in Community.
Taxability of Recurring or Nonrecurring Capital Assessments and Contributions
You explain that with member approval, Master Association may require capital
assessments for maintenance, repair, and replacement of Club Facilities. Such postmerger capital assessments and contributions levied pursuant to the annual budget or
special assessment will be shared proportionately by all Club Members, depending on
their membership class. Your request did not provide any information regarding particular
recurring or nonrecurring capital assessments or capital contributions.
Pursuant to Rule 12A-1.005(4)(a)1.c., Fla. Admin. Code, dues and user fees do not
include “[c]apital assessments levied by an organization against persons who are, or seek
to become, members of the organization. “ Further, pursuant to Rule 12A-1.005(4)(a)1.d.,
Fla. Admin. Code, “[c]apital contributions or additional paid-in capital paid to an
organization by individuals who have an equitable interest in the organization” are also
tax-exempt.
Rule 12A-1.005(4)(a), Fla. Admin. Code, provides:

2. Recurring or nonrecurring capital contributions or additional paid-in
   capital, or capital assessments, paid to an organization in a lump sum
   or by installments, are not subject to tax when such payments are:
   a. Separately accounted for and not recorded in an operating
   revenue account by the organization.
   b. Not paid for the right to use the organization’s recreational,
   physical fitness, or other facilities or equipment without subsequent
   periodic payments;
   c. Not used to effect a decrease in user fees or periodic
   membership dues; and,
   d. Not used to pay for the operating expenses of the organization.
   In your request, you provide no factual support for the exemption set forth above, instead
   concluding that the requirements of Rules 12A-1.005(4)(a)2.a. - d., Fla. Admin. Code,
   will be satisfied upon merger. Sales tax will not apply only if the criteria of Rule 12A1.005(4)(a)2., Fla. Admin. Code, are met. However, absent specific information, the
   Department is unable to determine whether, in the instant case, recurring or nonrecurring
   capital assessments and contributions would be tax-exempt following the merger.

Technical Assistance Advisement
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Concluding Statement
Post-merger, Florida sales tax will not be due on initiation fees charged to join Master
Association, the merged entity, because all the requirements of Rules 12A1.005(4)(a)1.a. and (b), Fla. Admin. Code, will have been met.
In accordance with Rule 12A-1.005(4)(d)3., Fla. Admin. Code, post-merger, the
membership fees and annual assessments paid by Social Sports Equity Club Members
will not be subject to sales tax; they will not constitute mandatory assessments based on
ownership of property in Community. The membership fees and annual assessments
paid by Premier Gold Equity Club Members, Signature Golf Equity Club Members, and
Tennis Equity Club Members, in excess of the membership fees and annual assessment
amounts paid by Social Sports Equity Club Members, are optional and will be subject to
sales tax.
Not enough information has been provided to determine whether, after merger, recurring
or nonrecurring capital contributions or additional paid in capital, or capital assessments
would be tax-exempt pursuant to Rule 12A-1.005(4)(a)2., Fla. Admin. Code.
This response constitutes a Technical Assistance Advisement under Section 213.22, Fla.
Stat., 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, Fla. Stat. 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, Fla. Stat., and are subject to disclosure to the
public under the conditions of Section 213.22, Fla. Stat. 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 10 days of the date of this letter.

Respectfully,

Alan R. Fulton
Alan R. Fulton
Revenue Program Administrator I
Florida Department of Revenue
Technical Assistance and Dispute Resolution

Technical Assistance Advisement
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cc:
XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
XXXXXXXXX

Record ID: #465182