When did a club have to report sales tax when members could pay annual dues in one payment or two installments?

Subject

Membership Dues

Plain-English summary

The club should report sales tax when it collected each membership-dues payment, not when it sent a December statement for the next year. A member paying half in January created a taxable admission then, with tax reported on the January return due by February 20. The remaining payment made in June was taxed when collected.

The Department suggested the club stop creating the full December accounts receivable because no invoice had been issued and the club treated the two payments as separate sales. It also said tax refunded to members could be credited on return line 6, but not above tax collected on line 5.

What this means for you

The ruling aligned admissions-tax reporting with actual collection under this club's payment arrangement. Prepaying tax on the full annual statement and then unwinding it with credits created avoidable reporting problems.

Common questions

Q: Was tax due when the year-ahead statement was mailed? No, under the described process.

Q: When was the first half reported? On the return for the month the January payment was collected.

Q: Could the club take a credit for tax refunded to members? Yes, subject to the stated line-6 limit.

Citations and references

• Fla. Stat. §§ 212.04(1), (4), 212.15(1) — admissions and remittance
• Fla. Admin. Code r. 12A-1.054 — transaction timing
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93A-001

Original ruling text

Title:

Membership Dues

Jan 05, 1993

RE: TAA 93A-001
Sales Tax
Remitting sales tax on dues when semi-annual payments are
made
Sections 212.04(1)(a)(b), (4), and 212.15(1) F.S.
Rule 12A-1.054, F.A.c.

Dear :

Thank you for your letter dated November 18, 1992, which
requests the issuance of a Technical Assistance Advisement (TAA)
regarding the correct way to report sales tax on membership dues
when members are granted the option of paying their dues in a
single lump sum payment or in two semi-annual payments. As
stated during our telephone conversation on Thursday, December
10, 1992, a statement dated December 31, 19xx, is sent to each
member notifying him of the next year's annual dues. Your club
allows members the option of either paying the dues in one lump
sum payment or paying half the dues when the December 31, 19xx,
statement is received and the remaining balance when the May 31,
19xx, statement is received.

The following accounting entries are made:

1) Entry made when December 31, 19xx, statement is issued
for the next year's dues:

Accounts Receivable $x,xxx

Deferred Sales

$x,xxx

Note: $x,xxx is the amount of the annual dues

2) Entries made when member only pays half of the annual

dues after receiving the December 31, 19xx, statement:

a) Cash $x,xxx
Accounts Receivable $x,xxx

a) To record receipt of payment (half of the annual dues)

b) Deferred Sales $x,xxx
Accounts Receivable $x,xxx

b) Entry made to write-off the remaining portion of the
annual dues from the club's books

3) Entry made when May 31, 19xx, statement is issued to
the member for the remaining balance

Accounts Receivable $x,xxx
Deferred Sale

$x,xxx

The club does not wish to carry the members' remaining
balance on its books as a receivable because members would be
subjected to a finance charge. Therefore, the partial payments
are recognized as two separate sales transactions and are not
deferred sales.

Accompanying your request are copies of a statement dated
December 31, 1991, a statement dated January 31, 1992, and a
statement dated May 31, 1992, for one of the club's members.

The club is encountering problems with its current method
of remitting sales tax. In essence, the club remits the total
sales tax due for its upcoming year's dues on its December
return. (An invoice has not been issued to the members, only a
statement showing the next year's annual dues). When the club
receives partial payments from its members it writes-off the
remaining balance from the members' accounts. The sales tax
payable account is also reduced accordingly. The club then
takes a credit for the sales tax credited to its members'
accounts on its succeeding tax returns until the credit balance
is reduced to zero. When members owing additional dues are
issued their May 31, 19xx, statement the club then remits the

additional sales tax due.

Your letter provides that a representative of this
department instructed you that your club was not allowed to take
sales tax credits on Line 6 of the tax return. On Thursday,
December 10, 1992, a supervisor in this Department's Refund
Section was contacted regarding the issues raised in your
letter. She advised me to inform you that you may take a credit
for tax refunded to members on Line 6 of your tax return;
however, the amount on this line may not exceed the tax
collected shown on line 5 of your tax return.

The following statutory cites are pertinent to the issues
raised in your letter:

Section 212.04(1)(a), F.S., provides:

"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."

Section 212.04(1)(b), F.S., further provides:

"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..." (Emphasis Supplied)

Section 212.04(4), F.S., provides in part:

"... The failure of any person to pay such taxes before the
21st day of the succeeding month after the taxes are
collected shall render such person liable to the same
penalties that are hereafter imposed upon such person for
being delinquent in the payment of taxes imposed upon the
sales of tangible personal property..." (Emphasis Supplied)

As provided in Section 212.15(1), F.S., taxes become state
funds at the moment of collection. To properly remit sales tax
collected on taxable dues it has been suggested that your club

not create an accounts receivable on its books in the month of
December since admissions are taxable at the point of sale.
Your club should wait until the members pay their dues in
January and recognize the sale of the taxable admission at that
time (point of sale). Sales tax would then be required to be
remitted on your January return (due on or before February 20th)
based upon the tax collected. Members paying the remaining
portion of their dues in June would be required to pay the
applicable tax at that time.

This response constitutes a Technical Assistance Advisement
under s. 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 s. 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 and your request
are public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of s. 213.22, F.S.
Your name, address, and any other details which might lead to
identification of the taxpayer must be deleted by the Department
before disclosure. In an effort to protect the confidentiality
of such information, we request you notify the undersigned in
writing within 15 days of any deletions you wish made to the
request or the response.

Sincerely,

Betsy Turner
Technical Assistant
Statutory Compliance Section

BT/