Was a private country club's special member assessment to prepay mortgage debt subject to Florida sales tax?

Subject

Special Assessments

Plain-English summary

The club's special assessment was subject to Florida sales tax. The private country club proposed charging each member $5,000 to prepay debt secured by first and second mortgages on club property.

The Department applied the rule taxing periodic assessments required from equity or nonequity club members for capital improvements or other operating costs. Using the money to pay debt and real-estate obligations did not take the assessment outside the tax.

What this means for you

Calling a charge a special assessment or capital payment did not control. The ruling focused on the required payment by members in conjunction with use of the club's golf, tennis, swimming, clubhouse, and other recreational facilities.

Common questions

Q: Was the assessment taxable even though it paid mortgage debt? Yes.

Q: How much was assessed? The submitted proposal assessed $5,000 against each member.

Q: Did the ruling address voluntary member contributions? No. It addressed a required special assessment.

Citations and references

• Fla. Admin. Code r. 12A-1.005(5) — club dues, assessments, and fees
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93A-013

Original ruling text

Title:

Special Assessments

Mar 02, 1993

RE: TAA 93A-013
Sales Tax on Membership Assessment
Rule 12A-1.005, F.A.C.

Dear :

Your letter of January 15, 1993, requested a Technical
Assistance Advisement on the application of the sales tax to the
above referenced matter. This response to your request
constitutes a Technical Assistance Advisement under Chapter
12-11, Florida Administrative Code (F.A.C.), and is issued to
you under the authority of s. 213.22, Florida Statutes (F.S.).

Your letter requests "whether the Club must remit sales tax
for receipt of payments from club members which are used to
amortize debt and pay real estate taxes of the Club."

FACTS

XXX (hereinafter, the Club) provides social, fraternal and
recreational facilities for its members. The club owns real
property consisting of a golf course, tennis courts, swimming
pool and clubhouse.

The Club executed a Note and First Mortgage in favor of
XXX; and the Club also executed and delivered a Note and Second
Mortgage in favor of XXX. The Club wishes to prepay a portion
of its indebtedness due under the First and Second Mortgages,
and in connection therewith has proposed to its membership a
special assessment in order to prepay the balance of the sums
due. Pursuant to this proposal, the amount assessed against each
member is $5,000.

RELEVANT PROVISIONS

Rule 12A-1.005, F.A.C., recently amended in December of
1991, provides as follows:

"(5) DUES AND INITIATION FEES, EQUITY AND NONEQUITY
MEMBERSHIPS, CAPITAL CONTRIBUTIONS AND ASSESSMENTS,
REFUNDABLE AND NONREFUNDABLE DEPOSITS, AND USER FEES.
"(a)1. Dues paid to any organization, including athletic
clubs, health spas, civic fraternal, and religious clubs,
and organizations which provide physical fitness facilities
or recreational facilities such as golf courses, tennis
courts, swimming pools, yachting, boating, athletic
exercise, and fitness facilities, are taxable,...
"(d)1. Effective July 1, 1991, the following fees paid to
private clubs or membership clubs as a condition precedent
to, in conjunction with, or for the use of the club's
recreational or physical fitness facilities are subject to
tax.
"a. Initiation fees when paid to equity or nonequity
private clubs and membership clubs...
"b. Any periodic assessments (additional paid in capital)
required to be paid by members of any equity or non equity
club for capital improvements or other operating costs,..."

DETERMINATION

Under the above provisions, and upon review of documents
submitted, it is the Department's position that the "special
assessment" collected from the members of the Country Club XXX
for the purposes of paying its debts, is subject to tax.

As provided in the above quoted provisions of amended Rule
12A-1.005, F.A.C., any periodic assessments required to be paid
by the members of private clubs, in conjunction with the use of
the club's facilities, are taxable.

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
based 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. Please note that we already have in
file some documents evincing some desired deletions.

Sincerely,

Nydia Men‚ndez
Technical Assistant

NM/pb
Con. #6660