Were dining-club dues and refundable initiation deposits taxable when membership included reciprocal access to a country club's golf course?

Subject

Initiation Fees

Plain-English summary

The dining club's monthly dues were taxable while its reciprocal agreement gave members access to the country club's golf course. Although the dining club owned no recreational facilities, the Department said membership made those facilities available and therefore provided recreation within the private-club admissions statute.

The result lasted as long as the agreement or a successor with equivalent terms remained in force. The Department did not classify the dues as restaurant cover charges or dining-room minimums; they were taxable because of the recreational access.

The refundable initiation deposits were not taxable. The club was obligated to repay them, recorded them as liabilities, and evidenced each repayment obligation with a written promissory note.

What this means for you

A club can provide taxable recreational access through another organization even without owning the facility. Refundable-deposit treatment depended on the repayment obligation, accounting, and written documentation.

Common questions

Q: Did separate greens and cart fees make the dues nontaxable? No.

Q: Were the dues taxed as restaurant minimum charges? No. Recreational access was the basis.

Q: When could a deposit become taxable? The cited rule said a portion became taxable when it ceased to be a recorded liability, including when applied to a taxable club obligation.

Citations and references

• Fla. Stat. §§ 212.04(1), 212.02(1) — admissions and private-club dues
• Fla. Admin. Code r. 12A-1.005(5)(d)1.c, (5)(d)2.e — club fees and refundable deposits
• Fla. Admin. Code r. 12A-1.011(14) — restaurant charges
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93A-020

Original ruling text

Apr 06, 1993

Re: Technical Assistance Advisement (TAA) 93A-020
Sales Tax - Initiation Fees and Dues Paid to a Members Only
Dining Facility Which Has Entered Into a Reciprocal Mutual
Access Agreement With a Golf and Country Club
Section 212.04, F.S.
Rule 12A-1.005, F.A.C.
XXX (Herein "Dining Club")
XXX (Herein "Country Club")

Dear :

This reply is to your October 28, 1992, petition for the
Department's issuance of a Technical Assistance Advisement
("TAA") pursuant to s. 213.22, F.S., concerning the captioned
matter and parties. Your petition has been carefully examined
and the Department finds it to be in compliance with the
requisite criteria set forth in Chapter 12-11, F.A.C.
Therefore, the Department is herewith granting your request for
the issuance of a TAA and the ensuing discourse shall embody
said ruling.

DISCUSSION OF FACTS

We understand the facts of the instant case as imparted by your
petition and further manifested by the supporting documents
thereto to be as follows:

FROM YOUR PETITION

"[1.] Members advance a refundable initiation deposit to the
[Dining Club] upon initiation. The [Dining Club] is obligated
to repay the deposit and the deposit is reflected as a liability
in the books and records of the [Dining Club]. The obligation to
repay the refundable deposit is evidenced by a Written
Promissory Note.

"[2.] The [Dining Club] charges each member monthly dues. The

monthly dues are required to be paid whether the member uses the
[Dining Club] in any particular month or not.

"[3.] The monthly dues are not a minimum charge. Each member
must pay for the cost of all meals. No portion of the monthly
dues is offset or used as a credit against food purchases.

"[4.] Sales tax is collected and remitted on all dining room
purchases.

"[5.] The [Dining Club] is solely a dining facility. The
[Dining Club] does not have any recreational or physical fitness
facilities.

"[6.] The [Dining Club] has entered into a reciprocal agreement
with [the Country Club] which allows the [Dining Club] members
the right to use the Country Club's golf course. Members of the
Country Club are in return allowed to use the [Dining Club's]
dining room because the Country Club has not yet constructed its
club house and dining facility. The [Dining Club's] members are
responsible for paying all greens fees, cart fees, etc. to the
Country Club for use of the golf course. The Country Club's
members pay for the cost of all meals they purchase at the
[Dining Club].

"[7.] A true copy of the reciprocity agreement is attached as
Exhibit `A.'

"[8.] The reciprocal use agreement will expire on October 31,
1994.

"[9.] The [Dining Club] has no ownership rights to any of the
Country Club's assets, nor does the Country Club have any
ownership rights to the [Dining Club's] assets. The members of
each club simply use the other club under a guest relationship.

"[10.] The [Dining Club] and the Country Club are not related
entities. There are no common ownership interests.

"[11.] The [Dining Club's] accountant requested a Technical
Assistance Advisement on August 14, 1991 as to whether or not

the affiliation caused by the reciprocal use agreement (Exhibit
A') would cause the [Dining Club) to start assessing tax on its members' monthly dues because the Country Club does have recreational and/or athletic facilities. A copy of the accountant's request is attached as ExhibitB.'

"[12.] The Department of Revenue declined to issue a Technical
Assistance Advisement on the inquiry. The Department of Revenue
did, however, issue a Letter of Technical Assistance, which is
attached as Exhibit `C.' The letter of technical Assistance
however, did not address the specific inquiry of whether the
above-described affiliation causes the [Dining Club's]
membership dues to be taxable. Instead, the Letter of Technical
assistance referred to Rule 12A-1.011(14), F.A.C., which states:

`The fee charged (cover charge, service charge, or any minimum
charge) made by a restaurant, tavern, night club, or other like
places of business is taxable.'"

FROM THE RECIPROCITY AGREEMENT

The intent of the Reciprocity Agreement ("Agreement") is
describe as follows:

"Intent: To provide Full, Corporate and Junior members of the
[Dining Club] and Equity golf member[s] and those Annual
Non-Equity members... of [the Country Club] with mutual access
to one another's clubs subject to the conditions set forth
herein. It is further the intent of the parties to be certain
that members of each club are made to feel as though they are
members of the other club.

"Conditions: [Dining Club]

"1. [Dining Club] members will be treated as Sports
members of [the Country Club]...." (Emphasis Supplied)

REQUESTED ADVISEMENT

You endeavor to evoke the advice of the Department on
substantially the following questions:

1. Are the monthly membership dues charged by the Dining Club
that does not itself own and provide recreational or physical
fitness facilities subject to sales tax by reason of the
reciprocity agreement identified as Exhibit `A' existing by and
between the Dining Club and the Country Club or for any other
reason?

2. Are the refundable deposits advanced to the Dining Club
   subject to sales tax considering the facts that the Dining Club
   is obligated to repay the deposits, that the deposits are
   reflected as a liability in the Dining Club's books and records,
   and that each deposit is evidenced by a written promissory note?

DEPARTMENT'S FINDINGS

RESPONSE, QUESTION 1:

LAW AND ANALYSIS

The ensuing passage, quoted from the Florida Statutes, is
pertinent to resolution of Question 1:

Section 212.04(1), F.S., 1992 Supplement: "(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...."

For the purpose of administering the above levy on admissions,
s. 212.02(1), F.S., defines the term "admissions" in part to
mean and include:

"... 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...."
(Emphasis Supplied)
Resolution of this question turns on the intent of the Florida
Legislature in its use of the term "providing" in the above
statute. Gleaning the intent of the Legislature from its choice
of words necessitates employment of the ensuing fundamental
precepts of statutory construction established by the Florida
Supreme Court:

It is a fundamental principle of statutory construction
that legislative intent and policy concerns must control
our construction of statutes and that the determination as
to the intent of the legislature is based upon the plain
and ordinary meaning of the language in the statute itself
(Holly v. Auld, 450 So.2d 217 (Fla.1984)).

In the matter of St. Petersburg Bank & Trust Co. v. Hamm,
414 So.2d 1071 (Fla.1982), the Florida Supreme Court held
that while legislative intent controls construction of
statutes, that intent is determined primarily from language
of the statute; plain meaning of statutory language is
first consideration.

In the matter of S.R.G. Corp. v. Department of Revenue, 365
So.2d 687 (Fla.1978), the Florida Supreme Court held that
legislative intent must be determined primarily from the
language of statute, as the legislature must be assumed to
know the meaning of the words and to have expressed its
intent by the use of the words found in the statute.

Inasmuch as the Supreme Court has established that the intent of
the Legislature is discerned from the plain and ordinary meaning
of the words it has adopted, we, thus, consult The American
Heritage Dictionary, Second College Edition, as a widely used
and recognized source of the common meaning of words. The
definition of the word "provide" found in this source is
representative of the plain and ordinary meaning of such word
and reads as follows:

"provide... 1. To furnish; supply. 2. To make ready;
prepare. 3. To make available; afford." (Emphasis Supplied)

The Department, upon scrutiny of the Agreement, has determined
that said Agreement in substance and effect operates to grant
members of the Dining Club rights and privileges in terms of
access, use, and enjoyment of the Country Club's facilities
substantially paralleling those of a "sports member" of the
Country Club. Moreover, the Dining Club members would not be
afforded or enjoy such rights or privileges apart from their
membership in the Dining Club without themselves becoming
members of the Country Club. Thus, relative to the plain and
ordinary meaning of the term "providing", the Department finds
that the substance and effect of the Agreement results in the
Dining Club making available recreation facilities to its
membership and that there is no debate that the access to
recreational facilities arising under the agreement clearly
comes within the scope of the statutory phrase "providing
recreational or physical fitness facilities" as utilized by
Legislature in s. 212.02(1), F.S.
FINDING

In view of the foregoing statutory provisions and analysis
thereof, the Department hereby enters its finding that the above
statute does contemplate and embrace the imposition of sales tax
on dues paid to the Dining Club in light of the existence of the
Agreement by and between the Dining Club and the Country Club.
Accordingly, the Dining Club is obliged to collect and remit tax
on its monthly membership dues for as long as the Agreement or
successor agreements of equivalent terms remain in force.

As an aside, the Department does not consider the monthly
membership dues, as in the nature of a cover or service charge
paid in connection with the use of the restaurant. No part of
the monthly membership dues represent a taxable fee within the
purview of Rule 12A-1.011(14), F.A.C., which states:

"The fee charged (the cover charge, service charge or any
minimum charge) made by a restaurant, tavern, night club or
other like places of business is taxable."

This conclusion is supported by the provision relating to
minimum dinning room fees contained in Rule 12A-1.005(5)(d)1.c.,

F.A.C., which states:

Rule 12A-1.005(5)(d), F.A.C.: "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 tax....
"c. Dining room minimum fees paid to equity or non equity
clubs to the extent that sales tax is not paid on the
dining room charges...."

This rule provision confines taxation of dining room minimum
fees to those charged by membership clubs with recreational or
physical fitness facilities and only to the extent that sales
tax is not paid on the dining room charges. There would be no
purpose to this limitation on the taxation of dining room
minimum fees if all such fees were taxable as a "cover charge,
service charge, or any minimum charge made by a restaurant,
tavern, night club or other like places of business...." and,
thus, we are compelled to conclude that the monthly membership
dues are not susceptible to tax under Rule 12A-1.011(14), F.A.C.
As to whether the Dining Club's membership dues constitute a
"dining room minimum fee" relative to Rule 12A-1.005(5)(d)1.c.,
F.A.C., was not specifically raised in your petition, but does
come within the general scope of whether the Dining Club's
membership dues are subject to sales tax as a form of admission.
We answer by saying that a pattern of rulings by the Department
has evolved which come down on the side of the membership fees
being distinguishable from a "dining room minimum fee". Hence,
we find that the Dining Club's monthly memberships do not
represent a "dining room minimum fee" and, accordingly, are not
taxable as such. Nevertheless, this becomes moot as the Dining
Club's monthly membership dues are taxable for the reasons
earlier denoted, above.

RESPONSE, QUESTION 2:

LAW AND ANALYSIS

The ensuing passage, quoted from the Florida Administrative
Code, is pertinent to resolution of Question 2:

Rule 12A-1.005(5)(d)2., F.A.C.: "The following payments
made to private clubs or membership clubs are not `fees'
which are subject to tax on admissions....
"e. Refundable deposits advanced to an organization when
the organization is obligated to repay the deposit and the
deposit is reflected as a liability in the organization's
books and records. The organization's obligation to repay
refundable deposits must be evidenced by a promissory note,
a bond, or other written documentation. At the time the
deposit or any portion of it is not shown as a liability in
the organization's books and records, such as a portion of
the deposit being applied against a member's taxable
obligation to the club, that portion is subject to tax."
(Emphasis Supplied)

In construing the exemption described in the foregoing rule, the
Department must adhere to and be guided by the long-standing and
fundamental precept of statutory construction, established by
the Florida Supreme Court, which mandates that exemptions from
or exceptions to taxing statutes must be strictly construed
against the taxpayer. See Asphalt Pavers v. Dept. of Revenue,
584 So.2d 57 (Fla. 1st DCA 1991); Dade Cty. Taxing Auth. v.
Cedars of Lebanon, 355 So.2d 1205 (Fla. 1978), reh. den. April
5, 1978; Williams v. Jones, 326 So.2d 425 (Fla. 1975), reh. den.
March 4, 1976; Straughn v. Camp, 293 So.2d 689 (Fla. 1974);
United States Gypsum Company v. Green, 110 So.2d 409 (Fla.
1959).

Strict analysis of the above quoted rule passage manifests the
presence of a three prong test to be employed in ascertaining
whether a refundable deposit constitutes a form of taxable
admission. These prongs are, namely: (i) the organization must
be obligated to repay the deposit; (ii) the deposit must be
reflected on the organization's books as a liability; and (iii)
the organization's obligation to repay the deposit must be
evidenced by a written promissory note, bond, or other written
documentation. All three prongs comprising the test as described
in Rule 12A-1.005(5)(d)2.e., F.A.C., above, are present in the
facts under advisement herein.

FINDING

Since a strict analysis of the facts of this case support that
the refundable deposits paid to the Dining Club by its members
specifically satisfy all criteria set forth in Rule
12A-1.005(5)(d)2.e., F.A.C., above, requisite to constituting a
nontaxable payment, the Department finds that said refundable
deposits are not subject to sales tax.

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 confidential
information, we request you notify the undersigned in writing
within 15 days of any deletions you wish made to the request or
this response.

Sincerely,

Daniel M. Wagner, Jr.
Tax Law Specialist

DW/dw
Con. #5317