Were post-July 1991 installments taxable when non-equity country-club initiation fees had been sold before July 1, 1991?

Subject

Initiation Fees/Installment Payments

Plain-English summary

The club should not have charged sales tax on installments for non-equity initiation fees sold before July 1, 1991. The Department treated the sale as occurring when the membership transaction was made, even though payments continued afterward.

The club had to refund the tax to affected members before seeking relief from the State. It could then file a refund application or take a credit on later returns within 36 months after it had remitted the tax.

What this means for you

The ruling applied the effective date to the original sale, not each later payment. It did not exempt initiation fees sold on or after July 1, 1991.

Common questions

Q: Did later installment dates make the old sale taxable? No.

Q: Who had to refund the members? The club.

Q: What was the club's deadline for a state refund or credit? Within 36 months after remitting the tax.

Citations and references

• Fla. Stat. § 212.04(3) — admissions tax
• § 23, ch. 91-112, Laws of Fla. — July 1, 1991 effective date
• Fla. Admin. Code rr. 12A-1.005(5)(b), 12A-1.054(1), 12A-1.014(7) — fee timing and refunds
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93A-023

Original ruling text

Title:

Initiation Fees/Installment Payments

Apr 07, 1993

RE: TAA 93A-023
Sales Tax; Sale of memberships in a non-equity country club
prior to July 1, 1991, with installment payments being made
after July 1, 1991
Section 212.04(3), F.S.
Rules 12A-1.005, 12A-1.014, 12A-1.054(1), F.A.C.

Dear :

This is in response to your letter dated March 16, 1993,
which requests the issuance of a Technical Assistant Advisement
on the above referenced issue. Accompanying your request is a
copy of my original response (non-binding letter of technical
advice) which was issued to XXX [hereinafter "Club"] on February
8, 1993, and a copy of your original request dated January 5,
1993. A copy of the notice which was distributed by this
department to private clubs and membership clubs is also
included with your request.

Since July 1, 1991, the "Club" has been charging sales tax
on initiation fees which were purchased by members prior to July
1, 1991, and paid on an installment basis. Earlier
correspondence with XXX [hereinafter "Member"], a member of the
"Club", provided that XXX signed a promissory note on October 1,
1989, with the "Club" for a principal amount totalling $3,750.00
which represented the balance due on his initiation fee to gain
membership to the "Club".

"Member" was billed sales tax in the amount of $87.22 by
the "Club" when his second annual installment ($1,246.00) became
due on November 1, 1991. "Member" stated that sales tax was
also added to his final installment of $1,371.00 which was due
on November 1, 1992.

As provided in my earlier correspondence, pursuant to

Section 23, Chapter 91-112, L.O.F., effective July 1, 1991,
initiation fees paid to private clubs providing recreational or
physical fitness facilities are taxable. Dues paid to such
clubs were taxable prior to July 1, 1991, and continue to be
subject to sales tax.

Rule 12A-1.005(5)(b), F.A.C., provides:

"Through June 30, 1991, initiation or membership fees are
not taxable as charges for admissions when paid exclusively
for membership in the organization and when they do not
entitle the payor to use the organization's recreational or
physical fitness facilities or equipment without subsequent
payments, such as dues or user fees."
Regarding sales tax on admissions, Section 212.04(3), F.S.,
provides:

"Such taxes shall be paid and remitted at the
same time and in the same manner as provided for
remitting taxes on sales of tangible personal
property, as hereinafter provided."

Rule 12A-1.054(1), F.A.C., further provides:

"The full amount of the tax on cash sales, credit sales,
installment sales or sales made on any kind of deferred
payment plan shall be due at the moment of the
transaction."

The transaction in question occurred on October 1, 1989,
and is therefore exempt from sales tax. The department's
position on this issue was addressed in the January 1992 issue
of Florida CPA Today. The question and its response were as
follows:

"29. Memberships have been sold prior to July 1 with
installment payments being received with interest on or
after July 1, 1991. Is the installment collection subject
to sales tax?
"a. What about on the interest collected?

[Response]

"If the sale of the membership took place prior to July 1,
1991, no tax is due, even though installment payments are
made after July 1, 1991. If the sale of the membership
took place on or after July 1, 1991, and the interest was
separately stated from the sale of the membership, tax
would be due only on the sale of the membership, assuming
that the membership is not an equitable membership."

Based upon the above cited regulatory and statutory
authority, the "Club" was in error when it charged several
members sales tax on their membership or initiation fees
purchased prior to July 1, 1991, which were paid on an
installment basis. As provided in Rule 12A-1.014(7), F.A.C.,
the members are required to secure a refund of the taxes paid in
error from the "Club" before the "Club's" claim to the State for
credit or refund will be approved. The "Club" may either file a
refund application (Form DR-26) with this department within 36
months from the date of payment of the tax to the state (i.e.,
if the "Club" originally remitted the tax on its November return
filed on December 20, 1991 it must file the refund application
within 36 months of December 20, 1991) or the "Club" may take
credit for the tax it has refunded to its members on subsequent
sales tax returns it files within the 36 months following the
date on which the "Club" remitted the tax to the state.

A copy of Form DR-26, Application for Refund, has been
enclosed.
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/
Enclosure