Were installments paid after July 1, 1991 taxable when a non-equity country-club membership was sold in 1989?

Subject

Membership Fees

Plain-English summary

The country club should not have charged sales tax on the member's 1991 and 1992 installments. The Department treated the membership transaction as occurring when the member signed the promissory note on October 1, 1989—not when the later installments were paid.

The cited tax treatment for covered private-club initiation fees took effect July 1, 1991. Because this non-equity membership had already been sold, the later installments did not become taxable merely because payment continued after that date.

The member reported $87.22 of tax charged in 1991 and $95.47 in 1992. The Department said the club collected that tax in error, but the member had to obtain the refund from the club; the club could then pursue its own credit or refund from the State.

What this means for you

This ruling applied transaction-date treatment to a pre-effective-date installment sale. It did not say that every club membership or installment payment is exempt. The date the membership was sold, whether it was an equity or non-equity membership, and how any interest was stated all mattered.

Common questions

Q: Did paying installments after July 1, 1991 make this membership taxable? No. The sale occurred in 1989.

Q: Was the club's tax collection correct? No. The Department expressly said the club collected the tax in error.

Q: Could the member claim the refund directly from the Department? No. The ruling required the member to secure the refund from the club.

Citations and references

• Fla. Stat. § 212.04(3) — tax on admissions
• Fla. Admin. Code r. 12A-1.054(1) — timing for cash, credit, and installment transactions
• Fla. Admin. Code r. 12A-1.014(7) — customer refund from the dealer
• § 23, ch. 91-112, Laws of Fla. — cited July 1, 1991 effective date
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93A-032

Original ruling text

Title:

Membership Fees

May 17, 1993

RE: TAA 93A-032
Sales Tax
Membership fees paid to a country club on installment
basis, sale of membership occurred prior to July 1, 1991
Section 212.04(3), F.S.
Rule 12A-1.014, F.A.C.

Dear :

This is in response to your request dated April 17, 1993,
for the issuance of a Technical Assistance Advisement on the
above referenced issue. You are in receipt of a non-binding
Letter of Technical Advice issued by this writer on December 15,
1992, and a non-binding response issued by Ms. Rose Stanley,
Taxpayer Assistance Specialist, on November 20, 1991, which
provide that the non-equity membership purchased on October 1,
1989, from XXX [hereinafter "Club"] is exempt from sales tax.
To date, you indicate that the "Club" has refused to refund the
tax collected in error. Your letter provides in part:

"... My original request of October 28th 1991 has still not
been resolved. On October the 1st 1989 I signed a contract with
the [Club]. The principal sum of XX (sic). I contend that I
should not have to pay state tax on this contract as it was in
force prior to July 1, 1991 at which time Section 23, Chapter
91-112 L.O.F. was effective.

"I was charged sales tax of $87.22 on 11/1/91 and $95.47 on
11/1/92 for a total of $183.19. I am requesting that the State
reimburse me that money or take steps to order [Club] to
reimburse me and also supply the proper paperwork for them to
obtain their reimbursement...."

As stated in your letter, many other members are involved
in a situation similar to yours. It is your assumption that

should the "Club" fail to refund the tax collected in error to
its members a class action suit will follow.

During our telephone conversation on Wednesday, March 17,
1993, you disclosed that the "Club" acknowledged their receipt
of a non-binding opinion from this writer on the issue in
question; however, the "Club" has failed to refund the tax
collected in error to you.

As provided in your earlier correspondence, a promissory
note was created on October 1, 1989, between yourself and the
"Club" in which the principal sum of XX was financed to be paid
in three annual installments. The first payment was due by
November 1, 1990. The final installment was due by November 1,
1992. As stated in my response to you dated December 15, 1992,
initiation fees paid to private clubs providing recreational or
physical fitness facilities became taxable effective July 1,
1991, pursuant to section 23, Chapter 91-112, L.O.F.

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."

As evidenced by the promissory note, 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 sales tax on
your installment payments made after July 1, 1991, for a nonequitable membership which was purchased on October 1, 1989. In
accordance with Rule 12A-1.014(7), F.A.C., you are required to
secure a refund of the tax paid in error from the "Club" before
the "Club's" claim to the State for credit or refund will be
approved.

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/
Con. #8404