Was a private club's annual inactive-member fee subject to Florida sales tax when it preserved good standing but allowed no facility use?

Plain-English summary

The Florida Department of Revenue concluded that a private club's annual inactive-member fee was not subject to sales tax. The fee represented the member's share of club operating expenses and kept the equity member in good standing while inactive.

Florida taxed private-club dues and fees paid as a condition of, in conjunction with, or for the use of recreational or physical-fitness facilities. Here, an inactive member could not use the club facilities unless the member first converted to equity or social membership, at which point a minimum food charge also applied.

Because the inactive fee itself granted no facility access, it was not a taxable admission. The notice also said the yearly overhead charge would be refunded on a quarterly prorated basis when the equity bond was sold.

What this means for you

Inactive club members

A fee that only maintains good standing and gives no recreational access was nontaxable under these facts.

Private clubs

The actual rights attached to the fee matter. The ruling relied on the club's express prohibition against facility use by inactive members.

Accountants and tax professionals

Separate inactive-status overhead charges from dues or fees that grant, preserve, or accompany facility access. The latter fall within the admissions-tax language cited in the ruling.

Common questions

Q: Could the inactive member use the club after paying the fee?
A: No. Facility use required conversion to equity or social membership and triggered a minimum food charge.

Q: What did the annual fee provide?
A: It kept the member in good standing and represented a share of the club's operating expenses.

Q: Why was the fee not a taxable admission?
A: It was not a condition for, connected with, or payment for use of the recreational facilities.

Citations and references

• Fla. Stat. §§ 212.02(1), 212.04(1)(a), and 213.22
• Fla. Admin. Code r. 12A-1.005(5)(d)1.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 97A-002

Original ruling text

Jan 09, 1997

Re: Technical Assistance Advisement 97A-002
Inactive Member Fee
ss. 212.02(1), 212.04, F.S.
Rule 12A-1.005, F.A.C.
SS# XXX

Dear :

This response is to your petition of September 20, 1996,
requesting the Department's issuance of a Technical Assistance
Advisement (TAA) pursuant to s. 213.22, F.S., and Ch. 12-11,
F.A.C., regarding the referenced matter. Your letter and
supporting documents provided the following pertinent
information.

FACTS PRESENTED

You are an equity member of the XXX ("Club"), and are currently
an "inactive member."

When members are placed in the inactive status they are required
to pay a yearly fee (which represents their portion of the
Club's operating expenses) in order to maintain their good
standing with the Club.

The annual notice of the fee sent to the member carries the
following stipulation:

Inactive members may not use the club facilities unless
they convert to equity/social membership in which event the
minimum food charge is applicable. On sale of Equity Bond,
yearly overhead charge will be refunded on a pro-rata basis
calculated quarterly.

REQUESTED ADVISEMENT

The issue in question is whether the inactive member fee imposed

by Club is subject to sales tax.

RELEVANT AUTHORITIES

Section 212.02(1), F.S., provides in part:

The term "admissions" means and includes the net sum of
money after deduction of any federal taxes for admitting a
person or vehicle or persons to any place of amusement,
sport, or recreation or for the privilege of entering or
staying in any place of amusement, sport, or recreation,
including but not limited to... all dues and fees paid to
private clubs and membership clubs providing recreational
or physical fitness facilities, including but not limited
to golf, tennis....

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.

Rule 12A-1.005(5)(d)1., F.A.C. also provides in pertinent part:

1. ...[T]he following fees paid to private clubs or
   membership clubs as a condition precedent to, or in
   conjunction with, or for the use of the club's recreational
   or physical fitness facilities are subject to tax.

ADVISEMENT

Pursuant to the referenced statutes and rule, dues and fees
charged for the use of recreational facilities are taxable. As
stated in the referenced rule, fees charged "as a condition
precedent to, or in conjunction with, or for the use of the
club's recreational or physical fitness facilities are subject
to tax."

Based on the facts provided, the payment of the inactive member
fee cannot be considered as a charge precedent to, or in
conjunction with, or for the use of the Club's premises since

the inactive member is not allowed to use the facilities without
converting to an equity/social member and paying a minimum food
charge.

The Department agrees with your conclusion that the fee is not
taxable since the fee merely allows the member to remain in good
standing with the club, and does not allow the inactive member
use of the recreational facilities.

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,

Edith Sapp
Tax Law Specialist
Tax Policy and Dispute Resolution

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