Were mandatory social-membership dues paid to a homeowners association for common recreational facilities subject to Florida sales tax?

Plain-English summary

The mandatory social-membership dues were exempt from Florida sales tax. Every homeowner had to maintain social membership as a condition of owning a dwelling unit, could not avoid the charge by declining to use the facilities, and faced a continuing property lien and possible foreclosure for nonpayment.

The association owned and operated the common areas, including restaurant facilities, golf courses, tennis courts, and related amenities. The social dues covered common-area losses and overhead rather than an optional admission purchased separately by a member.

Optional charges were different. Golf and tennis memberships, food and beverage minimums, and other separately billed member purchases remained taxable.

What this means for you

The exemption required all four elements identified by the Department: mandatory payment, payment to a homeowners association, payment as a condition of ownership or occupancy, and club facilities that are common elements or common areas of the real property.

A charge does not become exempt merely because an HOA collects it. Voluntary upgrades and separately purchased benefits remain subject to the ordinary admissions or sales-tax rules.

Common questions

Q: Why were the social dues mandatory? The declaration required payment regardless of use, made membership a condition of ownership, and allowed a lien and foreclosure for nonpayment.

Q: Did the facilities qualify as common areas? Yes. They had been transferred to the association and were maintained for association members.

Q: Were optional golf and tennis memberships exempt too? No. Their optional nature made them taxable.

Q: What about food, beverages, or minimum charges? The ruling said optional separately billed charges, including food and beverage minimums, were taxable.

Citations and references

• Fla. Stat. § 212.02(1) — admissions include private-club recreational dues and fees
• Fla. Stat. § 212.04(1) — tax on admissions
• Fla. Admin. Code r. 12A-1.005(5)(d)2.d. — exemption for qualifying mandatory homeowners-association dues
• Fla. Stat. § 617.301(2) and (7) — common areas and homeowners-association requirements
• Downey v. Jungle Den Villas Recreational Ass'n, Inc., 525 So. 2d 438 (Fla. 5th DCA 1988) — association-held recreational property as a common element
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 97A-052

Original ruling text

SUMMARY

Mandatory social membership dues paid to a homeowner's
association required to be paid as a condition of ownership
of real property are exempt where the homeowner's
association club facilities are common areas of the real
property. The dues are mandatory because a lien is placed
on the property for nonpayment, the homeowner's association
can foreclose on the lien, and membership is required upon
purchasing the real property as a condition of ownership.

Aug 11, 1997

Re: Technical Assistance Advisement 97A-052
Sales and Use Tax
Property Owner's Association, Mandatory Assessments
Rule 12A-1.005(5)(d)2.d., F.A.C.
XXX ("Association")

Dear :

This is in response to your letter of April 25, 1997,
requesting a technical assistance advisement (TAA) concerning
the applicability of sales tax to mandatory assessments paid by
a homeowner to a property owners association.

FACTS

The Association was incorporated in the State of Florida on
November 21, 1985 under Chapter 617 of the Florida Not-ForProfit Corporation Act. You enclosed a copy of the Declaration
of Protective Covenants, Conditions, and Restriction for the
Association (the Declaration) by which the Association, the
Association members, and the developer are governed. The
Association owns and operates common areas, including country
club type amenities such as restaurant facilities, golf and
tennis pro shops, two 18-hole golf courses and 30 tennis courts
for its members. This property was transferred by deed from the

developer to the Association. The purpose of the Association is
to take title to, operate, administer, manage, lease and
maintain the Association common areas, the golf courses, and the
tennis club.

The Association has four categories of membership, common
area maintenance, social, golf, and tennis. When an individual
purchases a residence (real property) in the community, they are
required at a minimum to purchase a common area maintenance and
social membership in the club. A golf or tennis membership is
optional. All homeowners in the community are required to
become social members as a condition to residential ownership
and are charged an annual common area maintenance and social
membership fee. The social membership fees are a continuing
lien against the member's dwelling unit. Common area
maintenance fees provide for such direct expenses as common area
maintenance expenses, security services, cable television, as
well as allocated general and administrative and general
insurance costs. Social membership dues are set to cover losses
for common areas such as the restaurant and the bar and are
applied to overhead expenses such as insurance, administrative,
utilities, maintenance, and housekeeping costs. Optional charges
for items directly purchased by a member such as food and
beverages are taxed to the member.

All members receive one voting right. Members who purchase
an optional golf or tennis membership, maintain their single
voting status. Social members who have not purchased golf or
tennis options can not vote on matters which specifically relate
to golf or tennis.

The Board of Directors of the Association adopts an annual
budget sufficient to maintain and operate the Association and to
fulfill the obligations of the Association. Upon such adoption
of the annual budget, the Board of Directors sets forth the
common area maintenance fees and dues for each respective
membership category charged to each member of the Association.
No member may waive or otherwise escape liability for the
amounts charged each resident of the community association by
non-use of the common areas or facilities or abandonment of his
or her parcel.

In the event any Association member shall fail to pay any
amounts charged, the Association has the right to file an action
in equity to foreclose its lien. The lien may be foreclosed by
an action in the name of the Association in like manner as a
foreclosure of a mortgage on real property.

QUESTION

Are the social membership dues subject to state sales tax?

YOUR POSITION

You argue that the membership fees along with the common
area maintenance assessment are not a taxable admission pursuant
to Rule 12A-1.005(5)(d)2.d., F.A.C., because the fee is
mandatory, the fee is paid to a homeowner's association, the fee
is required to be paid as a condition of ownership, and the club
facilities are part of the common elements or common areas of
the real property. You claim social membership status as well
as common area maintenance membership status is required when
purchasing real property in the Association community. You
agree that both golf and tennis related membership dues are
subject to sales tax based upon their optional nature with
regard to occupancy of real property in the Association
community.

STATUTORY AND REGULATORY AUTHORITY

Section 212.04(1), F.S., states in part:

(1)(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....

Section 212.02(1), F.S., states:

(1) 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, theaters, outdoor theaters,
shows, exhibitions, games, races, or any place where charge
is made by way of sale of tickets, gate charges, seat
charges, box charges, season pass charges, cover charges,
greens fees, participation fees, entrance fees, or other
fees or receipts of anything of value measured on an
admission or entrance or length of stay or seat box
accommodations in any place where there is any exhibition,
amusement, sport, or recreation, and 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, except physical
fitness facilities owned or operated by any hospital
licensed under chapter 395.

Rule 12A-1.005(5)(d)2.d., F.A.C., states:

2. The following payments made to private clubs or
   membership clubs are not "fees" which are subject to tax on
   admissions.

d. Mandatory dues and fees paid to a... homeowners'
association... when they are required to be paid as a
condition of ownership or occupancy of real property and
the club facilities are part of the common elements or
common areas of the real property.

Section 617.301, F.S., states in part:

(2) "Common area" means all real property within a
community which is owned or leased by an association or
dedicated for use or maintenance by the association or its

members, including, regardless of whether title has been
conveyed to the association:

(a) Real property the use of which is dedicated to the
association or its members by a recorded plat....

(7) "Homeowners' association" or "association" means a
Florida corporation responsible for the operation of a
community in which the voting membership is made up of
parcel owners or their agents, or a combination thereof,
and in which membership is a mandatory condition of parcel
ownership, and which is authorized to impose assessments
that, if unpaid, may become a lien on the parcel....

DISCUSSION

Rule 12A-1.005(5)(d)2.d., F.A.C., provides four criteria.
The fee must be (1) mandatory, (2) paid to a homeowner's
association, (3) required to be paid as a condition of
ownership, and (4) the club facilities are part of the common
elements or common areas of the real property.

The fees were mandatory, because section 8.01 required that
members pay the fees regardless if they used the common areas or
not. The Declaration provides that there is an affirmative
covenant of the residential owners to pay the social membership
dues. The Declaration agreement provides that the social
membership dues are a continuing lien on a member's dwelling
unit. Failure to pay the fees may result in foreclosure on the
dwelling unit.

Here, the fees were paid to a homeowner's association. The
Association was organized as a not-for-profit homeowners'
association pursuant to section 617.301(7), F.S. The
Declaration provides that the Association is responsible for the
common areas. The Association is authorized by the Declaration
to impose assessments and collect the social membership dues.
The Association may foreclose for nonpayment.

The third criterion is also a requirement under section
617.301(7), F.S. The Declaration required the dwelling owners

to obtain a social membership as a condition of ownership.
Here, the parcel owners, or the residential owners, are required
to be members as a condition of parcel ownership. The
Declaration provides that members are required to maintain
membership as a condition of ownership of the dwelling units.

The fourth criterion requires that the club facilities be
part of the common elements or common areas. The Declaration
required that the club facilities, including the golf course,
tennis courts, and other recreational facilities part of the
common area, were transferred to the Association by deed as
required in section 617.301(2), F.S. The Declaration provides
that the property maintained by the Association is common areas
for the use of Association members. In Downey v. Jungle Den
Villas Recreational Assn., Inc., 525 So.2d 438 (Fla 5th DCA
1988), the Fifth District Court of Appeal found that the real
property to be used for the recreation facilities the legal
title of which was in the entity created to own, operate and
manage the recreation facilities, was actually a "common
element."

DETERMINATION

Based on a review of the Declaration and other
documentation provided, the social membership fees are exempt
pursuant to the criteria established in Rule 12A1.005(5)(d)2.d., F.A.C. However, any optional charges
separately billed to the members are taxable, including food and
beverages minimums and golf and tennis memberships.

This response constitutes a Technical Assistance Advisement
under Section 213.22, F.S., which is binding on the Department
only under the facts and circumstances described in the request
for this advise as specified in Section 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 advise 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 Section 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 response.

Sincerely,

Charles Wallace
Senior Tax Specialist
Technical Assistance and Dispute Resolution

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