Was a Florida country club's separately billed $636-per-member assessment for golf-course capital improvements subject to admissions tax as club dues or fees?

Plain-English summary

Florida ruled that a country club's special assessment for golf-course renovations was not taxable as club dues or fees.

The club billed 689 full equity golf members $636 each to renovate greens and bunkers. It initially added $44.52 of sales tax per member and remitted $30,674.28 to the Department. The project ultimately cost $446,503.

Several facts separated the assessment from ordinary dues:

• payment did not give a member the right to use the club's facilities;
• ordinary monthly dues did not decrease;
• the assessment was a fixed amount billed separately;
• the money went into a capital asset replacement fund and was recorded in the general ledger rather than booked as income; and
• the funds were spent as the capital improvements progressed, not on club operations.

Section 212.04 taxed admissions, and section 212.02(1) included dues and fees paid to private recreational clubs. But the cited John's Island Club decision treated special capital assessments as distinct from dues and fees and invalidated the part of Rule 12A-1.005 that had attempted to tax them broadly.

Because this assessment matched the capital-improvement characteristics discussed in that case, the Department concluded it was not subject to tax.

What this means for you

Private clubs

The label "assessment" is not enough. Keep the capital charge separate from recurring dues, identify the specific improvement, segregate the proceeds, and avoid using them for operations if the facts are intended to match this TAA.

Club members

A special charge may differ from taxable dues when it funds a particular capital project and does not buy access, reduce dues, or cover operating expenses. This TAA does not make every club assessment tax-free.

Accountants

The club's treatment supported the result: the proceeds went to a capital asset replacement fund, were not booked as income, and were disbursed with the renovation work. Maintain records showing the assessment's source and use.

Tax professionals

Check current law before relying on the 1998 analysis. The TAA expressly depended on John's Island Club and the distinction between an involuntary, special-purpose assessment and recurring dues or voluntary user fees.

Common questions

Q: What did each member pay?
A: Each of 689 full equity golf members was assessed $636.

Q: What project did the money fund?
A: Renovation of the golf-course greens and bunkers.

Q: Did paying the assessment give members access to the club?
A: No. Facility use continued to depend on membership and ordinary dues.

Q: Were monthly dues reduced because of the assessment?
A: No. The club continued its recurring dues and continued collecting tax on them.

Q: Could the assessment fund operating expenses?
A: Not on these facts. The TAA states the funds were not used for operations.

Q: Does the TAA say the club was entitled to a refund of tax already remitted?
A: It concludes the assessment was not subject to tax, but the response does not state a refund order or procedure.

Citations and references

• Fla. Stat. § 212.04 — tax on admissions.
• Fla. Stat. § 212.02(1) — admissions include dues and fees paid to private recreational or fitness clubs.
• Fla. Admin. Code r. 12A-1.005(5)(d)1.b. — capital-assessment provision discussed in the TAA and invalidated in the cited litigation.
• Florida Department of Revenue v. John's Island Club, Inc., 680 So. 2d 475 (Fla. 1st DCA 1996).
• Oklahoma City Golf and Country Club v. Oklahoma Tax Commission, 825 P.2d 267 (Okla. 1992).
• Fla. Stat. § 213.22 — Technical Assistance Advisements.
• Fla. Stat. ch. 119 — public-record disclosure with identifying details deleted.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98A-089

Original ruling text

SUMMARY

Assessments were made against the members of a country club
to finance capital improvements for a major renovation to
enhance the value of the club. Payment of the assessments
did not entitle the members to use the club's facilities,
did not result in a decrease in the club membership dues or
fees, and they were not used to pay operating expenses.
The assessments were made in a specific amount, and were
separately billed to the members. The assessments are not
"dues or fees" included in the definition of admissions as
provided by section 212.02(1), F.S. Therefore, the
assessments are not subject to the tax.

Dec 04, 1998

Re: Technical Assistance Advisement 98A-089
Sales and Use Tax; Capital Assessments
Section 212.04, F.S.; Section 212.02(1), F.S.
Rule 12A-1.005, F.A.C.
XXX (Taxpayer)

Dear :

This is in response to your letter dated August 21, 1998,
requesting an advisement regarding the payments of capital
assessments by country club members for golf course
improvements.

FACTS

The Taxpayer is a nonprofit corporation organized under
Chapter 617, F.S. The Taxpayer is composed of members rather
than shareholders. Members are issued certificates instead of
stock. The club equity members pay $8,300 as the membership
contribution. The value was determined by an independent firm.
The club equity members are not allowed to transfer their
membership other than to the Taxpayer. The Taxpayer is

obligated to repurchase the membership only if an acceptable
willing buyer is found. Resigning members receive the greater
of the membership contribution paid, or 90% of the amount
charged to the new purchaser. Only equity members are allowed
to vote. The value of total membership equity as of December
31, 1996, was $10,051,789.00. All members also were required to
pay dues on a periodic basis.

The sole purpose of the Taxpayer is to own and operate a
private country club exclusively for the pleasure and recreation
of its members. In December 1994, the golfing membership
approved a plan to renovate the greens and bunkers on the golf
course. The total estimated cost of the project was $400,000
and was to be paid by an assessment against all full equity
golfing members. Each full equity golf member would be assessed
$636.00 to cover the cost of this project. On March 31, 1995,
689 full equity golfing members each were billed $636.00, plus
Florida State Sales Tax of $44.52. The total amount billed was
$438,204.00, plus $30,674.28 sales tax. The total tax revenue
was remitted to the Department. Each member was given the
option of paying the full amount in April 1995, or they could
ask for a $20.00 monthly billing. The renovation project was
completed in the summer of 1995 at a total cost of $446,503.00.
The funds received were placed in a capital asset replacement
fund and were recorded in the general ledger. The funds were
not booked as income. The funds were disbursed as improvements
progressed, and were not used for operations. Monthly
membership dues remained unchanged and Taxpayer continued to
collect and remit tax with respect to such recurring monthly
dues.

QUESTION PRESENTED

Are the capital assessment billings subject to state sales tax?

TAXPAYER'S POSITION

It is your position that the capital assessments charged to
the members for repayment are not subject to tax. You believe
that the capital assessments are similar to the assessments in
Florida Department of Revenue v. John's Island Club, Inc., 680

So.2d 475 (Fla. 1st DCA 1996).

RELEVANT AUTHORITY AND ANALYSIS

Section 212.04, F.S, provides in part:

212.04 Admissions tax; rate, procedure, enforcement.-(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....

The term "admissions" is defined under s. 212.02(1), F.S., in
part as follows:

The following terms and phrases when used in this chapter have
the meanings ascribed to them in this section, except where the
context clearly indicates a different meaning:

(1) The term "admissions" means and includes... 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)1.b., F.A.C., provides:

(5) DUES AND INITIATION FEES, EQUITY AND NONEQUITY
MEMBERSHIPS, CAPITAL CONTRIBUTIONS AND ASSESSMENTS,
REFUNDABLE AND NONREFUNDABLE DEPOSITS, AND USER FEES.

(d)1. Effective July 1, 1991, the following fees paid to

private clubs as a condition precedent to, in conjunction
with, or for the use of the club's recreational or physical
fitness facilities are subject to tax.

b. Any periodic assessments (additional paid in capital)
required to be paid by members of an equity or nonequity
club for capital improvements or other operating costs,
unless the periodic assessment meets the criteria of a
refundable deposit as provided in sub-subparagraph 2.e.
below....

Section 212.04, F.S., taxes all "dues" and "fees" paid to
private and membership clubs providing recreational or physical
fitness facilities, including, but not limited to golf, tennis,
swimming... unless specifically exempt. "Dues" and "fees" are
not defined in Chapter 212, F.S., or in Rule 12A-1.005, F.A.C.;
therefore, we must look to the ordinary usage of the terms, as
was done in Oklahoma City Golf and Country Club v. Oklahoma Tax
Commission, 825 P.2d 267 (Okl. 1992). In that case, the court
used the definition of "dues" as found in Black's Law
Dictionary, page 450 (5th ed. 1979) ("Black's") and Webster's
Third New International Dictionary, page 699 (1963)
("Webster's"). Black's defines "dues," as applied to clubs, as
"sums paid toward support and maintenance of same and as a
requisite to retain membership." "Dues" are defined by Webster's
as "the fee or charge required for membership, affiliation,
initiation, use, subscription."

In John's Island Club, supra, the District Court of Appeals
affirmed the final order determining the invalidity of Rule
12A-1.005(5)(d)1.b., F.A.C., because the Rule exceeded the
Department's grant of rulemaking authority, and modified,
enlarged, and contravened the law implemented. The final order
found Rule 12A-1.005(5)(d)1.b., F.A.C., went beyond the
parameters of the admissions statute, since "capital
contributions" and "capital assessments" do not fall within the
generally understood definition of "dues" or "fees" as applied
to a club. The hearing officer set forth, in the final order,
various dictionary definitions, together with case law from
other jurisdictions, which recognized a distinct difference
between "dues and fees" and "assessments." Under the cited

definitions and case law, a "fee" is either: (1) a voluntary
charge paid toward support and maintenance of the club as a
requisite to membership, or (2) user charges which are
voluntary, so that a member can decide whether or not to incur
the charge based on whether the member uses the particular
service to which it relates. The term "assessment" was defined
as: (1) A specific demand or request by the club upon its
membership, as a whole or as a class, for a certain sum of
money; the proportion to be paid by each member being stated, or
(2)An involuntary charge levied on each member for a special
purpose, and not recurring on a regular basis as in the case of
dues and fees, or (3) A charge levied on each member in the
nature of a tax or some other burden for a special purpose. In
the absence of clearer legislative consideration of what was
meant by the terms "capitalization fees" and "capital facility
fees," the court, in its opinion, agreed with the hearing
officer and concluded that Rule 12A-1.005(5)(d)1.b., F.A.C., was
inconsistent with the provisions of chapter 212, F.S., because
"assessments" are not "dues" and "fees."

RESPONSE

The members in John's Island Club, supra, were assessed for
expenditures related to capital improvements. The assessments
were made to finance capital improvements which enhanced the
value of the club. Similarly, in the instant situation,
assessments were made against the members of a country club to
finance capital improvements for a major renovation. The
assessments did not entitle the members to use the club's
facilities, did not result in a decrease in the club membership
dues or fees, and they were not used to pay operating expenses.
The assessments were made in a specific amount, and were
separately billed to the members. The capital assessments here
are not "dues" and "fees." As such, the assessments are not
subject to the tax.

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 advice 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 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 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
(850) 922-4734

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