Are the annual membership fees a marine towing and assistance membership organization charges recreational boaters subject to New York sales tax as club dues or a taxable service?

Plain-English summary

Sea Tow Services International bills itself as "Your Road Service at Sea" — a membership organization for recreational boaters, modeled on the Automobile Club of America, with over 350 U.S. Coast Guard-licensed captains on call around the clock. Members pay a $95 annual fee and, in return, get free on-the-water assistance if their boat becomes disabled, navigational and weather help, radio checks, tidal information, boat-buying referrals, discounts through Sea Tow's partner network, and a subscription to the member magazine. Only about 10-15% of members actually need on-the-water help in a given year, but everyone gets access to all the benefits regardless of use, and members have no say in running the organization or any ownership stake in it.

New York taxes retail sales of tangible personal property, sales of certain listed ("enumerated") services, and — separately — dues paid to a "social or athletic club" (with tax on the initiation fee and on annual dues over $10). The Department found none of those categories fit. Sea Tow's $95 fee isn't a charge for any of the taxable enumerated services, and it isn't a sale of tangible personal property. And Sea Tow isn't a social or athletic club in the first place, so the club-dues tax under § 1105(f)(2) doesn't apply either. That means the membership fee is entirely outside New York's sales tax. The Department did note, though, that Sea Tow itself still has to pay sales or use tax on whatever taxable goods and services it buys to actually deliver those member benefits (like the equipment or supplies used in its rescue operations).

What this means for you

Membership-based service organizations

If your organization isn't a social or athletic club, and your membership fee isn't really a charge for a taxable service or product, your dues can fall outside sales tax entirely — even if members get a bundle of valuable benefits (on-call assistance, referrals, discounts, publications) as part of the fee. The analysis turns on what kind of organization you are and what the fee is actually paying for, not on how valuable or service-like the member benefits feel.

Accountants and tax professionals

Two separate questions had to both come out favorably here: (1) whether the fee is a receipt from a taxable retail sale or enumerated service (it wasn't), and (2) whether the organization is a "social or athletic club" under § 1105(f)(2), since club dues get taxed on their own separate basis regardless of the first question. Membership organizations that provide member-only access to discounts, referral networks, or on-call professional services, without operating as clubs and without selling an enumerated service, may be able to point to this reasoning — but remember the organization's own purchases of taxable inputs used to deliver member benefits remain fully taxable.

Common questions

Q: Are all membership fees exempt from New York sales tax?
A: No. This result depends on the fee not being a charge for a taxable service or product, and the organization not qualifying as a "social or athletic club" under the separate club-dues tax. Different facts (e.g., a genuinely social/athletic club, or a fee that's really payment for a taxable service) can come out differently.

Q: Does Sea Tow still pay any sales tax at all?
A: Yes — on its own purchases. The Department noted Sea Tow must pay sales or use tax on any taxable services or tangible personal property it buys to provide member benefits; the exemption applies only to the membership fee itself.

Q: Can another membership organization rely on this ruling?
A: No. This advisory opinion binds the Department only for Sea Tow Services International on the facts it described. A different membership structure, benefit mix, or organizational purpose could lead to a different result.

Citations and references

Statutes and regulations:

• Tax Law § 1105(a) (tax on retail sales of tangible personal property)
• Tax Law § 1105(c) (tax on enumerated services)
• Tax Law § 1105(f)(2)(i) (tax on social or athletic club dues and initiation fees)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2001.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a01_23s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-01(23)S
Sales Tax
July 31, 2001

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S001128A

On November 28, 2000, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Sea Tow Services International, Inc., P. O. Box 1178 Southold, New York
11971-0958.
The issue raised by Petitioner, Sea Tow International, Inc., is whether the membership fees
charged by it are considered a sale of tangible personal property or services, or whether they are not
subject to tax.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner is the world’s largest professional marine assistance organization with over 350
U.S. Coast Guard licensed captains on call 24 hours a day, 7 days a week, to serve its members.
Petitioner is primarily a membership organization for recreational boaters. Modeled after the
Automobile Club of America, Petitioner has developed as “Your Road Service at Sea®.” Each
member pays an annual membership fee of $95 to belong and then is entitled to membership
privileges. Members enjoy the following privileges:
•

Free on-the-water assistance when their boat becomes disabled.

•

Enrollment in Petitioner’s Advantage Network, that provides discounts for tangible
personal property and services at over 1,700 marine related companies nationwide.

•

Navigational assistance while on their boat.

•

Sea and weather condition reports.

•

Radio communication checks.

•

Tidal information.

•

Boat buying referrals.

•

A free subscription to the member magazine, "Lifelines."

-2­
TSB-A-01(23)S
Sales Tax
July 31, 2001

•

Direct access to Sea Tow licensees in their area for information relating to boating
dockage and service providers in their area.

Approximately 10% to 15% of its members actually require on-the-water assistance in any
given year, yet all members receive access to all privileges whether they use them or not. Members
do not control any activities of Petitioner’s organization, participate in the selection of members or
the management of Petitioner’s organization, or possess any proprietary interest in Petitioner.
Petitioner promotes boating safety to its members and to the general public through its
sponsorship of boating education programs, and teaches boating safety classes along with the United
States Power Squadron. Petitioner also maintains an active Web site that promotes and educates
boating safety to the general public.
Applicable Law
Section 1105(a) of the Tax Law imposes a tax on “[t]he receipts from every retail sale of
tangible personal property, except as otherwise provided in this article.”
Section 1105(c) of the Tax Law imposes sales tax upon receipts from the sales, except sales
for resale, of certain enumerated services.
Section 1105(f)(2)(i) of the Tax Law imposes sales tax upon the following:
The dues paid to any social or athletic club in this state if the dues of an active
annual member, exclusive of the initiation fee, are in excess of ten dollars per year,
and on the initiation fee alone, regardless of the amount of dues, if such initiation fee
is in excess of ten dollars. Where the tax on dues applies to any such social or
athletic club, the tax shall be paid by all members, other than honorary members,
thereof regardless of the amount of their dues, and shall be paid on all dues or
initiation fees for a period commencing on or after August first, nineteen hundred
sixty-five. . . .
Opinion
Petitioner is a membership organization modeled after the Automobile Club of America.
Petitioner’s members pay $95 to belong. Petitioner offers, free of charge, a number of services
including on-the-water assistance, navigational assistance, radio checks, tidal information, boat
buying referrals, and a free subscription to the member magazine, “Lifelines.”

-3­
TSB-A-01(23)S
Sales Tax
July 31, 2001

Petitioner’s membership fee is not a charge for an enumerated taxable service or for the sale
of tangible personal property. Petitioner is not a social or athletic club for purposes of Section
1105(f)(2) of the Tax Law. Its membership fees, accordingly, are not club dues subject to tax under
Section 1105(f)(2). Thus, Petitioner’s membership fee is not subject to sales tax. However,
Petitioner is required to pay sales or use tax on its purchases of any taxable services or tangible
personal property used in providing its members with their privileges.

DATED: July 31, 2001

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist III
Technical Services Division

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.