Is a large Manhattan health club's membership and initiation fee subject to New York's social/athletic club dues tax, or to New York City's separate tax on gyms and health salons?

Plain-English summary

Manhattan Plaza Associates LP runs the Manhattan Plaza Health Club, a large facility with a 75-foot indoor pool and sundeck, an indoor rock-climbing wall, sauna and steam rooms, traditional weight and cardio equipment, personal training, nutritional counseling, scuba diving and swimming lessons, yoga, and dance instruction, plus free access to tennis facilities. Members pay an initiation fee and membership dues, with extra charges for personal training, nutrition counseling, and private lessons. Members don't control the club's social or athletic activities, don't select other members, and hold no ownership interest — membership is capped only because of the facility's physical size.

New York exempts admission charges where the patron is a participant in a sporting activity (like a pool or bowling alley), which covered the club's charges here. That left the question of whether the club's fees are instead taxable as social or athletic club dues. Under the regulatory test, an entity only counts as a "club or organization" subject to that tax if members meaningfully control its activities, elections, or management, or hold a proprietary stake — none of which was true at Manhattan Plaza. So the dues tax didn't apply.

Separately, New York City taxes weight-control salons, gymnasiums, and similar establishments, and every charge for the use of such facilities. Because Manhattan Plaza offers a broad mix of sporting and fitness activities well beyond plain gym equipment (following the Department's earlier ruling for New York Health and Racquet Club, TSB-A-99(26)S), the Department found it isn't the kind of narrow establishment that local tax targets. So the club's membership charges escaped every tax theory raised — the state admission tax, the state club-dues tax, and the NYC gym/health-salon tax.

What this means for you

Large, multi-activity health and fitness clubs

A facility offering a genuinely broad range of sporting and fitness activities — not just standard gym equipment — has a real chance of falling outside both the state's social/athletic club dues tax and New York City's narrower gym/health-salon tax, as long as its governance structure gives members no real control over the organization. The broader and more varied your activity offering, the further you likely sit from the "gymnasium" or "health salon" category NYC's local tax targets.

Accountants and tax professionals

This opinion reaches the same three-part result (participant-sports exemption applies; club-dues tax doesn't apply; NYC gym tax doesn't apply) as the Department's contemporaneous ruling for La Palestra, Inc. (TSB-A-01(17)S), on very similar facts — a useful pairing for understanding how the Department consistently applies these three overlapping tax provisions to large, activity-diverse health clubs.

Common questions

Q: Is every health club's membership fee exempt from New York sales tax?
A: No. The result depends on specific facts: genuine lack of member control over the organization (for the state dues tax) and a broad enough activity mix (to escape NYC's narrower gym/health-salon tax). A facility organized more like a true membership club, or one that's simply a gym or weight-control salon, could be taxed differently.

Q: Does restricting membership because the facility is only so big make it a taxable "club"?
A: No — the regulations specifically say restricting membership solely due to the physical size of the facility does not, by itself, make an entity a taxable "club or organization."

Q: Can another health club rely on this ruling?
A: No. It binds the Department only for Manhattan Plaza Associates LP on the facts described. Other clubs should compare their own governance structure and activity mix before assuming the same result.

Citations and references

Statutes and regulations:

• Tax Law § 1105(f)(1) (admission-charge exemption for participant sports facilities)
• Tax Law § 1105(f)(2)(i) (tax on social or athletic club dues and initiation fees)
• Tax Law § 1107(a) (additional New York City sales tax)
• Tax Law § 1212-A(a)(2) (NYC local tax authorization on gyms, health salons, and similar facilities)
• NYC Administrative Code § 11-2002(h) (NYC tax on weight control salons, gymnasiums, and similar establishments)
• 20 NYCRR § 527.11(b)(5) (definition of "club or organization")
• 20 NYCRR § 527.11(b)(7) (definition of "athletic club")

Prior rulings referenced:

• New York Health and Racquet Club, Adv Op Comm T&F, May 19, 1999, TSB-A-99(26)S

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_4s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-01(4)S
Sales Tax
January 11, 2001

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S000911B

On September 11, 2000, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Manhattan Plaza Associates LP, 482 West 43rd Street, New York, New York
10036.
The issue raised by Petitioner, Manhattan Plaza Associates LP, is whether the fees charged
by it for the use of its facilities are subject to New York State and local sales tax.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner, which does business as Manhattan Plaza Health Club, provides a variety of
participant sport and fitness activities at its facility in New York City. Petitioner’s facility has a 75
foot indoor swimming pool and sundeck, an indoor rock climbing wall and sauna and steam rooms.
In addition, Petitioner offers traditional fitness and training facilities such as weight lifting
equipment, stepping machines, running and cycling equipment, aerobics classes, along with personal
training, nutritional counseling, and sports specific programs. Petitioner also offers scuba diving and
swimming lessons, yoga classes and dance instructions. It provides its members with free access to
tennis facilities.
Petitioner charges an initiation fee and membership fees for use of its facility. Members must
pay extra fees for personal training services and nutritional counseling, as well as for private rock
climbing and swimming instruction. Petitioner’s members do not control any social and athletic
activities, selection of members or management activities. The members do not possess any
proprietary interest in Petitioner. The number of members is restricted solely because of the physical
size of the facility.
Applicable Law & Regulations
Section 1105(f) of the Tax Law imposes sales tax, in part, on:
(1) Any admission charge . . . except charges to a patron for admission to,
or use of, facilities for sporting activities in which such patron is to be a participant,
such as bowling alleys and swimming pools.
(2)(i) The dues paid to any social or athletic club in this state if the dues . . .
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.

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TSB-A-01(4)S
Sales Tax
January 11, 2001

Section 1107(a) of the Tax Law provides:
General. On the first day of the first month following the month in which a
municipal assistance corporation is created under article ten of the public authorities
law for a city of one million or more, in addition to the taxes imposed by sections
eleven hundred five and eleven hundred ten, there is hereby imposed on such date,
within the territorial limits of such city, and there shall be paid, additional taxes, at
the rate of four percent, which except as provided in subdivisions (b) and (d) of this
section, shall be identical to the taxes imposed by sections eleven hundred five and
eleven hundred ten. Such sections and the other sections of this article, including the
definition and exemption provisions, shall apply for purposes of the taxes imposed
by this section in the same manner and with the same force and effect as if the
language of those sections had been incorporated in full into this section and had
expressly referred to the taxes imposed by this section.
Section 1212-A(a)(2) of the Tax Law authorizes the City of New York to impose a local sales
tax on "beauty, barbering, hair restoring, manicuring, pedicuring, electrolysis, massage services and
similar services, and every sale of services by weight control salons, health salons, gymnasiums,
turkish and sauna bath and similar establishments and every charge for the use of such facilities;"
such tax to be administered and collected by the Commissioner of Taxation and Finance.
Section 11-2002(h) of the Administrative Code of the City of New York imposes sales tax,
in part, on:
(h) Receipts from . . . every sale of services by weight control salons,
gymnasiums, turkish and sauna bath and similar establishments and every charge for
the use of such facilities. . . .
Section 527.11(b) of the Sales and Use Tax Regulations provides, in part, the following
definitions of terms that are contained in section 1105(f)(2) of the Tax Law:
(5) Club or organization. (i) The phrase club or organization means any
entity which is composed of persons associated for a common objective or common
activities. Whether the organization is a membership corporation or association or
business corporation or other legal type of organization is not relevant. Significant
factors, any one of which may indicate that an entity is a club or organization, are:
an organizational structure under which the membership controls social or athletic
activities, tournaments, dances, elections, committees, participation in the selection
of members and management of the club or organization, or possession by the

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TSB-A-01(4)S
Sales Tax
January 11, 2001

members of a proprietary interest in the organization. The organizational structure
may be formal or informal. (Emphasis supplied)
(ii) A club or organization does not exist merely because a business entity:
(a) charges for the use of facilities on an annual or seasonal
basis, even if an annual or season pass is the only method of sale and
provided such passes are sold on a first-come, first-served basis;
(b) restricts the size of the membership solely because of the
physical size of the facility. Any other type of restriction may be
viewed as an attempt at exclusivity;
(c) uses the word club or member as a marketing device;
(d) offers tournaments, leagues and social activities which are
controlled solely by the management.
*

*

*

(7) Athletic club. (i) An athletic club is any club or organization which has
as a material purpose or activity the practice, participation in or promotion of any
sports or athletics.
*

*

*

(ii) Athletic activities does not include exercising or calisthenics solely for
health or weight reduction purposes, as contrasted to sports. An establishment that
merely provides steam baths, saunas, rowing machines, shaking machines and other
exercise equipment shall not be considered an athletic club. However, there is a four­
percent local sales tax in the city of New York on every sale of services by weight
control salons, health salons, gymnasiums, Turkish baths, sauna baths and similar
establishments, and on every charge for the use of such facilities.
Opinion
Petitioner’s charges to its patrons entitle them to use facilities for sporting activities in which
the patron is to be a participant. Petitioner’s charges, therefore, are not subject to the tax on
admission charges under Section 1105(f)(1) of the Tax Law. Petitioner’s charges would be subject
to sales tax under Section 1105(f)(2) of the Tax Law if Petitioner operated an athletic club as defined
in paragraphs (5) and (7) of Section 527.11 of the Sales and Use Tax Regulations.

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TSB-A-01(4)S
Sales Tax
January 11, 2001

Petitioner’s members do not control any social or athletic activities, selection of members
or club management, or possess any proprietary interest in Petitioner. Therefore, Petitioner is not
operating an athletic club as defined in paragraphs (5) and (7) of Section 527.11 of the Sales and Use
Tax Regulations. Accordingly, Petitioner’s charges to its members are not subject to tax as dues paid
to an athletic club under Section 1105(f)(2) of the Tax Law.
Since Petitioner provides a variety of sporting activities and facilities to its members,
Petitioner’s facilities are not weight control salons, gymnasiums or other establishments described
in Section 11-2002(h) of the Administrative Code of the City of New York. Petitioner’s charges,
therefore, are not for services provided by, or use of facilities in, weight control salons, gymnasiums
or other establishments described in such Section 11-2002(h) and are thus not subject to that tax.
See New York Health and Racquet Club, Adv Op Comm T & F, May 19, 1999 TSB-A-99(26)S.
Membership charges for the use of Petitioner’s facilities are therefore not subject to any of
the taxes imposed under Sections 1105(f) and 1107 of the Tax Law or Section 11-2002(h) of the
New York City Administrative Code.

DATED: January 11, 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.