If a curling club converts from a taxable social/athletic club to a tax-exempt organization, does that change whether its membership dues are subject to New York sales tax?

Plain-English summary

Rochester Curling Club has run its own curling facility since incorporating in 1961. In 2000, it amended its Certificate of Incorporation to expand its mission — adding training programs for children and junior curlers, adult education classes, intramural and international competitions, and Olympic tryout support. Based on those expanded activities, the IRS issued an advance ruling recognizing the club as exempt from federal tax under Section 501(c)(3) (charitable/educational/amateur-sports purposes), replacing its prior status under Section 501(c)(7) as a purely social/athletic club — under which it had been collecting New York's club-dues tax on membership dues all along. New York's own Department of Taxation and Finance subsequently certified the club as an exempt organization based on that federal ruling.

New York exempts sales and "amusement charges" (a category that specifically includes club dues) made by qualifying exempt organizations — including those organized and operated exclusively for charitable, educational, or amateur-sports-competition purposes. Since Rochester Curling Club established its exempt purpose (via the IRS ruling) and received New York's own exempt-organization certification, its membership dues — including facility-use charges — are no longer subject to New York sales tax at all, a complete change from its prior status where dues were taxed as social/athletic club dues.

That exempt status isn't permanent or unconditional, though. Two things to watch:

It depends on continuing to meet the exemption tests. If the club's organizing documents or its actual activities ever drift outside the requirements for exempt status (the "organizational" and "operational" tests), its dues would become taxable again as social/athletic club dues, to the extent the club still fits that separate definition.

Some activities stay taxable regardless. Even a fully exempt organization's retail shop sales, restaurant/tavern food and drink sales, and paid parking/garage services remain subject to tax — exempt status covers dues and most other charges, but carves out these specific commercial-style activities.

What this means for you

Sports clubs and associations considering a nonprofit status change

Converting from a purely social/athletic club to a recognized charitable/educational/amateur-sports exempt organization can eliminate sales tax on membership dues entirely — a meaningful financial benefit — but it requires genuinely restructuring your purposes and activities to meet both the organizational and operational tests, not just relabeling.

Newly-exempt membership organizations

Don't assume every dollar you collect is tax-free once you're exempt — shop sales, restaurant/food sales, and paid parking services remain taxable even for a fully qualified exempt organization.

Accountants and tax professionals

This is a clean illustration of the interplay between Tax Law § 1105(f)(2) (social/athletic club dues) and § 1116(a)(4)/(f) (exempt organizations, including the amateur-sports carve-out that lets a sports organization retain exempt status despite providing athletic facilities/equipment, unlike ordinary charitable organizations). Track both the federal exemption basis and the state's own certification, since New York independently certifies exempt status.

Common questions

Q: Does getting IRS 501(c)(3) status automatically make membership dues exempt from New York sales tax?
A: You still need New York's own exempt-organization certification under Tax Law § 1116(a)(4), though the federal ruling is typically the basis for establishing exempt purpose.

Q: What happens if the club later stops qualifying for exempt status?
A: Its dues would revert to being taxable social/athletic club dues under § 1105(f)(2), to the extent the club fits that definition.

Q: Are all of a curling club's revenues exempt once it has exempt status?
A: No — retail shop sales, restaurant/tavern food and drink sales, and paid parking/garage services remain taxable even for an otherwise fully exempt organization.

Citations and references

Statutes and regulations:

• Tax Law § 1101(d)(3) (amusement charge definition); § 1101(d)(6) (dues definition); § 1101(d)(13) (social or athletic club definition)
• Tax Law § 1105(f)(2) (social/athletic club dues tax)
• Tax Law § 1116(a)(4) (exempt organization status); § 1116(b) (limits on exemption; taxable shop/restaurant/parking sales); § 1116(f) (qualified amateur sports organization)
• 20 NYCRR § 527.11 (club dues imposition; definitions); § 529.7 (exempt organization qualification tests)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2002.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a02_29s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-02(29)S
Sales Tax
July 12, 2002

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S010612A

On June 12, 2001 the Department of Taxation and Finance received a Petition for Advisory
Opinion from Rochester Curling Club, Inc., 71 Deep Rock Road, Rochester, NY 14624.
The issue raised by Petitioner, Rochester Curling Club, Inc., is whether the organization’s
change in status from a social/athletic club to an exempt organization affects the taxability of its
membership dues.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner is an association of curlers that incorporated in 1961 and have been curling
together since that time at their own facility. On April 7, 2000, Petitioner amended its Certificate
of Incorporation to reflect a change in its purpose and activities. Petitioner conducts training
programs for children, junior curlers and adult education classes. Petitioner will also hold
competitions for mural and intermural teams, ultimately leading to national and international
competitions, as well as tryouts to compete in the World Olympics.
Petitioner received an advance ruling from the Internal Revenue Service on August 1, 2000,
indicating that it is exempt from federal tax under Section 501(c)(3) of the Internal Revenue Code,
based on the additional activities described above. Prior to August 1, 2000, Petitioner was exempt
from federal tax under Section 501(c)(7) of the Internal Revenue Code as a social or athletic club,
and collected the sales tax imposed on membership dues by Section 1105(f)(2) of the Tax Law.
Petitioner has applied for and received from the New York State Department of Taxation and
Finance exempt status under Section 1116(a)(4) of the Tax Law based on the advance ruling.
Applicable Law and Regulations
Section 1101(d) of the Tax Law provides, in part:
When used in this article for purposes of the tax imposed under subdivision
(f) of section eleven hundred five, the following terms shall mean:
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(3) Amusement charge. Any admission charge, dues or charge of roof
garden, cabaret or other similar place.

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(6) Dues. Any dues or membership fee including any assessment,
irrespective of the purpose for which made, and any charges for social or sports
privileges or facilities, except charges for sports privileges or facilities offered to
members’ guests which would otherwise be exempt if paid directly by such guests.
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(13) Social or athletic club. Any club or organization of which a material
purpose or activity is social or athletic.
Section 1105(f) of the Tax Law imposes sales tax, in part, on:
(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. . . .
Section 1116 of the Tax Law provides, in part:
(a) Except as otherwise provided in this section, any sale or amusement
charge by or to any of the following or any use or occupancy by any of the following
shall not be subject to the sales and compensating use taxes imposed under this
article:
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(4) Any corporation, association, trust, or community chest, fund or
foundation, organized and operated exclusively for religious, charitable, scientific,
testing for public safety, literary or educational purposes, or to foster national or
international amateur sports competition (but only if no part of its activities involve
the provision of athletic facilities or equipment), or for the prevention of cruelty to
children or animals. . . .
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(b) Nothing in this section shall exempt:
(1) retail sales of tangible personal property by any shop or store operated by
an organization described in paragraph (4), paragraph (5) or paragraph (6) of
subdivision (a) of this section;

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(2) sales of food or drink in or by a restaurant, tavern or other establishment
operated by an organization described in paragraph (1), paragraph (4), paragraph (5)
or paragraph (6) of subdivision (a) of this section, other than sales exempt under
paragraph (ii) of subdivision (d) of section eleven hundred five, from the taxes
imposed hereunder, unless the purchaser is an organization exempt under this
section;
(3) sales of the service of providing parking, garaging or storing for motor
vehicles by an organization described in paragraph (4) or paragraph (5) of
subdivision (a) of this section operating a garage . . . parking lot or other place of
business engaged in providing parking, garaging or storing for motor vehicles;
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(d)(1) Except as provided in paragraph (2) of this subdivision, any admissions
all of the proceeds of which inure exclusively to the benefit of the following
organizations shall not be subject to any of the taxes imposed under subdivision (f)
of section eleven hundred five:
(A) an organization described in paragraph (4), (5) or (6) of subdivision (a)
of this section;
(2) The exemption provided under paragraph (1) of this subdivision shall not
apply in the case of admissions to:
(A) Any athletic game or exhibition unless the proceeds shall inure
exclusively to the benefit of elementary or secondary schools or unless in the case
of an athletic game between two elementary or secondary schools, the entire gross
proceeds from such game shall inure to the benefit of one or more organizations
described in paragraph (4) of subdivision (a) of this section;
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(f) (1) For purposes of paragraph four of subdivision (a) of this section, in the
case of a qualified amateur sports organization (A) the requirement of such
paragraph that no part of its activities involve the provision of athletic facilities or
equipment shall not apply, and (B) such organization shall not fail to meet the
requirement of such paragraph merely because its membership is local or regional
in nature.
(2) For purposes of this subdivision, the term “qualified amateur sports
organization” means any organization organized and operated exclusively to foster

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national or international amateur sports competition if such organization is also
organized and operated primarily to conduct national or international competition in
sports or to support and develop amateur athletes for national or international
competition in sports.
Section 527.11 of the Sales and Use Tax Regulations provides, in part:
(a) Imposition. (1) A tax is imposed upon 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 $10 per year.
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(b) Definitions. As used in this section the following terms shall mean:
(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
members of a proprietary interest in the organization. The organizational structure
may be formal or informal.
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(6) Social club. A social club is any club or organization which has a
material purpose or activity of arranging periodic dances, dinners, meetings or other
functions affording its members an opportunity of congregating for social
interrelationship.
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(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.
Section 529.7 of the Sales and Use Tax Regulations provides, in part:
(a) General. (1) Any corporation, association, trust, or community chest, fund
or foundation, organized and operated exclusively for religious, charitable, scientific,

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testing for public safety, literary or educational purposes, or to foster national or
international amateur sports competition (but only if no part of its activities involve
the provision of athletic facilities or equipment) . . . In addition, such organizations
may, except under the circumstances described in subdivision (i) of this section,
make sales without collecting the sales or use tax.
(2) An organization is not exempt from tax because it is organized and
operated as a nonprofit organization or because it appears to meet the requirements
of this section. In order to establish its exempt status, it is necessary to file a
completed application as set forth in subdivision (f) of this section and prove that the
organization meets the statutory requirements.
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(b) Qualifications. (1) In order to qualify for exemption, an organization must
be formally organized. An organization will not be considered formally organized
unless it has an organizing document defining its purposes and activities and a code
of regulations describing how it will function and select the officers empowered to
act for it. . . .
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(2) In addition to the formal organization requirement, an organization must
prove that it is both organized and operated exclusively for one or more of the
purposes specified in subdivision (e) of this section. If an organization fails to meet
either the organizational test or the operational test, it is not exempt.
(c) Organizational test. (1) General. The organizational test relates solely to
the provisions of the organizing documents.
(i) An organization is organized exclusively for one or more exempt purposes
only if its organizing documents:
(a) limit the purposes of such organization to one or more exempt purposes;
and
(b) do not expressly empower the organization to participate, other than as
an insubstantial part of its activities, in activities which in themselves are not in
furtherance of one or more exempt purposes.
(ii) In no case will an organization be considered to be organized exclusively
for one or more exempt purposes, if, by the terms of its organizing documents, the

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purposes for which such organization is created are broader than the purposes
specified in section 1116(a)(4) of the Tax Law. . . .
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(d) Operational test. (1) General. The operational test relates solely to an
organization's activities.
(2) Activities. An organization will be regarded as “operated exclusively” for
one or more exempt purposes only if almost all of its activities accomplish one or
more exempt purposes specified in section 1116(a)(4) of the Tax Law and described
in subdivision (e) of this section. An organization will not be so regarded if more
than an insubstantial part of its activities is not in furtherance of an exempt purpose.
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(e) Exempt purposes. (1) In order to be exempt from the sales and use tax as
an organization described in section 1116(a)(4) of the Tax Law, an organization must
be both organized and operated exclusively for one or more of the purposes listed in
this subdivision.
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(ii) Charitable. The term “charitable” includes: relief of the poor, distressed,
or underprivileged; advancement of religion; advancement of education or science.
....
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(v) Educational shall mean the instruction or training of the individual for the
purpose of improving or developing his capabilities or the instruction of the public
on subjects useful to the individual and beneficial to the community. . . .
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(viii) Fostering national or international amateur sports competition.
Notwithstanding paragraph (a)(1) of this section, an organization that provides
athletic facilities or equipment will qualify for exemption as an organization
organized and operated exclusively to foster national or international amateur sports
competition if it is a qualified amateur sports organization. If an organization is not
a qualified amateur sports organization, it will not qualify for exemption as an
organization organized and operated exclusively to foster national or international

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amateur sports competition if it provides athletic facilities or equipment. For
purposes of this subparagraph the term “qualified amateur sports organization”
means any organization organized and operated exclusively to foster national or
international amateur sports competition and which is also organized and operated
primarily to conduct national or international competition in sports or to support and
develop amateur athletes for national or international competition in sports. A
qualified amateur sports organization shall not fail to meet the requirements of this
subdivision merely because its membership is local or regional in nature. An
organization provides athletic facilities or equipment if the organization permits the
use of athletic facilities or equipment that it owns, or pays for, or otherwise assumes
the cost of the use of athletic facilities or equipment owned by any other person, or
reimburses amateur athletes for the cost of athletic facilities or equipment. The term
“foster national or international amateur sports competition” refers to organizations
that:
(a) prescribe rules and standards for competition in an amateur sport
or represent the United States in an international body that prescribes such
rules and standards;
(b)sponsor national championships or international competition in an
amateur sport;
(c) sponsor local, regional and national competition to select
participants in national championships or international competition in an
amateur sport;
(d) provide security, ticket sales and similar administrative services
at amateur sports competitions described in clauses (b) and (c) of this
subparagraph;
(e) provide administrative, coaching and training services to amateur
athletes;
(f) provide medical care and insurance to amateur athletes;
(g) conduct equipment research for the benefit of amateur athletes;
(h) disseminate information to amateur athletes; and
(i) provide financial assistance to amateur athletes, but only if such
assistance does not affect the amateur status of athletes to whom it is
provided.

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For purposes of clauses (e), (f) and (h) of this subparagraph, the term
“amateur athletes” refers only to athletes who participate, or reasonably can be
expected to participate, in national championships or international competition in an
amateur sport.
(2) An organization is not organized or operated for one or more of the above
exempt purposes unless it serves the public rather than a private interest. Thus, to
meet the requirements of this subdivision, it is necessary for an organization to prove
that it is not organized or operated for the benefit of private interests such as
designated individuals, the creator or his family, shareholders of the organization, or
persons controlled, directly or indirectly, by such private interests.
(3) If an organization is organized and operated exclusively for an exempt
purpose or purposes, exemption will be granted to such an organization regardless
of which exempt purpose or purposes is specified in its application for exemption.
For example, if an organization claims exemption on the ground that it is
“educational,” exemption will not be denied if, in fact, it is “charitable.”
Opinion
Petitioner has established it is organized for exempt purposes and received an advance ruling
under Section 501(c)(3) of the Internal Revenue Code. Having received an advance ruling from the
Internal Revenue Service, Petitioner has established that it is organized for exempt purposes.
Petitioner has also received certification from the Department of Taxation and Finance as an exempt
organization under Section 1116(a)(4) of the Tax Law.
Section 1116(a) of the Tax Law provides, with certain exceptions not relevant in this case,
that any sale or amusement charge by any of the organizations or government entities described in
such Section 1116(a) is not subject to sales tax. The term “amusement charge” includes club dues.
See Section 1101(d)(3) of the Tax Law. Accordingly, provided that Petitioner remains organized
and operated exclusively for exempt purposes, in a manner qualifying for exemption under Section
1116(a)(4) of the Tax Law, membership dues charged by Petitioner, including charges to members
for use of Petitioner’s facilities, are not subject to tax.
Should Petitioner’s exempt status change because it fails to meet the organizational or
operational test for exempt status under Section 1116(a)(4) of the Tax Law, then such dues may be
subject to tax under Section 1105(f)(2) of the Tax Law to the extent that Petitioner constitutes a
social or athletic club.
It should be noted that although Petitioner may be an exempt organization under Section
1116(a)(4) of the Tax Law, sales of tangible personal property by a shop or store operated by
Petitioner, and sales of food and drink by a restaurant, tavern or other establishment operated by

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Petitioner, as well as other transactions, may be subject to tax. See Section 1116 of the Tax Law.
If Petitioner made taxable sales, it would be required to register under Section 1134 of the Tax Law
and collect and remit the appropriate sales tax.

DATED: July 12, 2002

NOTE:

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

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