Are membership dues for a national boat-towing club subject to New York sales tax, and does the club (or its administrator) have to register and collect New York tax?

Plain-English summary

BoatU.S. is a not-for-profit national boating membership organization (similar to an auto club), whose annual dues of $19 to $99 buy members a bundle of benefits regardless of tier: a marina discount program, federal lobbying representation, a free magazine subscription, a theft reward program, access to discounted boat insurance, and — the headline benefit — 24-hour nationally dispatched boat towing assistance, with basic membership covering up to $50 per towing incident and the top tier covering unlimited towing. Boat America Corporation, a separate for-profit company, licenses the BoatU.S. name, administers the towing contracts as BoatU.S.'s disclosed agent, screens the independent contractors who perform the towing, and collects renewal dues by mail on BoatU.S.'s behalf — but earns no revenue from those dues and passes every dollar through to BoatU.S. Boat America previously owned four New York retail stores (since sold to West Marine, which continues operating them under the BoatU.S. name and selling BoatU.S. memberships there, with sales tax currently being collected on those in-store dues sales).

Two separate questions got two separate answers. First, are the dues themselves taxable club dues? No — New York's club-dues tax only reaches "social or athletic" clubs, and BoatU.S. members don't control any of its activities, elections, member selection, or management, and hold no ownership stake in it — so it isn't that kind of club at all, and its membership fees escape the dues tax entirely (BoatU.S. still has to pay sales/use tax on its own taxable purchases used to deliver member benefits, just not collect tax on the dues themselves). Second, who has enough presence in New York to be legally required to register and collect tax? BoatU.S. does — because West Marine's in-state stores sell its memberships and independent contractors perform its towing services in New York, both create sufficient nexus, obligating BoatU.S. to register and collect tax on any taxable New York sales it makes through its own catalog or website. Boat America, by contrast, doesn't have to register, because — acting only as BoatU.S.'s disclosed agent with no employees, stores, or other presence of its own in New York — it lacks the "demonstrably more than a slightest presence" the Constitution requires for a state to force an out-of-state seller to collect its tax. The Department flagged that West Marine's current practice of collecting sales tax on membership dues sold in its stores is actually unnecessary (since the dues aren't taxable), and that overcollected/oversubmitted tax can be refunded on a timely application.

What this means for you

National membership organizations bundling member benefits

Whether your dues are taxable "club dues" turns on member control — genuine control over the organization's activities, elections, or management points toward a taxable social/athletic club, while a passive membership model (members get benefits but don't run anything) keeps dues outside that tax, regardless of how valuable the bundled benefits are.

Membership organizations selling through in-state retail partners or contractors

Independent retail stores selling your memberships, or independent contractors performing services on your behalf in a state, can create sufficient nexus there even without your own employees or offices — obligating you to register and collect that state's tax on your own direct sales.

Companies acting as a disclosed agent for a related organization

Acting purely as a disclosed agent (processing payments, administering contracts) for another entity, without any independent physical presence of your own in a state, generally doesn't itself create nexus — but that conclusion depends on genuinely separate corporate treatment; if the agent and the principal are found to be alter egos of each other, this analysis wouldn't hold.

Common questions

Q: Is a boat-towing club's membership fee taxed like country-club dues in New York?
A: No, if members don't control the club's activities, elections, or management — that passive-membership structure keeps it out of New York's "social or athletic club" dues tax, regardless of how many benefits the dues buy.

Q: Does selling memberships through in-state retail stores create nexus for an out-of-state membership organization?
A: Yes — retail stores selling the organization's memberships, along with independent contractors performing services (like towing) on its behalf in the state, are enough physical presence to require registration and tax collection on the organization's own taxable sales.

Q: Does an agent that just processes payments for another organization have to collect tax too?
A: Not necessarily — an agent with no independent physical presence of its own in the state (no stores, employees, or representatives), acting only as a disclosed agent, generally isn't required to register or collect tax on its own account.

Citations and references

Statutes and rules:

• Tax Law § 1101(b)(5), (6), (8) (sale/purchase; tangible personal property; vendor and nexus definitions)
• Tax Law § 1105(c)(3) (installing/maintaining/repairing tangible personal property)
• Tax Law § 1105(f)(2)(i) (tax on social/athletic club dues and initiation fees)
• Tax Law § 1137 (payment of tax); § 1139 (refunds)
• 20 NYCRR 526.10 (vendor; nexus requirements; interstate vendors)

Prior authority relied on:

• Orvis Company, Inc. v Tax Appeals Tribunal, 86 NY2d 165 (physical presence for nexus need not be substantial)
• Quill Corp. v. North Dakota, 504 US 298 (Commerce Clause nexus requirement)
• Sea Tow Services International, Inc., TSB-A-01(23)S (membership organization owes tax on its own taxable purchases despite exempt dues)
• Harfred Operating Corporation, TSB-A-86(28)S (alter ego / disregarded entity doctrine)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2004.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a04_3s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-04(3)S
Sales Tax
February 24, 2004

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S030625B

On June 25, 2003, the Department of Taxation and Finance received a Petition for Advisory
Opinion from Boat America Corporation, 880 South Pickett Street, Alexandria, Virginia, 22304.
Petitioner, Boat America Corporation, provided additional information pertaining to the Petition on
August 26, 2003 and December 30, 2003. On September 5, 2003, BoatU.S., 880 South Pickett
Street, Alexandria, Virginia, 22304 joined Petitioner as co-Petitioner. In the interest of clarity, Boat
America Corporation (Boat America) and BoatU.S. are referred to throughout this Advisory Opinion
by name.
The issues raised by Boat America and BoatU.S. are:
1.

Whether dues paid for membership in a club which, among other things, provides
boat towing services to its members are subject to sales tax.

2.

Whether either Boat America or BoatU.S. has nexus with New York State for sales
tax purposes and is therefore required to register for sales tax purposes and collect
tax on its retail sales.

Boat America and BoatU.S. submit the following facts as the basis for this Advisory
Opinion.
Boat America and BoatU.S. are separate legal entities. BoatU.S. is a not-for-profit
corporation organized under the laws of the District of Columbia. Boat America is a Virginia for
profit corporation. Boat America and BoatU.S. entered into a licensing agreement giving Boat
America exclusive contractual rights to use and sublease the trade name and logo "BoatU.S." Boat
America contracts to provide BoatU.S. with administrative services and to provide assistance to the
members of BoatU.S. in all areas of activity related to non-commercial boating in the United States.
Boat America does not act on its own behalf but administers the towing contracts on behalf of
BoatU.S. Boat America acts as agent for BoatU.S. in dealing with towing providers and other
entities, and does not perform towing or other services itself or have such services performed on its
behalf. Boat America is empowered by BoatU.S. to screen independent contractors who provide
the services for BoatU.S. Boat America also collects membership dues by mail on behalf of
BoatU.S. for renewal of membership in BoatU.S.’s club. Boat America derives no revenue from
these dues. The funds are passed through to BoatU.S. in their entirety.
BoatU.S. memberships are for a one year term. At the time for renewal, the member is billed
by mail. These bills are mailed directly by BoatU.S. from outside New York.

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Each member pays an annual membership fee of between $19 and $99, depending on the
selected service level, and is then entitled to membership privileges. All members, regardless of
their selected service level, enjoy the following privileges.
•

Marina discount program provides discounts for fuel, overnight slips and repairs at
participating marinas nationwide.

•

Representation for boat owners through federal lobbying efforts.

•

A free subscription to the member magazine, BoatU.S.

•

24-hour nationally dispatched boat towing services including battery jumps, fuel
delivery, prop disentanglement, and soft groundings at sea. The basic membership
dues provide members with emergency towing service up to $50 value per incident.
Payment of dues at the top ($99) service level allows members unlimited per incident
emergency towing service.

•

Theft reward program.

•

Access to low cost boat insurance programs.

BoatU.S. promotes boating safety to its members and to the general public through its on-line
boating safety course. All members receive access to all privileges whether they use them or not.
Members do not control any activities of BoatU.S.’s organization, participate in the selection of
members or the management of BoatU.S.’s organization, or possess any proprietary interest in
BoatU.S.
Boat America owned four retail stores in New York State trading as BoatU.S. Marine
Centers. Boat America sold its retail stores to West Marine, Inc. on January 13, 2003. Boat
America asserts that neither it nor BoatU.S. has had any physical presence in New York since the
sale date, that neither it nor BoatU.S. has had any employees, independent contractors, agents or
other representatives in New York, and that the only sales of taxable property or services by Boat
America in New York consist of de minimus sales of tangible personal property in the form of boat
lettering sold through BoatU.S.’s Web site. BoatU.S. makes sales of tangible personal property
through its own catalog and Web site. West Marine, Inc. continues to operate the four retail stores
purchased from Boat America using the BoatU.S. Marine Center name.
West Marine, Inc., operating under the BoatU.S. name, is currently collecting dues for
BoatU.S. memberships sold in West Marine, Inc. retail stores in New York. West Marine, Inc. has
been collecting sales tax on these dues. Persons purchasing a membership in BoatU.S. in the

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BoatU.S. Marine Centers owned and operated by West Marine, Inc. receive a receipt showing
BoatU.S. as the seller of these memberships.
Applicable law and regulations
Section 1101 of the Tax Law provides, in part:
(a) When used in this article the term "person" includes an individual, partnership,
limited liability company, society, association, joint stock company, corporation, estate,
receiver, trustee, assignee, referee, and any other person acting in a fiduciary or
representative capacity, whether appointed by a court or otherwise, and any combination of
the foregoing.
(b) When used in this article for the purposes of the taxes imposed by subdivisions
(a), (b), (c) and (d) of section eleven hundred five and by section eleven hundred ten, the
following terms shall mean:
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(5) Sale, selling or purchase. Any transfer of title or possession or both, exchange or
barter, rental, lease or license to use or consume (including, with respect to computer
software, merely the right to reproduce), conditional or otherwise, in any manner or by any
means whatsoever for a consideration, or any agreement therefor, including the rendering
of any service, taxable under this article, for a consideration or any agreement therefor.
(6) Tangible personal property. Corporeal personal property of any nature. . . .
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(8) Vendor. (i) The term "vendor" includes:
(A) A person making sales of tangible personal property or services, the
receipts from which are taxed by this article;
(B) A person maintaining a place of business in the state and making sales,
whether at such place of business or elsewhere, to persons within the state of tangible
personal property or services, the use of which is taxed by this article;
(C) A person who solicits business either:

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(I) by employees, independent contractors, agents or other
representatives; or
(II) by distribution of catalogs or other advertising matter, without
regard to whether such distribution is the result of regular or systematic
solicitation, if such person has some additional connection with the state
which satisfies the nexus requirement of the United States constitution;
and by reason thereof makes sales to persons within the state of tangible
personal property or services, the use of which is taxed by this article;
(D) A person who makes sales of tangible personal property or services, the
use of which is taxed by this article, and who regularly or systematically delivers
such property or services in this state by means other than the United States mail or
common carrier;
(E) A person who regularly or systematically solicits business in this state by
the distribution, without regard to the location from which such distribution
originated, of catalogs, advertising flyers or letters, or by any other means of
solicitation of business, to persons in this state and by reason thereof makes sales to
persons within the state of tangible personal property, the use of which is taxed by
this article, if such solicitation satisfies the nexus requirement of the United States
constitution;
Section 1105 of the Tax Law provides, in part:
Imposition of sales tax
On and after June first, nineteen hundred seventy-one, there is hereby imposed and
there shall be paid a tax . . . upon:
(a) The receipts from every retail sale of tangible personal property, except
as otherwise provided in this article.
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*

(c) The receipts from every sale, except for resale, of the following services:
*

*

*

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(3) Installing tangible personal property . . . or maintaining, servicing
or repairing tangible personal property. . . not held for sale in the regular
course of business, whether or not the services are performed directly or by
means of coin operated equipment or by any other means, and whether or not
any tangible personal property is transferred in conjunction therewith . . .
Section 1105(f)(2)(i) of the Tax Law provides, in part:
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. . . .
Section 1137 of the Tax Law provides, in part:
Payment of tax (a) Every person required to file a return under the preceding section
whose total taxable receipts, amusement charges and rents are subject to the tax imposed
pursuant to subdivisions (a), (c), (d), (e) and (f) of section eleven hundred five of this article
shall, at the time of filing such return, pay to the tax commission the total of the following:
(i) Four and one-quarter percent of the total of all receipts, amusement
charges and rents subject to tax under this article, and if any of such receipts,
amusement charges and rents are subject to local tax imposed pursuant to article
twenty-nine of this chapter, an additional percentage of the total thereof equal to the
percentage rate of such local tax;
(ii) All taxes imposed by section eleven hundred ten or pursuant to article
twenty-nine of this chapter upon such person's use of property or services; and
(iii) All moneys collected by such person, purportedly as tax imposed by this
article or pursuant to article twenty-nine, with respect to any receipt, amusement
charge or rent not subject to tax, and all moneys collected with respect to any receipt,
amusement charge or rent subject to tax, purportedly in accordance with a schedule
prescribed by the tax commission but actually in excess of the amount stated in such
schedule as the amount to be collected.
Section 1139 of the Tax Law provides, in part:
Refunds (a) In the manner provided in this section the tax commission shall refund
or credit any tax, penalty or interest erroneously, illegally or unconstitutionally collected or

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February 24, 2004
paid if application therefor shall be filed with the tax commission (i) in the case of tax paid
by the applicant to a person required to collect tax, within three years after the date when the
tax was payable by such person to the tax commission as provided in section eleven hundred
thirty-seven, or (ii) in the case of a tax, penalty or interest paid by the applicant to the tax
commission, within three years after the date when such amount was payable under this
article. . . . Such application shall be in such form as the tax commission shall prescribe.
No refund or credit shall be made to any person of tax which he collected from a customer
until he shall first establish to the satisfaction of the tax commission, under such regulations
as it may prescribe, that he has repaid such tax to the customer. . . .
Section 526.10 of the Sales and Use Tax Regulations provides, in part:
Vendor. (a) Persons included.
(1) (i) A person making sales of tangible personal property the receipts from which
are subject to tax is a vendor.
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(2) (i) A person maintaining a place of business in the State making sales, whether
at such place of business or elsewhere, to persons within the State of tangible personal
property or services, the use of which is tax [sic], is a vendor.
(ii) A person shall be considered to be maintaining a place of business in the
State if it, either directly or through a subsidiary, has a store, salesroom, sample
room, showroom, distribution center, warehouse, service center, factory, credit and
collection office, administrative office or research facility in the State.
(3) A person who solicits business by employees, independent contractors, agents or
other representatives and by reason thereof makes sales to persons within the State of
tangible personal property or services, the use of which is subject to tax, is a vendor.
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(4)(i) A person who solicits business by the distribution of catalogs or other
advertising matter, without regard to whether such distribution is the result of regular or
systematic solicitation, if such person has some additional connection with the State which
satisfies the nexus requirement of the United States Constitution and by reason thereof
makes sales to persons within the State of tangible personal property or services the use of
which is subject to tax, is a vendor.

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(ii) For purposes of subparagraph (i) of this paragraph, the additional
connection with the State a person may have in order to qualify as a vendor shall
include, but not be limited to:
(a) the operation of retail stores in the State;
(b) the presence of traveling sales representatives in the State;
(c) the presence of employees, independent contractors or agents in
the State;
(d) the presence of service representatives in the State;
(e) the maintenance of a post office box in the State for receiving
responses to such person's solicitations; or
(f) the maintenance of an office in the State, even if such office
performs no activities related to the sales solicited by such person.
Example 6: Company K is engaged in the mail-order retail sale of computer
hardware and software in New York State. Sales are solicited in New York
by means of direct mail advertising sent from the company's Oregon
headquarters. Company K has no property or employees in New York State.
The hardware and software are sent to New York customers via common
carrier. Customers of Company K who experience problems using a product
purchased may contact the company by phone in Oregon for assistance. In
certain instances, and at no charge to the customer, Company K will send a
computer expert employed by it in Oregon to New York State and provide
technical assistance at the customer's premises. Company K is a vendor
because of its having service representatives in the State. The result would
be the same if, alternatively, Company K has an independent contractor or
agent based in New York State or elsewhere provide technical assistance at
the customer's premises on Company K's behalf.
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(b) Responsibilities of vendors. Every vendor, unless specifically excluded by a
section of the Tax Law or this Title, has certain obligations with respect to registration,
collection of tax from customers, filing of returns and payment of tax. See Parts 532, 533,
539 and 540 of this Title.

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February 24, 2004
(c) Interstate vendors. (1) A person outside this State making sales to persons within
the State, who maintains a place of business in the State as described in paragraph (2) of
subdivision (a) of this section . . . is required to collect the tax on any taxable property or
services delivered in New York.
Opinion
BoatU.S. is a membership organization similar to the Automobile Club of America.
BoatU.S.’s members pay an annual membership fee of between $19 and $99, depending on the
selected service level. BoatU.S. offers members, free of any additional charge, a number of services,
including on-the-water assistance, a marina discounts program and theft reward program, and a free
subscription to the member magazine, BoatU.S.
BoatU.S.’s membership fee is not a charge for an enumerated taxable service or for the sale
of tangible personal property. BoatU.S. 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, BoatU.S.’s membership fee is not subject to sales tax. However, BoatU.S.
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. See Sea Tow Services International,
Inc., Adv Op Comm T & F, July 31, 2001, TSB-A-01(23)S.
Accordingly, neither Boat America nor West Marine, Inc. is required to collect New York
State or local sales tax on charges for renewals of club memberships. Where sales tax has been
collected from members and is subsequently refunded to those members, and where sales tax has
been remitted to the Tax Department by Boat America or West Marine, Inc. even though it was not
collected from members, Boat America and West Marine, Inc. are eligible for a refund or credit of
such tax upon timely application therefor. See sections 1137 and 1139 of the Tax Law.
West Marine, Inc. currently operates the four retail stores previously owned by Boat America
under the BoatU.S. Marine Center name and sells memberships for BoatU.S.’s membership
organization in New York. Persons purchasing a membership in BoatU.S. in the BoatU.S. stores
owned and operated by West Marine, Inc. receive a receipt showing BoatU.S. as the seller of these
memberships. In this capacity, West Marine, Inc. is considered an independent contractor, agent
or other representative of BoatU.S. In addition, independent contractors retained by BoatU.S. may
provide towing assistance to BoatU.S.’s members in New York. Accordingly, BoatU.S. is
considered to have sufficient nexus with New York State to require it to register for sales tax
purposes and to collect the sales or use tax on any sales of taxable property which it may make by
catalog or other means in New York State. See section 1101(b)(8)(i) of the Tax Law; and section
526.10(a)(4)(ii) of the Sales and Use Tax Regulations.
Boat America asserts that it has no physical locations in New York, and that it has no
employees, independent contractors, agents or other representatives in New York. A state can

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February 24, 2004
require an out-of-state seller to collect the state's sales or use tax only when there is a sufficient
nexus between the seller and the taxing state, as required by the Commerce Clause of the United
States Constitution. See National Bellas Hess, Inc. v. Illinois, 386 US 753; National Geographic
Society v. California board of Equalization, 430 US 561 (1977); Quill Corp. v. North Dakota,
504 US 298. In Orvis Company, Inc. v Tax Appeals Tribunal, 86 NY2d 165, 178, the court stated
with respect to the requirements for nexus, "While a physical presence of the vendor is required, it
need not be substantial. Rather, it must be demonstrably more than a %slightest presence’. . . And it
may be manifested by the presence in the taxing State of the vendor's property or the conduct of
economic activities in the taxing State performed by the vendor's personnel or on its behalf."
Provided that Boat America has no other connection with New York State, it is not required
to register or collect sales or use tax on its sales. This conclusion presumes that Boat America acts
as a disclosed agent of BoatU.S. in dealing with towing providers and is not a party to the towing
contracts in its own right, and that no employees or agents of Boat America are physically present
and performing services within the State on a temporary or other basis. Boat America’s customers
in New York are liable for any tax that was not collected from them at the time of sale. Boat
America may, however, voluntarily register to collect sales tax.
The above analysis presumes treatment of Boat America and BoatU.S. as separate legal
entities. However, if the activities of either Boat America or BoatU.S. were so dominated and
controlled by the other, or their activities were so commingled, that they would be considered to be
operating as alter egos of each other rather than separate legal entities, then the corporate structures
would be disregarded and the conclusions reached in this opinion regarding responsibility for
collection of tax would be different. See Harfred Operating Corporation, Adv Op St Tx Comm,
July 18, 1986, TSB-A-86(28)S.

DATED: February 24, 2004

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.