NY TSB-A-11(33)S Sales Tax 2011-12-20

Are paid 'membership' dues at an owner-operated public golf course taxable as social or athletic club dues in NY?

Short answer: No. Tax Law 1105(f)(2) taxes dues paid to a 'social or athletic club,' but this golf course isn't one. The owner retains sole control over the facility and all its operations; the 'members' have no ownership or proprietary interest, no vote, and no say over social functions, tournaments, management, or who else is admitted. Membership is open to the public and limited only by the course's capacity, and the owner uses the word 'member' merely as a marketing device. Because the members neither control the organization nor hold a proprietary interest in it, it isn't a club within the meaning of the statute, so the membership dues aren't subject to sales tax.

Disclaimer: This is an official New York State Department of Taxation and Finance Advisory Opinion (TSB-A), issued by the Office of Counsel at a taxpayer's request. It is limited to the facts set forth in it and binds the Department only with respect to the petitioner to whom it was issued, and only if that petitioner fully and accurately described all relevant facts; another taxpayer cannot rely on it. It reflects the law, regulations, and Department policy in effect when issued and may since have changed. Taxpayer-identifying details are redacted. New York State and local sales taxes are administered centrally by the Department. This summary is informational only and is not legal or tax advice. Consult a licensed New York tax professional about your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

The petitioner owns and operates a public golf-course facility (18-hole course, restaurant, bar, pro-shop) with about 300 "members." Membership is open to the public -- no restriction by geography, income, race, or religion, only by the capacity of the course. Members get one season-opening social gathering and may play in tournaments, but the petitioner retains sole control over the facility and all operations. Members have no ownership/proprietary interest, no vote, and no say in social functions, tournaments, the selection of officers/management/employees, or the acceptance of other members. The petitioner uses "member" as a marketing device. It asked whether the membership dues are taxable.

The Office of Counsel concluded the dues are not taxable:

The dues-tax statute. Tax Law 1105(f)(2) taxes dues paid to a "social or athletic club" (over $10/year). "Dues" is defined broadly (1101(d)(6)).
But this isn't a "club." A club/organization is one where the membership controls social/athletic activities, tournaments, elections, member selection, and management, or the members hold a proprietary interest (20 NYCRR 527.11(b)(5)). Here the members have no proprietary rights and no control over the entity's activities or management; membership is unrestricted (only by capacity); and "member" is just a marketing label (cf. Antlers Country Club, where control/property were held by stockholders, so it wasn't a club).
Result. Because the members neither control the organization nor hold a proprietary interest, the petitioner is not a social or athletic club under 1105(f)(2), and the membership dues are not subject to sales tax.

What this means for you

Golf courses, gyms, and other "membership" businesses

Calling your customers "members" does not make their dues taxable club dues. The dues tax applies only to a genuine social or athletic club -- one the members control (activities, elections, who gets in, management) or in which they hold a proprietary interest. If you, the owner, keep sole control and the "members" are simply paying for access to a facility you run, the dues generally aren't taxable under 1105(f)(2). (Note the flip side: where members do control admission and activities, it can be a club -- see TSB-A-13(8)S -- and separate charges for taxable goods or services at the facility are analyzed on their own.)

Common questions

Q: We call our golfers 'members' and charge dues -- is that taxable?
A: Not by itself. The dues are taxable only if you're a genuine social or athletic club the members control or own a piece of. If you keep sole control and 'member' is just a label, the dues aren't taxable.

Q: What makes something a 'club' for this tax?
A: Members controlling the activities, tournaments, elections, management, and admission -- or holding a proprietary interest in the organization.

Q: Our membership is open to the public and limited only by capacity. Does that matter?
A: Yes -- open, unrestricted membership with no member control or ownership points away from being a taxable club.

Citations and references

Tax Law section 1105(f)(2) (tax on dues of social or athletic clubs)
Tax Law section 1101(d)(6) (definition of dues)
20 NYCRR section 527.11(b)(5) (definition of club/organization)

Source

Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2011.htm
Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a11_33s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Counsel
Advisory Opinion Unit

TSB-A-11(33)S
Sales Tax
December 20, 2011

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S110830A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
Petitioner’s name and address redacted. Petitioner asks whether the membership dues paid by
the members are subject to sales tax. We conclude that membership dues paid for membership
in the club are not subject to sales tax under Section 1105(f)(2) of the Tax Law.
Facts
Petitioner is the owner and operator of a golf course facility that includes an 18-hole
course, a restaurant, a bar, and a pro-shop. Membership is open to the public and there are
approximately 300 members. Petitioner does not restrict its membership as to geographic area,
income, race, or religion. The only restriction on membership is the capacity of the golf course’s
facilities. A single social gathering is held for members by Petitioner at the beginning of each
season and members are allowed to participate in all tournaments throughout the year.
Petitioner at all times retains sole control and authority over the use and operation of the
facilities. The membership does not have any say, control, or rights over social functions, golf
tournaments, or any other aspect of the facilities’ operation. The membership does not
participate in the selection or election of Petitioner’s officers, directors, management, or
employees or participate in the selection or acceptance of other members. Members possess no
ownership or propriety interest in the Petitioner, and have no right to vote on any aspect of the
Petitioner’s business. Petitioner uses the term “member” as a marketing device to attract
business.
Analysis
Tax Law section 1105(f)(2) imposes sales tax on 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.” Tax Law section 1101(d)(6) defines dues as any
“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 are otherwise exempt if paid directly by such
guests.” Sales and Use Tax Regulation section 527.11(b)(5) defines a club or organization as
“any entity which is composed of persons associated for a common objective or common
activities . . . Significant factors, any one of which may indicate that any entity is a club or
organization, are: an organizational structure under which the membership controls social or

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TSB-A-11(33)S
Sales Tax
December 20, 2011

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.”
In Antlers Country Club, Inc., Tax Appeals Tribunal (November 19, 1992), it was held
that an entity was not a “club” because both control and property interest of the entity were held
by the stockholders, who were not all members of the club. In the present case, Petitioner’s
members possess no proprietary rights in the entity and have no control over its activities or
management. Membership in the club is not restricted, other than by the capacity of the facility
and the word “member” is used by Petitioner as a marketing device. Accordingly, Petitioner is
not a “social or athletic club” within the meaning of section 1105(f)(2) of the Tax Law. See 20
NYCRR §527.11(b)(5). Therefore, membership dues paid for membership in the club are not
subject to sales tax under Section 1105(f)(2) of the Tax Law.

DATED: December 20, 2011

NOTE:

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the
person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued or
for the specific time period at issue in the Opinion. The information provided in this
document does not cover every situation and is not intended to replace the law or
change its meaning.