If only one membership class of a social or athletic club has dues over $10 a year, must the club charge sales tax on all the other classes' dues too?

Plain-English summary

The Petitioner is a social or athletic club with seven membership classes (A, B, C, G, SA, SB, Associate). Dues vary widely: class A members pay at least $100/year with full privileges; some classes pay $10 or less; and class C pays no dues at all. The club asked whether all classes' dues are taxable.

The Office of Counsel concluded the club must collect sales tax on the dues, assessments, and other fees for all classes of membership:

• The dues tax is triggered. Sales tax applies to the dues of a social or athletic club when an active annual member's annual dues (excluding the initiation fee) exceed $10/year (section 1105(f)(2); Reg. 527.11). Class A members have full privileges (active annual members) and pay well over $10, so the tax applies to the club.
• Once it applies, everyone pays. The regulation provides that where the tax applies to a club, it must be paid by all members regardless of the amount of their dues or initiation fee (Reg. 527.11(a)(3)). The regulation's own Example 1 confirms it: if full members pay $15 and limited members pay $5, all members' dues are taxable even though some pay $10 or less.
• Result: the existence of one qualifying class (class A) makes every class's dues, assessments, and fees taxable -- including classes paying $10 or less.

What this means for you

Social and athletic clubs

The dues tax is an all-or-nothing switch at the club level, not a member-by-member test. If any class of active annual members pays more than $10/year in dues, you must charge sales tax on the dues, assessments, and fees of every membership class -- including reduced-rate, junior, senior, or associate tiers.

Assessments and other fees ride along

The ruling taxes "dues, assessments and other fees," so building-fund and insurance assessments are taxed alongside dues once the tax applies.

Initiation fees have their own trigger

Separately, an initiation fee over $10 is taxable regardless of the dues amount (Reg. 527.11(a)(2)).

Common questions

Q: Only our top membership tier pays more than $10 a year -- do the cheaper tiers escape the dues tax?
A: No. Once one class of active annual members exceeds $10/year, the tax applies to the club and must be collected from all members, regardless of how little they pay.

Q: A class pays no dues at all -- are its other fees taxable?
A: Yes. Once the tax applies to the club, it reaches the dues, assessments, and other fees of all classes.

Q: What's the threshold that turns the tax on?
A: Annual dues (excluding the initiation fee) over $10 a year for an active annual member; an initiation fee over $10 is independently taxable.

Citations and references

• Tax Law section 1105(f)(2) (dues paid to a social or athletic club)
• 20 NYCRR section 527.11 (dues of social or athletic clubs)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2015.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a15_4s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-15(4)S
Sales Tax
March 23, 2015

Office of Counsel

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S140204B

The Department of Taxation and Finance received a Petition for Advisory Opinion from
the REDACTED REDACTED (“Petitioner”). Petitioner asks whether the dues of certain
membership classes are subject to State and local sales tax.
We conclude that Petitioner must collect sales taxes on dues, assessments and other fees
for all classes of membership.
Facts
Petitioner is a social or athletic club as provided Tax Law § 1105(f)(2), and has seven
different classes of membership (A, B, C, G, SA, SB and Associate). According to Petitioner’s
by-laws, “A” and “G” classes of membership enjoy full club privileges. “A” class members pay
dues of at least $100.00 per year. Members of other classes of Petitioner pay varying amounts of
dues each year, including annual amounts that may be less than $10.00 per year. Specifically:
• “B” class members pay a one-time initiation fee of $600.00, dues of $100.00 per year,
an annual assessment for insurance of $100.00 per year, and an annual assessment for
a building fund of $80.00 per year;
• “C” class members do not pay any annual dues or assessments;
• “G” class members pay a total of $1.00 in dues and assessments per year;
• “SA” class members pay a total of $10.00 in dues and assessments per year;
• “SB” class members pay a total of $10.00 in dues and assessments per year; and,
• “Associate” class members pay a total of $100.00 in dues and assessments per year.
Analysis
The sales and use tax regulations provide in relevant 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.
(2) A tax is imposed on the initiation fee paid to any social or athletic club,
regardless of the amount of dues, if such initiation fee is in excess of $10.
(3) Where the tax applies to any social or athletic club, the tax shall be paid by all
members thereof, regardless of the amount of their dues or initiation fee.

-2-

TSB-A-15(4)S
Sales Tax
March 23 2015

20 NYCRR § 527.11
Petitioner acknowledges that it is a social or athletic club for sales tax purposes.
Petitioner’s “A” membership class has full club privileges and thus are “active annual members”
(see 20 NYCRR § 527.11[b]). Furthermore, since Petitioner’s class “A” members are active
annual members and pay dues, or assessments, in excess of $10.00 a year, sales taxes must be
collected on Petitioner’s class “A” membership dues.
Petitioner’s other membership classes may not have full club privileges and/or pay dues
or assessments of $10 or less a year. As noted above, the sales tax regulations specifically
provide: “[w]here the tax applies to any social or athletic club, the tax shall be paid by all
members thereof, regardless of the amount of their dues or initiation fee” NYCRR
§ 527.11(a)(3). Example “1” under NYCRR § 527.11 provides the following illustration for the
proper application of the regulations:
A social club maintains two types of memberships. Full memberships are $15 per
year and limited memberships are $5 per year. Since the dues paid by the full
members are in excess of $10 per year, all members' dues are taxable even though
some are not more than $10.
Thus, although some of Petitioner’s membership classes pay dues or assessments of
$10.00 or less a year, or do not have full club privileges, the dues of all classes are subject to
State and local sales tax because Petitioner’s class “A” membership independently meets the
requirements for application of the sales tax. Therefore, Petitioner must collect sales tax on the
dues, assessments or other fees for all classes of membership.

DATED: March 23, 2015

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.