Is a health-fitness center a taxable 'social or athletic club,' and which of its membership fees, dues, and service charges are subject to sales tax?

Plain-English summary

Steuben Place Recreational Corp. runs a facility for individual health and fitness, with social and athletic activities. Participants get an initial screening and medical exam, then access to fitness and aerobics classes, a Nautilus program, a pool, a gym, racquetball/volleyball/badminton courts, and a running track; there is also a public-facing bar and dining. Members pay an initial membership fee plus a monthly "club dues" option, with lockers and net-bag laundry available; guests (admitted only with a member) pay for facility and locker use, plus court fees. The center asked (1) whether it is a social or athletic club under § 1105(f)(2), and (2) how its various charges are taxed.

The Department held it is not a taxable club — so dues aren't taxed — but sorted its other charges.

• Not a "social or athletic club." Section § 1105(f)(2) taxes dues over $10/year paid to a social or athletic club; § 1101(d)(13) defines that as a "club or organization" with a material social or athletic purpose. The regulation (20 NYCRR § 527.11(b)(5)) lists indicators — members controlling activities, tournaments, elections, committees, member selection, management, or a proprietary interest. The center stated its members do none of these and hold no proprietary interest. So it is not a club or organization, and its "membership fees" and "club dues" are not taxable dues.
• Locker rental — taxable. Charges for locker rental are taxable as the service of storing tangible personal property under § 1105(c)(4).
• Net-bag laundry — not taxable. Laundry receipts are excluded from the tax on servicing tangible personal property (§ 1105(c)(3)(ii)).
• Restaurant and bar — taxable. Receipts from food and drink are taxable under § 1105(d)(1).
• Dance/social admissions — taxable. Admissions to social activities such as dances are taxable under § 1105(f)(1) (20 NYCRR § 527.10(e)(2)(d)).
• Athletic guest fees — not taxable. Guest fees for using the athletic facilities and court time are excluded from tax (20 NYCRR § 527.10(d)(4)).

What this means for you

Whether you're a taxable "club" turns on member control, not the word "club" in your name. New York looks at whether members run the activities, pick members, manage the entity, or own a piece of it. A commercially run fitness center whose members just buy access is generally not a taxable club, so its dues aren't taxed.

A single facility can have a mix of taxable and exempt charges. Even when dues aren't taxed, individual services are judged on their own: lockers (storage) and food/drink are taxable; laundry and athletic-use guest fees are not; social-event admissions are.

Map each fee to its own statute. Don't tax — or exempt — everything just because the dues answer went one way. Lockers, laundry, meals, court time, and dances each have a distinct rule.

Common questions

Q: Are my fitness center's membership fees and dues taxable?
A: Not if your members don't control activities, select members, manage the entity, or hold a proprietary interest — then you're not a "social or athletic club" and dues aren't taxed under § 1105(f)(2).

Q: What about locker rentals and the café?
A: Locker rental is taxable as storage (§ 1105(c)(4)), and food and drink are taxable (§ 1105(d)(1)).

Q: Are guest court fees or laundry service taxable?
A: No. Guest fees for using the athletic facilities and courts are excluded (20 NYCRR § 527.10(d)(4)), and net-bag laundry service is not taxable (§ 1105(c)(3)(ii)).

Citations and references

Statutes:

• Tax Law § 1105(f)(2) — tax on dues paid to a social or athletic club (over $10/year)
• Tax Law § 1101(d)(6) — definition of "dues" (includes any assessment)
• Tax Law § 1101(d)(13) — definition of "social or athletic club"
• Tax Law § 1105(c)(4) — tax on storing tangible personal property (lockers)
• Tax Law § 1105(c)(3)(ii) — laundry service excluded from the servicing tax
• Tax Law § 1105(d)(1) — tax on receipts from the sale of food and drink
• Tax Law § 1105(f)(1) — tax on admissions to places of amusement

Regulations:

• 20 NYCRR § 527.11(b)(5) — definition of "club or organization" and its indicators
• 20 NYCRR § 527.10(e)(2)(d) — admissions to social activities such as dances are taxable
• 20 NYCRR § 527.10(d)(4) — guest fees for use of athletic facilities and courts are excluded

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1982.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a82_35s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-82(35)S
Sales Tax
October 7, 1982

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S820222A

On February 22, 1982 a Petition for Advisory Opinion was received from Steuben PlaceRecreational Corp., c/o Urbach, Kahn & Werlin, 66 State Street, Albany, New York 12207.
The issues raised are (1) whether the Petitioner constitutes a social or athletic club, within
the meaning of section 1105(f)(2) of the Tax Law, and (2) whether fees charged by Petitioner as
"membership fees," "club dues", and for various services are subject to sales tax.
Petitioner operates a facility which promotes a program of individual health fitness, as well
as providing for social and athletic activities. Participants in the program are given an initial
screening, a medical examination and medical tests to determine their degree of fitness prior to
commencing an exercise program. The participants have access to adult fitness classes, aerobic
classes, a Nautilus conditioning program, a swimming pool and other athletic facilities, including
a gymnasium, racquetball courts, volleyball and badminton courts, and a running track. Petitioner
will also operate a bar and facilities for dining, and such facilities will be available for use by the
public.
Applicants for membership pay an initial membership fee and, in addition, select one of
several monthly "club dues" options. Members enjoy varying privileges in relation to the dues option
selected. Rental lockers are available, as is also net bag laundry service. Guests, who will be
admitted only if accompanied by a member, will be charged a fee for the use of the athletic facilities
and the locker room, with an additional fee for use of the courts.
Section 1105(f)(2) of the Tax Law imposes a tax on" . . . 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 . . . ." The term "dues" is defined in section 1101(d)(6) of the Tax Law as
including" . . . any assessment, irrespective of the purpose for which made . . . . " Section
1101(d)(13) of the Tax Law defines the term "social or athletic club" to mean any ". . .club or
organization of which a material purpose or activity is social or athletic." The Sales and Use Tax
Regulations define the phrase "club or organization" to mean: ". . . 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 organization structure under which the membership controls social or athletic
activities, tournaments, dances, elections, committees, participation in the selection of members and

ROBERT W. BOUCHARD, ACTING COMMISSIONER
GABRIEL B. DiCERBO , DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR
TP-8 (8/82)

-2­
TSB-A-82(35)S
Sales Tax
October 7, 1982

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." 20 NYCRR 527.11(b)(5).
Petitioner states with respect to the foregoing that: " . . . the membership does not control the
social or athletic activities; tournaments, dances, elections, or committees. The membership does not
participate in the selection of members and management. The members do not possess a proprietary
interest in the corporation." It follows therefrom that Petitioner is not a "club or organization," within
the meaning of the regulation provision quoted above and, thus, is not a "social or athletic club,"
within the meaning of section 1105(f)(2) of the Tax Law. Accordingly, the "membership fees" and
"club dues" charged by Petitioner do not constitute "dues paid to any social or athletic club," and are
thus not subject to tax.
As to Petitioner's other charges, the following applies. Petitioner's charges for locker rental
are subject to tax pursuant to section 1105(c)(4) of the Tax Law, which imposes a tax on receipts
from the service of "storing all tangible personal property not held for sale in the regular course of
business. . . ." Charges for net bag laundry service are not subject to tax, inasmuch as receipts from
the service of laundry are excluded from the tax on receipts from the service of "maintaining,
servicing or repairing tangible personal property." Tax Law, § 1105(c)(3)(ii). Receipts from the
operation of the restaurant and bar/lounge are subject to tax under section 1105(d)(1) of the Tax
Law, which imposes a tax on receipts from the sale of food and drink. Receipts from admissions to
social activities such as dances are subject to tax under section 1105(f)(1) of the Tax Law, which
imposes a tax on admissions to places of amusement. 20 NYCRR 527.10(e)(2)(d). However, guest
fees paid for the use of Petitioner's athletic facilities and for court time are excluded from the
operation of such tax. 20 NYCRR 527.10(d)(4).

DATED: September 21, 1982

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau