Does a membership swimming-pool operator owe sales tax on seasonal membership fees, and on separate charges for renting chaise lounges and lockers?

Plain-English summary

The Flatbush Sun and Swim Club in Brooklyn operates a swimming pool for recreational and athletic use on a membership basis. For a seasonal fee, members use the pool and recreation areas; chaise lounges and lockers are separately available on a rental basis. It asked whether it must collect sales tax on the seasonal membership fees and on the lounge and locker rentals.

The Department held: the membership fees are not taxable dues, but the separate lounge and locker rentals are taxable.

• The seasonal membership fees are not taxable dues. Section § 1105(f)(2) taxes dues paid to a social or athletic club, and 20 NYCRR § 527.11(b)(5) treats an organization as a "club" mainly when the members control its activities, elections, committees, member selection or management, or hold a proprietary interest. Here the operator has exclusive ownership and control over all the club's activities; members have no such control or interest, membership is unrestricted and sold first-come, first-served. So the pool is not a social or athletic club, and the membership fees are not taxable dues.
• Renting chaise lounges is taxable. A "sale" includes a rental of tangible personal property (§ 1101(b)(5)), and § 1105(a) taxes retail sales of tangible personal property. Separate charges to rent chaise lounges are therefore taxable.
• Renting lockers is taxable. Section § 1105(c)(4) taxes the storage of tangible personal property and the rental of safe deposit boxes or similar space. Separate charges to rent lockers are therefore taxable.

What this means for you

Not being a "club" only settles the dues question. Here the pool escaped the dues tax because the owner — not the members — runs and owns it. But that conclusion says nothing about the club's other charges, which are analyzed on their own terms.

Separately stated rentals get taxed even when membership doesn't. The moment the operator charges separately to rent equipment (chaise lounges) or space (lockers), those charges fall under the sales tax: equipment rental as a sale of tangible personal property, and locker rental as taxable storage/space. Bundling versus separately stating charges can change the result — separate rental charges are squarely taxable.

The same fact — owner control — cuts both ways in the club analysis. Owner control means the members don't control the organization, so it isn't a member "club" and dues aren't taxed. (Contrast a restricted, residents-only membership, which New York has treated as an "exclusivity" that does make a club even without member control — see TSB-A-83(48)S.) Compare also the fitness-center opinion TSB-A-83(43)S, where dues were likewise not taxable.

Common questions

Q: We run a members-only pool. Are the seasonal membership fees taxable?
A: Not where the operator owns and controls everything and members have no control or ownership interest, with membership sold first-come, first-served. On those facts it isn't a "social or athletic club," so the fees aren't taxable dues under § 1105(f)(2).

Q: We rent out chaise lounges and lockers for extra fees. Is that taxable?
A: Yes. Chaise-lounge rental is a taxable rental of tangible personal property (§§ 1105(a), 1101(b)(5)); locker rental is taxable as storage/space under § 1105(c)(4).

Q: If the membership fee isn't taxed, why are the rentals?
A: They're different transactions under different statutes. Escaping the club-dues tax doesn't exempt separately charged rentals of equipment or space, which are taxable in their own right.

Citations and references

Statutes and regulations:

• Tax Law § 1105(f)(2) — tax on dues paid to a social or athletic club
• Tax Law § 1105(a) — tax on retail sales of tangible personal property
• Tax Law § 1101(b)(5) — "sale" includes rental, lease or license to use
• Tax Law § 1105(c)(4) — tax on storage of tangible personal property and rental of safe deposit boxes or similar space
• 20 NYCRR § 527.11(b)(5) — definition of "club or organization"

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1983.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a83_42s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-83(42)S
Sales Tax
October 27, 1983

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S830628A

On June 28, 1983 a Petition for Advisory Opinion was received from Flatbush Sun and Swim
Club, 1755 Utica Avenue, Brooklyn, New York 11234.
The issue raised is whether an operator of a swimming pool for recreational and athletic
purposes on a membership basis is required to collect sales tax on fees charged to members for the
use of the facilities for the season.
Petitioner operates a swimming pool facility. Members are permitted, for a seasonal fee, the
use of the pool and recreation areas. In addition, chaise lounges and lockers are available on a rental
basis. Petitioner states that there are no restrictions regarding membership, memberships being sold
on a first-come, first-served basis. Members do not control social or athletic activities, tournaments,
dances, elections or committees, nor do they participate in the selection of members or the
management of the club, nor do they have any proprietary interest in the club.
Section 1105(f)(2) of the Tax Law imposes a sales tax on the dues paid to any social or
athletic club in this state.
Section 527.11(b)(5) of the Sales and Use Tax Regulations defines the term "club or
organization" as "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.
(ii) A club or organization does not exist merely because a business entity:
(a) charges for the use of facilities on an annual or seasonal basis, even if an annual or season
pass is the only method of sale and provided such passes are sold on a first-come, first-served basis;
(b) restricts the size of the membership solely because of the physical size of the facility.
Any other type of restriction may be viewed as an attempt at exclusivity;
(c) uses the word club or member as a marketing device;

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-83(42)S
Sales Tax
October 27, 1983

(d) offers tournaments, leagues and social activities which are controlled solely by the
management." 20 N.Y.C.R.R. 527.11(b)(5).
Section 1105(a) of the Tax Law imposes a sales tax on the receipts from every retail sale of
tangible personal property unless otherwise excluded or exempted. Section 1101(b)(5) of the Tax
Law defines the term "sale" to include the leasing or rental of property.
Section 1105(c)(4) of the Tax Law imposes a sales tax on the storage of tangible personal
property not held for sale in the regular course of business, and the rental of safe deposit boxes or
similar space.
Accordingly, inasmuch as Petitioner has exclusive ownership of and control over all the
activities of the club, the Flatbush Sun and Swim Club is not a club or organization within the
meaning and intent of the Tax Law. Therefore, membership fees paid thereto are not subject to the
tax imposed under section 1105(f)(2) of the Tax Law. However, where there are separate charges
for the rental of chaise lounges and for lockers, such charges would be subject to tax pursuant to
sections 1105(a) and 1105(c)(4) of the Tax Law, respectively.

DATED: September 28, 1983

s/FRANK J. PUCCIA
Director
Technical Services Bureau