Are country-club membership fees taxable dues when membership is limited to residents of one apartment complex, even without member control?

Plain-English summary

Max Pollock asked whether membership in the Towers Country Club is taxable. The club — a business entity on the premises of the North Shore Towers apartment complex in Queens — offers a golf course, indoor and outdoor pools, tennis courts, sauna, showers, locker rooms and lounges. Only residents of North Shore Towers may become members. Members have no proprietary interest and no control over the club's operation.

The Department held it is a social or athletic club, so the membership fees are taxable dues.

• Dues are broadly defined. Section § 1105(f)(2) taxes dues paid to a social or athletic club, and "dues" includes any membership fee, assessment, or charge for social or sports privileges (20 NYCRR 527.11(b)(2)).
• Control and ownership are only some of the club factors. Member control of activities/management or a proprietary interest can indicate a club — but they aren't the only route (20 NYCRR 527.11(b)(5)).
• Exclusivity is independently enough. Where an entity provides club-type facilities (like a country club) and makes them available only to a limited group — other than first-come memberships capped by the facility's physical size — it is a club even without member control or proprietorship. The regulation's Example 30 treats an association whose facilities are restricted to nearby property owners as an athletic club (20 NYCRR 527.11(b)(7)).
• Result. Because membership is restricted to North Shore Towers residents, the Towers Country Club is a social or athletic club, and the fees collected are dues subject to tax under § 1105(f)(2).

What this means for you

Exclusive membership can make a club taxable even if members run nothing and own nothing. New York's dues tax has two independent triggers: member control/ownership, or exclusivity. Restricting a country-club-style facility to a select group (here, one building's residents) is exclusivity — and that alone makes the dues taxable.

Know the line between capacity and exclusivity. Limiting first-come membership to what the facility physically holds is fine and doesn't create a club. Limiting membership to a defined group — by residence, geography, income, or similar — is exclusivity that points to a taxable club.

This is the mirror image of the "open club" rulings. Contrast TSB-A-84(7)S (Willows) and TSB-A-84(3)S (a swim club), where open, first-come membership with no member control meant no taxable club. Here the restricted membership flips the result the other way.

Common questions

Q: Our club is only open to residents of our building/community. Are the dues taxable?
A: Likely yes. Restricting club-type facilities to a limited group is exclusivity, which makes the entity a social or athletic club under § 1105(f)(2) even if members have no control or ownership — so the fees are taxable dues.

Q: Members don't run or own the club. Doesn't that make it not a club?
A: Not by itself. Member control and proprietary interest are only some of the indicators. Exclusivity is an independent basis for finding a taxable club.

Q: What kind of membership limit is not a problem?
A: Limiting first-come, first-served membership solely to the physical capacity of the facility. Other restrictions may be viewed as an attempt at exclusivity.

Citations and references

Statutes:

• Tax Law § 1105(f)(2) — tax on dues paid to a social or athletic club

Regulations:

• 20 NYCRR 527.11(b)(2) — definition of "dues"
• 20 NYCRR 527.11(b)(5) — definition of "club"; control and exclusivity factors
• 20 NYCRR 527.11(b)(7) Example 30 — restricted-membership association is an athletic club

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_48s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-83(48)S
Sales Tax
December 12, 1983

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S830916A

On September 16, 1983 a Petition for Advisory Opinion was received from Max Pollock,
270-04V Grand Central Parkway, Floral Park, New York 11005.
The issue raised is whether payments for membership in the Towers Country Club are subject
to the sales tax imposed under section 1105(f)(2) of the Tax Law.
Petitioner states that a business entity, the "Towers Country Club," owns and operates the
Towers Country Club on the premises of the North Shore Towers, an apartment complex in Queens,
New York. Facilities include a golf course, indoor and outdoor swimming pools, tennis courts,
sauna, shower, locker rooms and lounges. Only residents of the North Shore Towers are eligible to
become general members of the club, and only general members qualify for golf or tennis
memberships. Petitioner also states that members do not have a proprietary interest in the club nor
any control over the operation of the club. A membership application form and a membership
information brochure submitted by Petitioner each state that only residents of the North Shore
Towers are eligible to become members.
Section 1105(f)(2) of the Tax Law imposes a sales tax on dues paid to any social or athletic
club in this state. Section 527.11(b)(2) of the Sales and Use Tax Regulations defines the term "dues"
as "(a) any dues or membership fee, (b) any assessment, irrespective of the purpose for which made,
and (c) any charges for social or sports privileges or facilities."
The Regulations go on to describe a "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;
(d)
offers tournaments, leagues and social activities which are controlled solely by the
management." 20 NYCRR 527.11(b)(5)
RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

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

-2­
TSB-A-83(48)S
Sales Tax
December 12, 1983

The Regulations provide the following example, germane to the present case: "An association
owns land on which it provides tennis courts and bathing beaches, with equipment and attendants
and parking lots for members and their guests, gives parties for members and guests, provides water
to the land of its members and maintains private roads. Only the owners of property in the vicinity
of the association's land, may be members of the association. The association is an athletic club as
the use of its facilities is restricted to members and a material purpose of it is providing sports
privileges and facilities." 20 NYCRR 527.11(b)(7), Example 30.
The foregoing example illuminates the significance of the reference to exclusivity contained
in 20 NYCRR 527.11(b)(5)(ii)(b). That is, where an arrangement is made for the provision of
facilities and services of a type normally found in an athletic or social club, such as a country club,
and the use of such facilities and services is made available only to a limited group of people (except
where memberships offered on a first-come, first-served basis are limited in number by the physical
dimensions of the establishment), the same will constitute a social or athletic club within the
meaning of section 1105(f)(2) of the Tax Law, even in the absence of membership control or
proprietorship of the club. In the present instance, membership in the Towers Country Club, which
makes available services and facilities of a type normally found in country clubs, is limited to
residents of the North Shore Towers apartment complex. Such exclusivity, in accordance with the
provisions of the Sales and Use Tax Regulations here cited, renders the Towers Country Club a
social or athletic club, and the fees collected for membership therein constitute dues subject to tax
under section 1105(f)(2) of the Tax Law.

DATED: November 18, 1983

s/FRANK J. PUCCIA
Director
Technical Services Bureau