Are the monthly assessments a homeowners association charges to maintain common areas — including a tennis court — taxable as social or athletic club dues?

Plain-English summary

Stratford RP, Inc. (a real estate developer) created the Stratford Green Homeowners Association — a Not-for-Profit corporation — to own and operate a housing development's common property. Membership and one vote are automatic for each lot owner, and the member-elected board levies monthly assessments. The common property is roadways, parking, landscaping, lawn sprinklers, storm drainage, and a tennis court, reserved for members and their families, tenants, or guests. The developer argued the association is not an athletic club because only a minor portion of dues maintains the tennis court.

The Department held the assessments are taxable dues to a social or athletic club.

• Assessments are "dues." Tax Law § 1101(d)(6) defines dues to include any assessment, regardless of the purpose for which it's made. So the monthly assessments count as dues.
• This is a "club." Under 20 NYCRR 527.11(b)(5), the association's member-control, voting, and elected-board management structure makes it a club or organization.
• Homeowners associations can be "social clubs." Section 1105(f)(2) (and § 1101(d)(13)) has been applied to homeowners associations as social clubs — Merrick Estates Civic Association, Fox Wander West, and U.S. v. McIntyre (a members-only swimming pool made an association a social club). The common property here is not for public use; it gives members places to congregate for recreation and social activities.
• So the purpose is social/athletic. A material purpose of the association is social and athletic, so the assessments are dues to a social or athletic club and — if over $10 a year — are subject to State and local sales tax. That only a small share funds the tennis court doesn't change the result, because dues are taxed "irrespective of the purpose" of the assessment.

What this means for you

A homeowners association's assessments can be taxable club dues even if recreation is a small part of the budget. New York taxes the dues — defined to include any assessment regardless of purpose — once the group qualifies as a social or athletic club. You can't avoid the tax by pointing out that most of the money goes to roads, landscaping, or drainage.

Members-only recreational common areas make it a club. A pool, tennis court, trails, or beach reserved for residents gives the association a material social or athletic purpose. Public-use facilities would be different, but members-only recreation is the classic club fact pattern.

Automatic membership and not-for-profit status don't exempt you. Owners joining automatically and the group being a not-for-profit corporation do not change the analysis.

Common questions

Q: Only a tiny fraction of our assessments maintains the tennis court. Are the dues still taxable?
A: Yes. Dues include any assessment regardless of purpose, so the tax applies once the association qualifies as a social or athletic club — the recreation share of the budget doesn't matter.

Q: What makes our homeowners association a "club"?
A: A member-controlled, elected-board structure plus members-only recreational/common facilities. Courts have treated such associations as social clubs.

Q: We're a not-for-profit and membership is automatic. Doesn't that exempt us?
A: No. Neither the not-for-profit form nor automatic membership changes the result.

Citations and references

Statute, regulation, and cases:

• Tax Law § 1105(f)(2) — taxes dues over $10/year to a social or athletic club
• Tax Law § 1101(d)(6) — defines dues to include any assessment, irrespective of purpose
• Tax Law § 1101(d)(13) — defines a social or athletic club (material social or athletic purpose)
• 20 NYCRR 527.11(b)(5) — defines "club or organization" and its member-control factors
• Merrick Estates Civic Association v. State Tax Commission, 65 A.D.2d 669 (1978); Fox Wander West Neighborhood Association, TSB-H-80(156)S; U.S. v. McIntyre, 253 F.2d 728 — homeowners/members-only-facility associations treated as social clubs

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1987.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a87_40s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-87(40)S
Sales Tax
October 29, 1987

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S870624B

On June 24, 1987, a Petition for Advisory Opinion was received from Stratford RP, INC.,
c/o Rush Properties, Inc., One Barstow Road, Great Neck, New York 11021.
The issue raised is whether monthly dues paid to a homeowners association, engaged in the
management, maintenance and repair of the common areas within a real estate development, are
subject to sales tax under Section 1105(f)(2) of the Tax Law.
Petitioner, a real estate developer, created the Stratford Green Homeowners Association
("Association") - incorporated under the Not-for-Profit Corporation Law of the State of New York ­
to own and operate the housing development's common property. Membership and the right to one
vote is automatic for each owner of a lot within the community. The Board of Directors, elected by
the members, is empowered to levy monthly assessments.
The Association's corporate by-laws define common property as "areas of land devoted to
the common use and enjoyment of the members", restricting such use to the members and their
families, tenants or guests. The by-laws provide for the proceeds from assessments to be "used to
promote the recreation, enjoyment, health, safety and welfare of the members and other residents of
the property as a community".
Petitioner describes the common area as land and improvements constructed thereon
including roadways, parking area, landscaping, lawn sprinkler systems, storm drainage and a tennis
court.
Since only a minor portion of the monthly dues are used to maintain the tennis court,
Petitioner argues the association is not a social or athletic club because its material purpose is not
to provide sports privileges and facilities.
The Tax Law (§1105[f][2]) imposes a tax on dues paid 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 Tax Law (§1101[d][6]) defines the term "dues" as any dues or membership fee
including any assessment, irrespective of the purpose for which made. The term "social or athletic
club" is defined to mean any club or organization of which a material purpose or activity is social
or athletic. Tax Law §1101(d)(13).
Section 527.11(b)(5) of the Sales and Use Tax Regulations explains further:

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

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

-2­
TSB-A-87(40)S
Sales Tax
October 29, 1987

(i) The phrase club or organization means 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:
*

*

*

(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. (Emphasis added).
The Association clearly fits the definition of club or organization and, accordingly, the
monthly assessments are considered dues within the meaning and intent of the Tax Law. Whether
such dues are taxable is dependent on whether the Association is deemed a social or athletic club.
Section 1105(f)(2) of the Tax Law has been held applicable to homeowners associations as
a "social club". Merrick Estates Civic Association v. State Tax Commission, 65 A.D.2d 669 (1978);
Fox Wander West Neighborhood Association, State Tax Commission Advisory Opinion, July 29,
1980, TSB-H-80(156)S. In each case, home owners were obligated to become members of the
association and pay a share of the common area maintenance cost. Use of the properties (including,
in Merrick, a beach, swimming pool and related facilities, in Fox Wander common green areas and
a trail system) was restricted to homeowners living in a defined residential section.
Furthermore, in the Merrick determination, the Court relied on U.S. v. McIntyre (253 F 2d
728) where it was held that an association was a "social club" for tax purposes because it maintained
a non-public swimming pool available only to association members who, by prearrangement or
happenstance, met there for social purposes.
Similarly, the common property here at issue is not intended for public use but to provide,
in addition to the tennis court, areas where members may congregate for recreation and social
activities. Thus, a material purpose of the homeowners association is social and athletic.

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TSB-A-87(40)S
Sales Tax
October 29, 1987

Consequently, assessments paid by the members constitute dues paid to a social or athletic club
which, if in excess of ten dollars per year, are subject to State and local sales taxes.

DATED: October 29, 1987

s/ANDREW F. MARCHESE
Chief of Advisory Opinions

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.