Are dues to a golf and tennis club taxable when the club is corporately owned and runs private outings without members' consent, but members elect the board that manages it?

Plain-English summary

Harold Rothberg argued that his dues to the Canyon Club — a golf and tennis club — weren't taxable under Tax Law § 1105(f)(2). His reasons: the club held private outings and cancelled dinners without members' consent, it became a for-profit business owned by Mitsubishi International Corporation, and he said the members' role matched Example 19 of the regulation (an advisory committee with no real control — not a club).

The Department held the Canyon Club IS a taxable social or athletic club, so the dues were correctly paid and no refund is due.

• The key factor is member control. Under 20 NYCRR § 527.11(b)(5), an entity is a "club or organization" when its members control its activities — and dues can be taxable whether the club is for-profit or not-for-profit.
• The by-laws show member control. Control and management are vested in a nine-member Board of Governors that is elected by the membership, and one must be a voting member to serve. Because members elect the Board, the members control the organization — so it's a club under § 527.11(b)(5). A separate non-voting limited-member class doesn't change that.
• It's both a social and an athletic club. Given its activities, the Canyon Club fits both § 527.11(b)(6) (social club) and § 527.11(b)(7) (athletic club).
• Result: a social or athletic club with dues over $10/year — so the dues are taxable, Rothberg correctly paid, and no refund is due.

What this means for you

If your members elect the board that runs the club, the dues are taxable — even if the club is corporately owned and for-profit. New York looks past ownership and profit status to one question: do the members control management? Electing the governing board is control. That makes the entity a taxable social or athletic club under § 1105(f)(2).

Grievances about how the club is run don't make dues non-taxable. Complaints that management held outings or cancelled events without consent don't defeat the tax; the analysis is about the members' structural power (electing the board), not day-to-day satisfaction.

Contrast with a truly owner-run operation. New York reached the opposite result for an individually owned facility where members had no management role, no vote, and no proprietary interest (see TSB-A-88(31)S, EverGreen Country Club, decided the same year) — there, the "dues" were really season tickets and weren't taxable. The deciding difference is member control.

Common questions

Q: Our golf/tennis club is owned by a company and runs for profit. Are the dues still taxable?
A: Yes, if the members control management — for example, by electing the board that runs the club. For-profit or not-for-profit doesn't matter; member control does.

Q: Members had no say in specific decisions (outings, cancelled dinners). Doesn't that show we don't control the club?
A: No. The Department looks at structural control. If members elect the governing board, they control the organization for sales-tax purposes, regardless of particular management decisions.

Q: We have a non-voting membership tier. Does that make us not a club?
A: No. The existence of a non-voting class doesn't change the result if voting members elect the board.

Q: When are club dues NOT taxable?
A: When the club is genuinely owner-run and members have no management control, no vote, and no proprietary interest — then the charges are treated as use fees/season tickets, not taxable dues (as in the same-year EverGreen decision).

Citations and references

Statute and regulation:

• Tax Law § 1105(f)(2) — imposes tax on dues (over $10/year, excluding the initiation fee) paid to any social or athletic club in the state; where the tax applies, all members pay regardless of their own dues amount
• 20 NYCRR § 527.11(b)(5) — defines "club or organization"; member control of activities, elections, and management (or a proprietary interest) indicates a club, and dues may be taxable whether the club is for-profit or not-for-profit (Example 19: an advisory committee with no control is not a club)
• 20 NYCRR § 527.11(b)(6), (7) — a social club arranges functions for members' social interrelationship; an athletic club has a material purpose of practicing, participating in, or promoting sports or athletics

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1988.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a88_13s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-88(13)S
Sales Tax
January 26, 1988

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S870923A

On September 23, 1987, a Petition for Advisory Opinion was received from Harold Rothberg,
295 Madison Avenue, New York, New York.
The issue raised is whether dues paid to the Canyon Club are subject to the sales tax imposed
by section 1105(f)(2) of the Tax Law and, if not, is Petitioner entitled to a refund of sales tax paid
on such dues.
The Canyon Club is a golf and tennis club. The club maintains different types of
memberships. In addition to membership dues, the club obtains some of its revenue from catering
to non-members and by allowing non-members to use the club grounds and facilities for various
outings.
Petitioner believes that the Canyon Club's dues are not subject to sales tax for the following
reasons:
1.

Without notifying the members or securing their consent, the club held
approximately 18 private outings during June 1984.

2.

In July 1984, the club held 10 outings without knowledge or permission of the
members.

3.

In addition, the club cancelled dinners on both Saturdays and Sundays in 1981, 1982
and 1983 without any notice and without consent of the membership.

4.

Again in August, 1984, the club held 11 private parties without member's knowledge
and consent.

5.

In 1984, the club, formerly non-profit, obtained a catering license and became a profit
organization.

In addition, Petitioner states that the club is owned by Mitsubishi International Corporation
and that the management role of its members follows that of Example 19 of section 527.11 of the
sales tax regulations.
Example 19: Members of a club maintain an advisory committee to make suggestions
to the club owner. The owner is not obligated to accept any of the suggestions. The
members do not control any aspects of the club's activities; therefore, this is not a
"club or organization".
The following excerpts from the sales tax regulations pertain to club dues:
RODERICK G. W. CHU, COMMISSIONER
GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR
TP-8 (3/83)

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Sales Tax
January 26, 1988

527.11 Dues. [Tax Law, §1105(f)(2)] (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 and athletic club, the
tax shall be paid by all members thereof, regardless of the amount of
their dues or initiation fee.
Example 1: 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.

• *
  *
  (b)(5) Club or organization. (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.
  The By-Laws of the Canyon Club contain the following provisions regarding membership
  and the board of directors:
  ARTICLE II
  Section 1

Members shall possess voting power for the election of
members of the Board of Governors and for all other Club purposes,
except that the Board of Governors shall have authority to establish
a special class of members which, in consideration of the payment of

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Sales Tax
January 26, 1988
an annual fee, but without the payment of an initiation fee, shall have
limited privileges to use the facilities of the Club, but shall not have
voting rights.
ARTICLE III
BOARD OF GOVERNORS
Section 1.

Number, Qualifications, Election
and Term of Office.

The control and management of the Club and its property shall
be vested in a Board of Governors consisting of nine (9) members,
each of whom shall be a member entitled to vote. At the annual
meeting held in January, 1975, nine (9) Governors, and an Alternate
Governor for each of said Governors, shall be elected, three (3) for a
term of one (1) year, three (3) for a term of two (2) years and three (3)
for a term of three (3) years. At each successive annual meeting,
three (3) Governors (and an Alternate Governor for each Governor)
shall be elected to hold office for three (3) years as successors to the
Governors whose terms of office shall expire at such annual meeting.
All Governors and Alternate Governors shall hold office until their
successors have been elected and qualified. Any vacancy in the Board
of Governors shall be filled by the Alternate Governor to whom such
vacancy relates, for the unexpired portion of the term of such
vacancy. "Vacancy," as used in these By-Laws, shall mean a
permanently unoccupied post has been created by the occurrence of
any event terminating the lawful right to hold such post. Should
vacancies occur in the post of any Alternate Governor, the remaining
members of the Board of Governors may fill the vacancy for the
unexpired portion of the terms of such vacancy. (Emphasis supplied)
As indicated in §527.11(b)(5), the dues of a club may be subject to sales tax if the club is
either for-profit or not-for-profit.
The controlling factor in determining whether a club, in fact, exists is whether or not the
members have any control over the management of the organization. As stated in the Canyon Club
by-laws, the board of governors control and manage the club; the board is elected by the membership
and, in fact, in order to serve on the board, a person must be a member of the club.
Accordingly, since the members elect the Board of Governors the members have control of
the organization. Therefore, the Canyon Club is a "club or organization" for sales tax purposes. The
fact that another class of members do not vote for the Board of Governors does not change this
result.

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January 26, 1988
Additionally, regulation section 527.11(b)(6) and (7) provide:
(6) Social club. A social club or organization which has a material purpose or
activity of arranging periodic dances, dinners, meetings or other functions affording
its members an opportunity of congregating for social interrelationship.
(7) Athletic club. (i) An athletic club is any club or organization which has as a
material purpose or activity the practice, participation or promotion of any sports or
athletics.
Accordingly, based upon its activities, the Canyon Club is clearly a social or athletic club.
Since the Canyon Club is a social or athletic club with dues over $10 per year, Petitioner
correctly paid the sales tax imposed on dues and thus is not entitled to a refund.

DATED: January 26, 1988

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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