Are a club tennis pro's lesson fees, billed on members' monthly club statements, taxable as club dues?

Plain-English summary

Asher Kahn, doing business as Fenway Tennis Shop, is an independent contractor who runs the tennis facility at a private golf club and gives tennis lessons. A member books a lesson through the club; the fee shows up on the member's monthly club statement (no cash at the court); the club collects it and pays Kahn by check (no income/Social Security withholding, since he's a contractor). He asked whether those lesson fees are taxable as social/athletic-club dues under Tax Law § 1105(f)(2).

The Department said: not taxable — but only if the club is a true pass-through.

• "Dues" is defined broadly. Under Tax Law § 1101(d)(6) and 20 NYCRR § 527.11(b)(2)(i), taxable "dues" include any charge for sports privileges or facilities — which could sweep in lesson fees.
• The caddie-fee rule provides the escape. Borrowing from Declaratory Ruling 80-02 (TSB-H-80(23)S) — about a member's caddie fees billed through the club — the Department held Kahn's lesson fees are not dues if all four conditions hold:
  1. the fee is owed personally by the member to Kahn;
  2. rather than cash at the lesson, it is collected on the member's monthly statement and remitted by the club to Kahn;
  3. the club acts solely as a conduit between member and Kahn; and
  4. the statement clearly labels the charge as for tennis lessons.
• The trap: minimum-charge offsets. If the lesson fees are used to reduce a member's minimum monthly charge to the club, then condition (3) fails — the club is no longer a mere conduit — and the fees become taxable dues.

What this means for you

A club pro's lesson fees can stay tax-free if the club is just a billing pass-through. When the fee is personally owed to the independent professional, merely collected on the member's statement and handed over in full, clearly labeled, the club is a conduit and the fee isn't taxable club dues.

Don't let the fee do double duty. The moment a lesson fee is applied toward a member's minimum monthly spend at the club, the club stops being a neutral conduit and the fee is recharacterized as taxable dues. Keep instructional charges separate from any club minimum.

Labeling and structure matter. Spell out on the statement that the charge is for lessons, make sure it's owed to the pro (not the club), and remit it in full. Those specifics are what keep the arrangement outside § 1105(f)(2).

Common questions

Q: I'm an independent tennis pro at a club, and the club bills my lesson fees on members' statements. Are those taxable dues?
A: Not if all four conditions are met: the fee is owed personally to you, collected via the monthly statement and remitted to you, the club acts solely as a conduit, and the statement clearly identifies the charge as a tennis lesson.

Q: What breaks the exemption?
A: Using the lesson fees to reduce a member's minimum monthly charge to the club. That makes the club more than a conduit (condition 3 fails), and the fees become taxable dues.

Q: Where does this rule come from?
A: The Department applied the caddie-fee conduit test from Declaratory Ruling 80-02 (TSB-H-80(23)S) to tennis lessons — the same logic that keeps a member's caddie fees, billed through the club, from being taxable dues.

Citations and references

Statute, regulation, and ruling:

• Tax Law § 1105(f)(2) — imposes tax on dues paid to a social or athletic club in New York when an active annual member's dues (excluding the initiation fee) exceed $10 per year
• Tax Law § 1101(d)(6) — defines "dues" to include any dues or membership fee, any assessment, and any charge for social or sports privileges or facilities
• 20 NYCRR § 527.11(b)(2)(i) — regulatory definition of "dues" tracking the statute
• Declaratory Ruling of the State Tax Commission 80-02, TSB-H-80(23)S — a member's caddie fees billed through the club are not "dues" where the fee is owed personally to the caddie, disbursed in full to the caddie with the club acting solely as conduit, and separately stated as a caddie fee; the four-part test applied here to tennis lessons

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_41s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-88 (41)S
Sales Tax
August 24, 1988

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S880601C

On June 1, 1988, a Petition for Advisory Opinion was received from Asher Kahn D/B/A
Fenway Tennis Shop, 425 Henry Hudson Parkway, Riverdale, New York 10471.
The issue raised is whether tennis lessons given by Petitioner are subject to sales tax pursuant
to section 1105(f)(2) of the Tax Law.
Petitioner operates the tennis facility at a private golf club in Westchester County which
facility includes tennis courts and a tennis shop. Petitioner states that he operates exclusively as an
independent contractor.
Petitioner states that if a club member wishes to take a lesson, the member telephones the
club and sets a time with the professional or his shop keeper. The member then takes the lesson, and
the fee for the lesson appears on the member's monthly statement from the club. No cash is
exchanged. The lesson fees are collected by the accounting department of the golf club through the
member's monthly statements and monthly payments are then made by the club to Petitioner.
Payments to the professional are made by a check and no withholding amounts from such checks for
income and social security taxes are made since the professional is an independent contractor.
Moreover, with respect to the sports instruction fees, Petitioner maintains that the club merely
acts as a conduit between Petitioner and the members, similar to caddies at the club in the golfing
area.
Pursuant to section 1105(f)(2) of the Tax Law, sales 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 ten dollars per
year...
Section 1101(d)(6) of the Tax Law defines "dues" as:
Any dues or membership fee including any assessment, irrespective of the
purpose for which made, and any charges for social or sports privileges or facilities
except charges for sports privileges or facilities offered to members' guests which
would otherwise be exempt if paid directly by such guest.
Furthermore, section 527.11(b)(2)(i) of the Sales and Use Tax Regulations states, "The term 'dues'
includes: (a) any dues or membership fee; (b) any assessment, irrespective of the purpose for which
made; and (c) any charge for social or sports privileges or facilities".
RODERICK G. W. CHU, COMMISSIONER
TP-8 (9/88)

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

-2­
TSB-A-88 (41)S
Sales Tax
August 24, 1988
In a Declaratory Ruling of the State Tax Commission 80-02, TSB-H-80(23)S, it was held
that:
...where a club charges a member's account for caddie fees owed by that member to
a particular caddie, such fees are not 'dues' as defined in section 1101(d)(6) of the
Tax Law if (i) such fee is owed personally by the member to the caddie on account
of some service the caddie actually performed for the member; (ii) such fee is
disbursed directly, in total, to the caddie who actually performed the service, the club
acting solely as a conduit between the member and the caddie; and (iii) the charge is
separately stated to be a caddie fee.
Similarly, in the present case the tennis lesson fees charged by Petitioner will not be deemed
"dues" within the meaning of section 1101(d)(6) of the Tax Law and section 527.11(b)(2)(i) of the
Sales and Use Tax Regulation if: (1) the fees for the tennis lessons are owed personally by the
members to Petitioner; (2) instead of the members paying Petitioner in cash at the time of the lesson,
the lesson fees are collected by the accounting department of the golf club through the members'
monthly statements and monthly payments are then made by the club to Petitioner; (3) the club acts
solely as a conduit between the members and Petitioner; and (4) the charge on the members' monthly
statements clearly states that the charge is for tennis lessons. Accordingly, the fees charged by
Petitioner will be not subject to sales tax pursuant to section 1105(f)(2) of the Tax Law if all four
above conditions are met. However, if the tennis lesson fees are used to reduce any minimum
monthly charge due by a member to the club, condition number three above will not be met and the
tennis lesson fees will be considered taxable dues paid to a social or athletic club.

DATED: August 24, 1988

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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