When a social club collects membership dues and activity fees and forwards part of them to another club it shares facilities with, which club must report and remit the sales tax?

Plain-English summary

A not-for-profit alumni social club owned no clubhouse of its own. Instead it signed a facilities-sharing agreement with another established New York club, giving its members access to that club's dining, lodging, banquet, and athletic facilities. In exchange, the alumni club forwarded roughly 60% of its membership fees to the host club and held nearly all of its social functions there, paying the host club per function. The alumni club asked the Department how the sales tax on its dues and its members' activity fees should be reported and remitted when the money is largely passed through to the host club.

New York taxes the dues of a social or athletic club when an active annual member's dues exceed $10 per year (Tax Law § 1105(f)(2)). The Department held that the alumni club is a "social club" under the regulations, so it — the club that bills its members — must collect the tax on its dues, is personally liable for the tax it collects (§ 1133), and must register as a sales tax vendor (§ 1134). It cannot hand its sales tax collections over to the host club to report on the host club's return.

On the food and drink side, the Department applied the caterer/resale rules. When the alumni club runs a function at the host club, the host club must charge the alumni club sales tax on the food, beverages, and facilities. Because the alumni club is treated as reselling that food and drink to its own members, it must in turn collect sales tax on the activity fee it bills members — but it may take a credit on its return for the tax it already paid the host club, so the same food is not taxed twice.

What this means for you

Social and athletic clubs

If your club bills members for dues over $10 a year, you must register as a sales tax vendor and collect and remit the tax on those dues yourself. Sharing a building, staff, or billing services with another club does not let you route your dues tax through that other organization's return — the collection duty follows whoever charges the member.

Clubs that share facilities or pass money to a host

Money you forward to a host club is your business arrangement; it does not move the tax obligation. When the host club bills your members directly, the host collects the tax on those charges. When you organize the event and bill your members, you collect — and you claim credit for the tax the host charged you on the food and drink you are reselling.

Accountants advising membership organizations

The two moving parts here are the club-dues tax (§ 1105(f)(2)) and the food-and-drink resale credit (§ 527.8(f) and (i)). The resale-credit mechanism prevents double taxation: tax paid to the host on prepared food purchases is creditable against the tax the reselling club must collect from members on the activity fee. Match the credit to the tax actually paid.

Common questions

Q: Can our club let the club we share facilities with report and pay our dues tax?
A: No. The Department was explicit that the petitioner "may not transfer sales tax collections" to the host club for inclusion on the host club's return. The club that bills the member collects and remits.

Q: When is the host club the one that collects tax?
A: When the host club bills your members directly for use of its facilities or its services, the host club is liable for collecting and remitting the tax on those direct charges.

Q: How does the food-and-drink tax work for our functions?
A: The host club charges you tax on the food, drink, and facilities for the event. Because you are reselling that food to your members, you must collect tax on the activity fee — but you may credit the tax you paid the host on the food purchases against what you owe.

Q: Are dues under $10 a year taxable?
A: The tax applies to social or athletic club dues where an active annual member's dues exceed $10 per year. Below that threshold the dues tax does not apply.

Q: Can another club rely on this opinion?
A: No. An advisory opinion binds the Department only as to the petitioner and the facts described. It shows the Department's reasoning, but your facts may differ.

Citations and references

Statutes and regulations:

• Tax Law § 1101(d)(6) (definition of "dues")
• Tax Law § 1105(f)(2) (tax on social or athletic club dues over $10 per year)
• Tax Law § 1133 (personal liability of a person required to collect tax)
• Tax Law § 1134 (registration as a sales tax vendor)
• 20 NYCRR § 527.11 (dues; definition of a social club)
• 20 NYCRR § 527.8 (sale of food and drink; caterer resale credit)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1993.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a93_28s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-93 (28) S
Sales Tax
April 20, 1993

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S921123B

On November 23, 1992 a Petition for Advisory Opinion was received from The 1754 Alumni
Club Ltd., d/b/a The Columbia Club of New York, 24 East 39th Street, New York, New York 10016.
The issues raised by Petitioner, The 1754 Alumni Club Ltd., d/b/a The Columbia Club of
New York, are:
(1)

What is the proper manner of reporting and remitting sales tax with respect to annual
membership fees collected by a social club and forwarded to another social club
pursuant to a facilities sharing agreement.

(2)

What is the proper manner of reporting and remitting sales tax with respect to activity
fees collected by a social club and forwarded to another social club that hosts the
event and with which the first club shares facilities pursuant to a facilities sharing
agreement.

Petitioner is a not for profit alumni social club which is exempt from federal income tax
under section 501(c)(7) of the Internal Revenue Code. Petitioner's purpose is to provide social and
recreational activities to its members. In furtherance of this purpose, Petitioner provides access to
traditional club facilities and organizes a variety of social functions such as wine tastings, dances,
and lecture series.
Petitioner does not maintain currently, and has never maintained, its own physical facilities.
On November 1, 1990 Petitioner entered an agreement with the Williams Club of New York (the
"Williams Club") to share the facilities of the Williams Club. Under the terms thereof, Petitioner's
members are entitled to substantially the same membership privileges at the Williams Club as are
Williams Club members and Petitioner is granted the use of certain office space. These membership
privileges include access to the Williams Club's lodging, banquet and dining facilities as well as
access to associated social and athletic clubs. In exchange for these rights and privileges Petitioner
forwards approximately 60 percent of its membership fees to the Williams Club.
The facilities sharing agreement between Petitioner and The Williams Club states, in part:
4.
Initially the Columbia Club will be responsible for collecting its
members' dues. It is the intention of the Columbia Club to adjust its dues structure
as quickly as feasible to that of the Williams Club. If operations under this
agreement develop satisfactorily to both parties, the end point of such adjustment
would be a dues structure parallel to or merged with that of the Williams Club.

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Sales Tax
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The Williams Club will be responsible for collecting payments of Columbia
members' house charges (including reciprocal club charges when introductions have
been provided through the Williams Club) using the same procedures it employs to
assure prompt and complete satisfaction of all other members' financial obligations.
Separately identified monthly billing statements (eg "Columbia Club of NY at the
Williams Club") will be used whenever feasible.
Petitioner holds substantially all of its social functions at the Williams Club and generally
compensates the Williams Club for the use of its facilities on a per function basis.
Since September, 1991 it has been Petitioner's practice to collect New York sales tax on its
membership fees, remit the sales tax due thereon to the State and subsequently forward a portion of
the fees to the Williams Club as described above. Prior to that time, the Petitioner included the
appropriate sales tax with the fees forwarded to the Williams Club and the Williams Club remitted
such tax to the State.
With respect to the social functions organized by Petitioner and held at the Williams Club
Petitioner has generally paid all sales tax applicable to the Williams Club's provision of facilities,
food, beverages, etc. and the Williams Club has remitted the tax to the State. Petitioner charged its
members an activity fee to attend these functions which was based on and generally equaled its
compensation to the Williams Club (including all applicable sales tax paid by Petitioner). Petitioner
generally has not retained any profit from the activities nor has it collected any sales tax independent
of that charged by the Williams Club.
Section 1101 of the Tax Law states, in part:
Definitions. - - ...
(d) When used in this article for purposes of the tax imposed under subdivision (f)
of section eleven hundred five, the following terms shall mean:
(6) Dues. 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
...
Section 1105 of the Tax Law states, in part:
Imposition of sales tax. - - ... there is hereby imposed and there shall be paid a tax
... upon:
(f) (2) The dues paid to any social or athletic club in this state if the dues of an active
annual member ... are in excess of ten dollars per year ....

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TSB-A-93 (28) S
Sales Tax
April 20, 1993

Section 527.11 of the Sales and Use Tax Regulations states, in part:
Dues. [Tax Law, §l105(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 ... are in excess of $10 per year.
(b) Definitions. As used in this section, the following terms shall mean:
(2) Dues. (1) The term dues includes:
(a) any dues or membership fees;
(b) any assessment, irrespective of the purpose for which made, and
(c) any charge for social or sports privileges or facilities.
(6) Social club. A social club is any 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.
Section 527.8 of the Sales and Use Tax Regulations states, in part:
527.8 Sale of food and drink. [Tax Law, §ll05(d)] (a) Imposition. Sales tax
is imposed on the receipts, including any cover, minimum, entertainment or other
charge, from every sale of beer, wine or other alcoholic beverages and food or drink
of any nature sold in or by restaurants, taverns or other establishments in this State
or by caterers ...
(f) Caterers.
(2) Purchases by caterers.
(iv) Taxable food and drink. Purchases by caterers of prepared food or drink
(taxable under subdivision (a) of this section) may not be made for resale and are
subject to tax at the time of purchase. However, a caterer may take a credit on its
sales tax return for the tax paid on such food. (See subdivision (i) of this section for
more information on the purchase of food or drink for resale.)
Example 5:

A caterer has several parties at
onetime and is unable to prepare all
the food for the various groups. The
caterer purchases prepared meat

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TSB-A-93 (28) S
Sales Tax
April 20, 1993

platters and prepared hot and cold
salads to distribute to the various
catered groups. Although the caterer
may not purchase the prepared food
exempt from tax as a purchase for
resale, it may claim a credit when
reporting its catered sales on its sales
tax return for the tax paid on the food.
*

*

*

(i) Resale . (1) Any person purchasing food or drink for resale as such is required
to pay tax thereon at the time of purchase.
(2) When the food or drink is subsequently resold, the seller is required to
collect tax from the purchaser.
(3) The tax paid by the seller may be taken as a credit against the tax which
the seller is required to collect and remit on the subsequent sale The credit is limited
to the amount of tax actually paid on the purchase by the seller of the food and drink
resold.
Section 1133 of the Tax Law states, in part:
Liability for the tax - - (a) Except as otherwise provided .... every person required to
collect any tax imposed by this article shall be personally liable for the tax imposed,
collected or required to be collected under this article.
Section 1134 of the Tax Law states, in part:
Registration. - - (a)(1)(i) Every person required to collect any tax imposed by this
article .... shall file with the commissioner of taxation and finance a certificate of
registration, in a form prescribed by him ....
In the instant matter Petitioner is considered to be a social club as defined under Section
527.11(b)(6) of the Sales and Use Tax Regulations and is required to collect sales tax on dues
payments from members as imposed under Section 1105(f)(2) of the Tax Law and Section
527.11(a)(1) of said Regulations. Since Petitioner is required to collect sales tax, Petitioner is liable
for the sales tax collected as provided under Section 1133 of the Tax Law and is also required to be
registered as a sales tax vendor under the provisions of Section 1134 of the Tax Law.

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TSB-A-93 (28) S
Sales Tax
April 20, 1993

Accordingly, Petitioner is liable for collecting sales tax on the annual membership fee
charged to club members, and on all activity fees and other charges billed to members directly by
Petitioner. Petitioner must submit any sales tax collected on the sales tax return filed for the
applicable period in which the tax was collected.
Petitioner may not transfer sales tax collections to the Williams Club for inclusion on a sales
tax return filed by the Williams Club.
However, when the Williams Club directly bills Petitioner's members for use of the facilities
or for services rendered by the Williams Club, the Williams Club will be liable for collecting and
submitting any sales tax due on the charges billed directly to Petitioner's members.
When Petitioner organizes a social function which is held at the William's Club, the
William's Club in accordance with Sections 527.8(a) and (f)(2)(iv) of the Regulations, is required
to collect sales tax from Petitioner on all charges to Petitioner for food, beverage, etc. Since
Petitioner is considered to be reselling the food, drink, etc., to its members, Petitioner must collect
sales tax on the activity fee billed to its members to attend the function. However, Petitioner, in
accordance with Sections 527.8(f)(iv) and (i) of the Regulations, may claim a credit on the applicable
sales tax return for the amount of sales tax paid to the William's Club in connection with the
purchase of the food, drink, etc.

DATED: April 20, 1993

/s/
PAUL B. C0BURN
Deputy Director
Taxpayer Services Division

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