Are a golf course's membership initiation fees, annual dues, and driving-range fees subject to New York's tax on social or athletic club dues, even though it markets memberships and calls itself a 'country club'?

Subject

Whether initiation fees, dues, and driving range fees paid to Petitioner, the owner and operator of a golf course facility marketed as a "country club," are subject to sales tax.

What this means for you

A golf course owner runs its facility entirely as a business -- management makes every decision about tournaments, social activities, weather-related closures, and course design, with an advisory-only board of governors that merely relays communication between members and management. "Membership" is really just a marketing label for an annual pass letting the holder play golf: it's open to the general public, first come first served, without regard to race, religion, or residence, and capped at 300 only because that's the course's physical capacity. Members pay a membership fee for the right to play, or a non-refundable initiation fee that lowers their ongoing annual dues; the driving range is billed as a separate, additional charge.

New York taxes dues paid to a "social or athletic club" above a small threshold, but its own regulations say a club or organization doesn't exist just because a business charges for annual/seasonal facility access sold first-come-first-served, restricts membership size solely due to physical capacity, uses the words "club" or "member" as marketing, or runs management-controlled tournaments and social events. What DOES make something a taxable club is member control over activities or management, or a proprietary/ownership interest, or genuine exclusivity (restricting membership by geography, income, race, religion, etc.). None of that is present here: members have no say in governance, no ownership stake, and no ability to restrict who else can join beyond the facility's physical limits. Because the "club" and "membership" language is purely marketing rather than a real membership-controlled organization, the Department held this golf course isn't a social or athletic club at all -- so its initiation fees, membership dues, and driving-range fees are all outside the club-dues tax entirely.

Q&A

Q: We market our golf course or similar facility using "membership" and "club" language, but customers really just buy an annual pass -- are our fees automatically subject to the club-dues tax?
A: No, per this opinion -- using "club" and "member" as marketing terms alone doesn't create a taxable social or athletic club; what matters is whether members actually control activities/management or have a proprietary interest, and whether membership is genuinely exclusive.

Q: We cap membership because of our facility's physical capacity -- does that make us an exclusive "club"?
A: No, per this opinion and the Department's own regulations -- restricting membership solely due to physical facility size doesn't create a club or organization, unlike restricting membership by geography, income, race, religion, or similar means.

Q: Is our separately stated driving-range or facility add-on fee taxed differently from membership dues?
A: In this opinion, both the membership dues, the initiation fee, and the driving-range fee were all held exempt together, since the underlying organization wasn't a taxable social or athletic club to begin with.

Q: Can another golf course or similar facility rely on this opinion?
A: No. This advisory opinion binds the Department only as to the petitioner and the facts described here; another taxpayer cannot rely on it, though the Department applied the same reasoning it used in an earlier opinion involving a similarly structured facility.

Citations

• Tax Law § 1105(f)(2) -- imposes tax on dues paid to a social or athletic club in New York if an active annual member's dues (excluding the initiation fee) exceed ten dollars per year.
• Sales and Use Tax Regulations § 527.11(b)(5) -- defines "club or organization" by reference to member control over activities/management or a proprietary interest, and specifies that charging for annual/seasonal facility access, capping membership due to physical capacity, and using "club"/"member" as marketing do not by themselves create a club or organization.
• Brierwood Village, Inc., Adv. Op. Comm. T&F, February 13, 1989, TSB-A-89(6)S -- held that a similarly structured facility, where members had no proprietary rights or control and membership wasn't exclusive, was not a "social or athletic club" subject to the dues tax.

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_56s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-93 (56) S
Sales Tax
October 18, 1993

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S930709A

On July 9, 1993, a Petition for Advisory Opinion was received from I.H.C.C. Inc., 700
Veterans Memorial Highway, Hauppauge, N.Y 11788.
The issue raised by Petitioner, I.H.C.C. Inc., is whether initiation fees, dues, and driving
range fees paid to it are subject to sales tax.
Petitioner is the owner and operator of a tract of land located on Breeze Hill Road, Northport,
New York, which is utilized as a golf course facility. It commenced its operations as a golf course
on January 1, 1993. For marketing purposes only, the entire operation is referred to as a "country
club" and the right to play golf is referred to as a "membership."
All operating decisions are made by Petitioner.
In exchange for payment of a membership fee, the members receive a right to play golf at no
additional cost. In exchange for the payment of an initiation fee the annual membership dues are less.
The initiation fee is non-refundable.
Members are charged an additional amount for use of the driving range as a separately stated
charge.
Club members have no authority over any activities or management. The members have a
board of governors that act solely in an advisory capacity. Its function is to serve as a means of
communication between the members and management. All decisions are made solely by
management.
All tournaments and social activities of the club are purely at the discretion of management.
All decisions limiting the use of the course resulting from adverse weather conditions and
maintenance rest with management.
All course design changes and modifications rest with management.
The club members have no direct or indirect proprietary interest in management or the
petitioner.
The club members have no say about who may become a member of the club.

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TSB-A-93 (56) S
Sales Tax
October 18, 1993
Membership is limited to 300 members and is offered to the general public on a first come,
first served basis, without regard to race, religion, and/or residence. The only reason for the
limitation of membership is that the Petitioner has determined that 300 members is the maximum
physical capacity of the facility.
As a condition of membership, each prospective member is required to execute a written
membership agreement which will set forth the member's rights and obligations with respect to the
club.
The terms "membership" and "club" are utilized by the Petitioner purely as a marketing
device. A membership merely entitles the member the use of the facilities on an annual basis.
Section 1105(f)(2) of the Tax Law imposes a tax on "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 527.11(b)(5) of the Sales and Use Tax Regulations defines the term "club or
organization" as follows:
(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.
(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.

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TSB-A-93 (56) S
Sales Tax
October 18, 1993
*

Example 18:

*

*

A club owned by an individual which attempts to restrict its
membership by geographic area, income, race, religion or any other
means, is a "club or organization". However, a "club" owned by an
individual which restricts its membership only because of the physical
capacity of its facilities is not a club or organization.

In Brierwood Village, Inc., Adv Op Comm T&F, February 13, 1989, TSB-A-89(6)S, the
Commissioner advised that inasmuch as (1) the membership of the club possessed no proprietary
rights therein and had no control over its activities or management and (2) membership in the club
was not exclusive, with members being appointed and accepted from a waiting list maintained by
Petitioner, the subject club was not a "social or athletic club" within the meaning of section
1105(f)(2) of the Tax Law. Annual membership "fees" or "dues" were thus not subject to the
imposition of sales tax.
Accordingly, pursuant to Section 1105(f)(2) of the Tax Law, Section 527.11(b)(5) of the
Sales and Use Tax Regulations and Brierwood Village, Inc., supra, since membership is not
exclusive, members possess no proprietary interest in Petitioner and have no control over its
activities or management, and the term "club" and "member" are used solely as a marketing device,
Petitioner, is not a social and athletic club and, therefore, membership dues, initiation fees and
driving range fees paid by members are not subject to State and local sales taxes.

DATED: October 18, 1993

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

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