Are membership dues paid to a golf and country club subject to New York sales tax as dues to a 'social or athletic club,' when the club's stockholders (not its members) actually control the organization and membership is open to the public?

Subject

Whether dues paid by members are subject to sales and use taxes.

What this means for you

A golf and country club operates a golf course, clubhouse, restaurant, and bar. Membership is unrestricted and open to the general public on a first-come, first-served basis, and members can use the golf course and participate in tournaments and social events. But there's an important structural wrinkle: the club is owned by 197 stockholders, only 81 of whom happen to also be members -- and stock ownership isn't required for membership. The stockholders (not the members) elect the Board of Directors, staff all standing committees, and control every tournament and social function; members have no ownership interest in club assets and no say in selecting directors.

New York taxes dues paid to a "social or athletic club," defined by regulation around whether members themselves control social/athletic activities, tournaments, elections, or hold a proprietary interest in the organization -- factors this club's actual members simply don't have (that control sits with the separate stockholder group instead). The regulation also specifically says using the word "club" as a marketing device, or having membership open on a first-come first-served basis, does NOT by itself make an entity a taxable "club or organization." Following a 1989 precedent (Brierwood Village) with a similar members-have-no-control fact pattern, this opinion concludes the golf club isn't a "social or athletic club" within the meaning of the tax law, so its members' dues aren't subject to sales or use tax.

Q&A

Q: Our club calls its customers "members" and charges "dues," but those members don't elect our board or control club decisions -- are the dues taxable?
A: Per this opinion, no -- the club-dues tax turns on whether MEMBERS control social/athletic activities or hold a proprietary interest in the organization; if that control instead rests with a separate ownership group (like stockholders), the members' payments aren't taxable club dues.

Q: Does using the word "club" in our business name, or requiring an annual membership to use our facility, automatically make our charges taxable dues?
A: No, per this opinion and 20 NYCRR § 527.11(b)(5) -- using "club" as a marketing device, or selling access via an annual/seasonal membership on a first-come first-served basis, doesn't by itself create a taxable "club or organization."

Q: What if our membership WERE restricted (by geography, income, or some other exclusivity criterion) rather than open to the public?
A: This opinion doesn't address that scenario directly, but the regulation's own Example 18 notes that restricting membership by things like geographic area, income, race, or religion (as opposed to merely the physical capacity of a facility) can indicate a taxable "club or organization" instead.

Citations

• Tax Law § 1105(f)(2) -- imposes sales tax on dues paid to a social or athletic club in New York State when annual dues exceed $10 (exclusive of initiation fee) or the initiation fee exceeds $10.
• 20 NYCRR § 527.11(b)(5) -- defines "club or organization" by reference to member control over activities/management/proprietary interest, and clarifies that marketing use of "club," unrestricted first-come first-served membership, or facility-capacity-based size limits don't by themselves create a taxable club.
• Matter of Brierwood Village, Inc., Adv. Op. Comm. T&F, February 13, 1989, TSB-A-89(6)S -- prior opinion holding a similar organization (members with no proprietary rights or management control, non-exclusive membership) was not a "social or athletic club" for tax purposes; followed here.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1994.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a94_13s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-94 (13)S
Sales Tax
March 30, 1994

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S931222A

On December 22, 1993, a Petition for Advisory Opinion was received from Cobleskill Golf
and Country Club, Inc., P.O. Box 367, Cobleskill, NY 12043-0367.
The issue raised by Petitioner, Cobleskill Golf and Country Club, Inc., is whether dues paid
by members are subject to sales and use taxes.
Petitioner is the owner/operator of a golf course and country club which provides its members
with the use of a golf course, clubhouse and a restaurant and bar. All members are eligible to use
the golf course and to participate in all golf tournaments and other social functions such as dinners
and dances. Membership is not restricted and is available to the general public on a first come first
serve basis.
Petitioner is owned by 197 stockholders, of which only 81 are members of Petitioner. An
individual does not have to be a stockholder in order to be a member. The By-laws of Petitioner
delegates all management decisions of Petitioner to a Board of Directors. The Board of Directors
is elected by the stockholders; and only stockholders can be Directors. All standing committees
established by the Board are comprised entirely of stockholders. All tournaments and social
functions are controlled by the Directors.
Members do not have any ownership interest in any of the assets of Petitioner and they do
not participate in the selection of the Directors.
The use of the word "club" in Petitioner's name is to help market its golf course.
Section 1105(f)(2) of the Tax Law imposes sales tax upon the following:
(2) 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, and on the initiation fee alone, regardless of the amount of dues, if such
initiation fee is in excess of ten dollars...
Section 527.11(b)(5) of the Sales and Use Tax Regulations provides, in part, as follows:
(5) Club or organization. (i) The phrase "club or organization" means any
entity which is imposed 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

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TSB-A-94 (13)S
Sales Tax
March 30, 1994
organizational structure under which the membership control 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.
*

*

*

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". (emphasis added)
In Brierwood Village, Inc., Adv Op Comm T&F, February 13, 1989, TSB-A-89(6)S the
Commissioner held that inasmuch as (1) the membership of Petitioner's club possessed no
proprietary rights in Petitioner and had no control over its activities or management and (2)
membership in Petitioner was not exclusive, with members being appointed and accepted from a
waiting list maintained by Petitioner, Petitioner was not a "social or athletic club" within the meaning
of Section 1105(f)(2) of the Tax Law and, therefore, its annual membership "fees" or "dues" was not
subject to sales and use taxes.

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TSB-A-94 (13)S
Sales Tax
March 30, 1994
Accordingly, in the instant case since members in Petitioner possess no proprietary rights in
Petitioner and have no control over its activities or management, membership in Petitioner is not
restricted, and the word "club" as used in Petitioner's name is used as a marketing device pursuant
to Section 527.11(b)(5) of the Sales and Use Tax Regulations and Brierwood Village, Inc., supra,
Petitioner is not a "social or athletic club" within the meaning of Section 1105(f)(2) of the Tax Law.
Therefore, dues paid by its members for membership in Petitioner are not subject to sales and use
taxes.

DATED: March 30, 1994

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

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