Can a social and athletic club buy lockers tax-free as a purchase for resale, since it charges members a fee to use them?

Subject

, is whether a social and athletic club can purchase lockers without the payment of sales tax, as purchases for resale, where the club charges a fee to its members for the use of the lockers.

What this means for you

A tax-exempt social and athletic club, whose members elect a governing board and committees, installed new (non-permanently-attached) lockers in its refurbished clubhouse locker room. Members who want a locker pay an optional rental fee -- and the club bills them sales tax on that fee, since it's treating the charge as a taxable rental or storage service.

The Department disagreed with that framing -- but reached the same bottom-line result. It held that locker-use fees paid to a social/athletic club are actually taxed as club "dues" (specifically, a charge for social or sports privileges/facilities under 20 NYCRR § 527.11), not as a taxable rental of tangible personal property or a taxable storage service. That distinction matters because the club-dues tax (Tax Law § 1105(f)(2)) has no resale exception at all -- unlike some other taxable categories. So even though the club is effectively "reselling" locker access to its members and could otherwise expect to buy the lockers tax-free as inventory for resale, there's no legal mechanism for that here: the club must pay sales tax on its own purchase of the lockers, full stop. The opinion noted the same result would follow even under the alternative theory that locker rental is taxable storage of tangible personal property, since that category also lacks a resale exception.

Q&A

Q: We're a club and we charge members for locker/equipment use -- can we buy the underlying equipment tax-free as inventory for resale?
A: Not per this opinion -- because the charge to members is taxed as club dues (not a taxable rental/storage service), and the club-dues tax has no resale exception, the club must pay sales tax on its own equipment purchases regardless of member billing.

Q: If our locker/equipment fee were instead classified as a taxable rental or storage charge, would that open up a resale exemption?
A: No -- this opinion specifically noted that even under that alternative framing, the "storage of tangible personal property" tax category also has no resale exception, so the outcome would be the same either way.

Q: Does it matter that locker use is optional (not a mandatory part of membership)?
A: Not for this specific question -- optional locker fees are still taxed as club dues under the regulations' broad definition ("any charge for social or sports privileges or facilities"), regardless of whether use is mandatory or elective.

Citations

• Tax Law § 1105(f)(2) -- imposes sales tax on dues paid to a social or athletic club, with no resale exception.
• Tax Law § 1105(c)(4) -- imposes sales tax on storage of tangible personal property (and safe deposit box rentals), also with no resale exception.
• 20 NYCRR § 527.11 -- defines "dues" to include any charge for social or sports privileges or facilities, covering locker-use fees.
• American Locker Co. v. Gallman, 38 A.D.2d 105, aff'd 32 N.Y.2d 175 -- cited on locker rental as taxable storage of tangible personal property.

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_45s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-94 (45)S
Sales Tax
September 28, 1994

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S940718A

On July 18, 1994 a Petitioner for Advisory Opinion was received from Dapolito & Company,
CPA's P.C, 2234 Jackson Avenue, Seaford, New York 11783.
The issue raised by Petitioner, Dapolito & Company, CPA's P.C., is whether a social and
athletic club can purchase lockers without the payment of sales tax, as purchases for resale, where
the club charges a fee to its members for the use of the lockers.
The corporation in issue is a social and athletic club within the meaning of Section 501(c)
of the Internal Revenue Code. The corporation functions as a social and athletic club as defined
under Section 1101(d)(13) of the Tax Law and Sections 527.11(b)(5), (6), and (7) of the Sales and
Use Tax Regulations. The membership of the organization controls its activities through the elected
Board of Governors and committees.
The club purchased and installed new lockers in the locker room of its newly refurbished
clubhouse. These lockers are not permanently attached to the structure.
The members of the club are billed a locker rental fee for use of the lockers. These fees are
not mandatory and are based solely upon whether the member requests the use and takes possession
of a locker. When the locker fees are billed to the members, the club also bills them for sales tax.
Section 1105(c)(4) of the Tax Law imposes sales tax upon "[S]toring all tangible personal
property not held for sale in the regular course of business and the rental of safe deposit boxes or
similar space".
Section 1105(f)(2) of the Tax Law imposes sales tax upon "[T]he dues paid to any social or
athletic club in this state...".
Section 527.11 of the Sales and Use Tax Regulations states, in part:
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....

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TSB-A-94 (45)S
Sales Tax
September 28, 1994

(b) Definitions. As used in this section the following terms shall mean:
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(2) Dues
(i) 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.
In the instant case the charges by the club to its members for the use of the lockers are taxable
under Section 1105(f)(2) of the Tax Law and Section 527.11 of the Sales and Use Tax Regulations
as dues, and not as the rental of tangible personal property which would be taxable under Section
1105(a) of the Tax Law or the storage of tangible personal property which would be taxable under
Section 1105(c)(4) of the Tax Law.
Since there is no provision in Section 1105(f)(2) of the Tax Law which provides for a resale
exception from the payment of sales tax, therefore the club may not purchase the lockers in question
without the payment of sales tax.
It is further noted even if the provisions of Section 1105(f)(2) of the Tax Law were not
applicable, that since there is no provision in Section 1105(c)(4) which provides for a resale
exception from the payment of sales tax, the club could not purchase the lockers in question without
the payment of sales tax since the rental of the lockers is considered to be a charge for the storage
of tangible personal property. American Locker Co. v Gallman, 38 AD2d 105, affd 32 NY2d 175.

DATED: September 28, 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.