Are membership dues taxable as club dues when a golf and country club sells memberships to the general public on a first-come, first-served basis with no proprietary rights or membership control?

Plain-English summary

Lafayette Golf & Country Club, L.L.C. owns and runs a golf course, swimming pool, clubhouse, restaurant and bar. It's owned by 69 equity owners, but membership -- which gives access to the facilities -- is open to the general public on a first-come, first-served basis, and there's no requirement that a member be an equity owner or vice versa. Nonequity members hold no ownership interest in the club at all and have no vote in electing the nine-member Board of Managers that runs the day-to-day operations (that board is elected only by, and from among, the equity owners). Membership isn't restricted by geography, income, race, religion or anything else -- the only limit the Board can impose is capping membership if the facilities get too crowded. The club asked whether its member dues counted as taxable "club dues" under Tax Law § 1105(f)(2).

New York taxes dues paid to a "social or athletic club" over $10 a year. But the Department's own regulation (20 NYCRR § 527.11(b)(5)) says an entity isn't a taxable "club or organization" just because it charges for annual or seasonal facility use sold first-come-first-served, restricts membership only because of physical facility size, or uses the words "club" or "member" as a marketing device. What does matter is whether members actually have proprietary rights or control -- elections, committees, a say in choosing other members, or an ownership stake in the organization.

Because Lafayette's nonequity members have no ownership interest, no control over management or activities, face no membership restrictions beyond facility capacity, and the "club"/"member" language is just marketing, the Department found its facts essentially identical to an earlier ruling (Cobleskill Golf and Country Club, TSB-A-94(13)S) where dues were held not taxable. It reached the same conclusion here: Lafayette's dues are not subject to sales tax.

What this means for you

Golf clubs, athletic facilities and similar membership businesses

Calling your business a "club" and your customers "members" doesn't automatically make dues taxable. What matters is substance: do members actually have an ownership stake, voting rights, or real control over who else can join and how the place is run? If membership is really just a paid facility-access arrangement open to the public (subject only to a capacity cap), your dues may fall outside the sales tax entirely -- not just outside an exemption, but outside the definition of taxable "club dues" altogether.

Accountants and tax professionals

This ruling operates at a different analytical layer than the "irrespective of purpose" line of club-dues cases (which assume the entity is a genuine club and ask whether a particular charge counts as dues regardless of its purpose). Here the threshold question is whether the entity is a "club or organization" at all under 20 NYCRR § 527.11(b)(5) -- look first at proprietary interest, membership control, and whether any restriction goes beyond mere facility-size capacity, before reaching the dues-taxability analysis.

Members and consumers

If you're paying "dues" to use a golf course, gym or similar facility, whether sales tax applies can turn on details of the ownership and governance structure you may never see -- this isn't something you can determine just from your own membership experience.

Common questions

Q: Does using the word "club" in a business's name make its dues taxable?
A: No. The regulation specifically says using "club" or "member" as a marketing device doesn't by itself create a taxable club or organization.

Q: What would make this club's dues taxable instead?
A: If members held proprietary/ownership rights, had a vote or real control over management or membership decisions, or if membership were restricted by something other than facility capacity (geography, income, background, etc.).

Q: Can another club rely on this ruling?
A: No. This advisory opinion binds the Department only as to Lafayette Golf & Country Club and the specific facts it described; a club with different governance or membership rules could come out differently.

Citations and references

Statutes and regulations:

• Tax Law § 1105(f)(2)(i) (tax on social or athletic club dues)
• 20 NYCRR § 527.11(b)(5) (definition of "club or organization")

Prior rulings and cases referenced:

• Cobleskill Golf and Country Club, Inc., Adv Op Comm T&F, March 30, 1994, TSB-A-94(13)S
• Antlers Country Club, Inc., Dec Tax App Trib, November 19, 1992, TSB-A-92(79)S (as cited in the original opinion; the Tax Appeals Tribunal's own decisions are usually cited "TSB-D", so this may be a typo in the source)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1997.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a97_23s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-97(23)S
Sales Tax

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S970124B

On January 24, 1997, the Department of Taxation and Finance received a
Petition for Advisory Opinion from the Lafayette Golf & Country Club, L.L.C.,
4480 Lafayette Road, Jamesville, New York 13078.
The issue raised by Petitioner, Lafayette Golf & Country Club, is whether
dues paid by its members are subject to sales tax under section 1105(f)(2) of the
Tax Law.
Petitioner submits the following facts as the basis for this Advisory
Opinion.
Petitioner is a limited liability company whose purpose is to own and
operate a golf course and country club. Petitioner will accept membership from
the general public on a first come first served basis and will provide its
members with the use of the golf course, swimming pool, club house and a
restaurant and bar. Petitioner is owned by 69 equity owners. It is anticipated
that most of the owners will be dues paying members in Petitioner, though there
is no requirement that equity owners be members.
Similarly, there is no
requirement that a member be an equity owner of Petitioner in order to make use
of the facilities. Nonequity members have no interest in any of the assets of
the Petitioner.
Under the operating agreement for Petitioner, a nine member Board of
Managers oversees all of the day to day operations of the facilities, including
the social and athletic activities conducted at the facilities. The Board of
Managers are elected by the equity owners and must be equity owners themselves.
Nonequity members have no vote in the election of the Board of Managers.
Membership is available on an annual or seasonal basis and such memberships
are sold on a first come first served basis. The Board of Managers does reserve
the right to restrict membership based solely upon the size of the facilities and
the possibility of overcrowding. Petitioner does not restrict its membership by
geographic area, income, race, religion, or any other means. Petitioner has
chosen to use the word “club” and “member” as a means of marketing interest in
its facilities.
Section 1105(f)(2)(i) of the Tax Law imposes sales tax on the following:
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:

-2­
TSB-A-97(23)S
Sales Tax

(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 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 supplied)
In Cobleskill Golf and Country Club, Inc., Adv Op Comm T&F, March 30, 1994,
TSB-A-94(13)S, it was held that since members in Petitioner held no proprietary
rights, had no control over its activities or management, membership was not
restricted, and the word “club” as used in Petitioner’s name was used as a
marketing device pursuant to Section 527.11(b)(5) of the Sales and Use Tax
Regulations, the dues paid by members of the Cobleskill Golf & Country Club were
not subject to sales tax. See also Antlers Country Club, Inc., Dec Tax App Trib,
November 19, 1992, TSB-D-92(79)S.

-3­
TSB-A-97(23)S
Sales Tax

Since the pertinent facts as presented by Petitioner are virtually
identical to those presented in Cobleskill Golf & Country Club, supra, the dues
paid to Petitioner will likewise not be subject to sales tax.

DATED:

April 17, 1997

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

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