Is a special assessment that a country club charges members to build a safety tunnel subject to New York's club dues tax?

Plain-English summary

Mount Kisco Country Club's golf course is split by a state highway, forcing golfers to cross the busy road twice per round. After exploring cheaper alternatives (a traffic light, a bridge) that were all rejected by the relevant authorities, the club's members voted to fund construction of a tunnel under the highway, at an initial cost of $450,000. The state granted the club a permit and right-of-way to build the tunnel, but title to the improvement belongs to the state, and the club would have to remove it and restore the road if the permit were ever canceled. The club billed members a separate assessment earmarked solely for the tunnel, kept apart from its other general assessments. Because the club already concedes it's a taxable "social or athletic club" under New York's dues tax, it asked whether this particular assessment -- for a genuine capital improvement built purely for member safety -- escapes that tax.

New York's dues tax defines "dues" extremely broadly: it explicitly includes "any assessment, irrespective of the purpose for which made." The Department's own regulations spell out that even an assessment used entirely to fund a capital improvement (its example involves financing a new clubhouse dining room) is still taxable as dues. Because the tunnel assessment is, by definition, an assessment charged to club members -- regardless of its highly specific safety purpose, its separate billing, or the fact that title to the resulting improvement doesn't even belong to the club -- it falls squarely within the statutory definition of taxable dues. The purpose of the charge simply doesn't matter to the analysis.

What this means for you

Social and athletic clubs charging special assessments for capital projects

Segregating a special assessment's proceeds, earmarking it for a specific (even safety-driven) capital project, or building something whose title doesn't belong to the club, doesn't remove it from the dues tax -- "irrespective of the purpose for which made" means exactly what it says.

Country clubs, golf clubs, and similar member-based facilities planning special assessments

Budget for sales tax on any special assessment you plan to bill members, no matter how compelling or safety-related the underlying project is -- the only way to avoid the dues tax altogether is to not be a taxable social or athletic club in the first place (a separate threshold question from this ruling).

Accountants and tax professionals

This ruling reconfirms a well-established, bright-line rule (traced back to a 1990 Nassau Country Club ruling) that the "irrespective of purpose" language in the dues definition leaves essentially no room for a purpose-based exception, even for genuinely safety-motivated capital assessments.

Common questions

Q: Are special assessments for club capital improvements ever exempt from the dues tax?
A: No -- New York's definition of "dues" specifically includes any assessment regardless of its purpose, so capital-improvement assessments are taxable the same as any other club assessment.

Q: Does it matter that the assessment was motivated by member safety rather than amenities?
A: No -- the statute's "irrespective of the purpose for which made" language doesn't distinguish between safety-driven and amenity-driven assessments.

Q: Does it matter that title to the tunnel belongs to the state, not the club?
A: No -- the Department's analysis focused entirely on whether the charge to members is an "assessment" within the dues definition, not on who ultimately owns the resulting improvement.

Q: Does this ruling apply to my club's special assessment?
A: Not automatically. An Advisory Opinion binds the Department only for the taxpayer and facts it was issued to, and it can't be relied on by anyone else. Whether your organization is a taxable social or athletic club at all is a separate threshold question that would need its own analysis.

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_47s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-97(47)S
Sales Tax

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S970513C

On May 13, 1997, a Petition for Advisory Opinion was received from Mount
Kisco Country Club, Inc., 10 Taylor Road, Mount Kisco, New York 10549.
The issue raised by Petitioner, Mount Kisco Country Club, Inc., is whether
an assessment charged to members of a country club for the construction of a
tunnel which results in a capital improvement, and is built specifically for the
safety of the members, is subject to sales tax.
Petitioner submits the following facts.
Petitioner is a not-for-profit organization exempt from Federal taxation
pursuant to Section 501(c)(7) of the Internal Revenue Code. Petitioner and its
subsidiary, Mount Kisco Country Club Realty Corporation, own and operate a
country club which provides its members with the use of an 115 acre golf course,
a clubhouse, tennis and paddle courts, a swimming pool, and a restaurant and bar.
The 1st and 18th holes on the golf course are separated from the rest of the
course by Route 117, a New York State highway. Previously, golfers playing the
course had to either walk or drive their golf carts across the highway twice
during the course of playing a round of golf.
Petitioner became increasingly concerned about the safety of its members
and their guests due to the increased traffic on the highway.
Petitioner
approached the appropriate authorities seeking solutions for improving this
hazardous condition.
Numerous alternatives were pursued with the respective
authorities from simply installing a traffic light to building a bridge, some
more cost effective than others, all of which were rejected. Finally, the more
ambitious alternative of constructing a tunnel under the highway was approved.
Faced with no other alternative, in 1995 the members of Petitioner voted in favor
of moving forward with this project. Petitioner entered into a contract with a
construction company to construct the tunnel for an initial cost of $450,000.
The State, under its permit, granted Petitioner a right of way to construct the
tunnel under the highway with title to such capital improvement belonging to the
State.
Furthermore, cancellation of the permit would require Petitioner to
remove the improvement and restore the right of way to its original condition.
At the end of 1996, the construction of the tunnel was substantially completed.
Petitioner concedes it is a social or athletic club within the meaning of
Section 1105(f)(2) of the Tax Law. Therefore, sales tax is imposed on amounts
billed to members for initiation fees, annual dues and general assessments. The
assessment for construction of the tunnel was billed to the members separately,
and was earmarked solely for expenditures on the tunnel. The funds collected for
the tunnel were not commingled with other general assessments.

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TSB-A-97(47)S
Sales Tax

Applicable Law and Regulations
Section 1101(d) of the Tax Law provides, in part:
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, except charges for sports
privileges or facilities offered to members' guests which would
otherwise be exempt if paid directly by such guests.
Section 1105(f)(2)(i) of the Tax Law imposes sales 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, and on the initiation fee
alone, regardless of the amount of dues, if such initiation fee is
in excess of ten dollars. Where the tax on dues applies to any such
social or athletic club, the tax shall be paid by all members, other
than honorary members, thereof regardless of the amount of their
dues....
Section 527.11(b) of the Sales and Use Tax Regulations provides, in part:
Definitions. As used in this section, the following terms shall
mean:
*

*

*

(2) Dues. (i) The term dues includes:
(a) any dues or membership fee;
(b) assessment, irrespective of the purpose for which made; and
(c) any charge for social or sports privileges or facilities.
(emphasis added)

*

*

*

Example 4: A social club wishes to expand its clubhouse by adding a
new dining room to it. In order to finance the construction, the
club will assess each member $100. The assessment is subject to tax
as dues, regardless of the fact that the proceeds will be used for
a capital improvement.

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TSB-A-97(47)S
Sales Tax

Opinion
Petitioner states it is a social or athletic club for purposes of Section
1105(f)(2) of the Tax Law. Dues, as defined in section 1101(d)(6) of the Tax Law
and Section 527.11(b)(2)of the Sales and Use Tax Regulations, include any
assessment, irrespective of the purpose for
which such charge was made, to
members of a social or athletic club, and are taxable if in excess of ten dollars
per year. In this case, Petitioner was concerned for the safety of its members
crossing a busy road, that separates one part of the golf course from the other
part of the course. Although the tunnel is a capital improvement, the assessment
for this project still constitutes dues. See Nassau Country Club, Adv Op Comm
T&F, December 19, 1990, TSB-A-90(59)S.
Accordingly, the assessments issued to members of Petitioner
to sales tax under Section 1105(f)(2) of the Tax Law.

DATED: July 23, 1997

NOTE:

are subject

/s/
JOHN W. BARTLETT
Deputy Director
TechnicalServices Bureau

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