Does a multi-sport health and racquet club with initiation and membership fees have to charge New York State/local sales tax or New York City's separate gymnasium tax on its membership charges?

Plain-English summary

New York Health and Racquet Club runs multiple locations in New York City offering swimming pools, tennis, squash, racquetball, basketball, indoor golf and ski simulators, cycling, running, rowing, boxing, martial arts, dance, weight training, aerobics, saunas, personal training, nutritional counseling, and spa services. Members pay an initiation fee and a membership fee for general facility access (with extra charges for squash/tennis courts, lessons, and spa programs). Members don't run the club -- they have no vote in club governance, no role in selecting other members, and no ownership stake. The club asked whether its fees are taxable under any of three overlapping New York sales tax provisions.

Admission-charge tax: Not applicable. New York's admission-charge tax has a specific carve-out for charges to a patron for use of facilities where the patron is themselves the participant (like bowling alleys and swimming pools) -- exactly the club's model.

Athletic/social club dues tax: Not applicable either. This separate tax targets dues paid to a "club or organization," which the Department's own regulations define by governance factors: does the membership control social or athletic activities, elect officers, pick new members, or hold a proprietary interest in the entity? Here, none of that is true -- members are just customers of facilities, restricted in number only by physical space, with tournaments and programs run entirely by management. So the club isn't a "club or organization" for this tax at all, and its dues escape it.

New York City's separate gymnasium/health-salon tax: Also not applicable, extending the reasoning of an earlier ruling for Town Sports International. That NYC tax targets weight-control salons, gymnasiums, and similar single-purpose fitness establishments -- but this club offers a genuine breadth of participant sports (swimming, racquet sports, ball sports, martial arts, indoor golf/ski simulation) well beyond a plain gym, so it isn't the kind of narrow "gymnasium" the city tax was written to reach.

What this means for you

Multi-sport fitness and racquet club operators

Structure matters as much as amenities: if members have no vote, no governance role, no say in admitting new members, and no ownership stake, your dues likely escape the athletic-club dues tax regardless of how extensive or expensive your facilities are. Separately, offering a genuine variety of sports (not just a weight room) helps keep you out of New York City's narrower gymnasium/health-salon tax.

Single-purpose gyms and health/fitness studios

If your facility is closer to a pure weight-training/aerobics/sauna operation without broader sport variety, this ruling's reasoning on the NYC gymnasium tax may not extend to you -- that tax is specifically aimed at weight-control salons, gymnasiums, and similar establishments.

Accountants and tax professionals

This opinion is a useful three-part checklist for any membership-fee fitness business: (1) is the fee for participant use of sporting facilities (escapes the admission tax), (2) does the membership structure include real governance/ownership features (determines the athletic-club dues tax), and (3) does the facility offer genuine sport variety beyond a plain gym (determines NYC's separate gymnasium tax). All three are independent tests that can point different ways for different clubs.

Common questions

Q: Why don't this club's membership fees count as taxable "dues" to an athletic club?
A: Because the Department's test for a taxable "club or organization" looks at governance -- do members elect leadership, control activities, pick new members, or hold a proprietary interest? Here, none of those factors are present; members are simply customers.

Q: Is every gym or fitness facility exempt from New York City's gymnasium tax?
A: No -- this outcome depended on the club offering a broad range of genuine participant sports beyond weight training and aerobics. A facility that's really just a gym, sauna, or weight-control salon can still fall within that NYC tax.

Q: Does restricting membership size affect the analysis?
A: Not by itself -- the regulations specifically note that limiting membership solely because of a facility's physical size doesn't make an entity a taxable "club or organization."

Citations and references

Statutes, regulations, and prior rulings:

• Tax Law § 1105(f)(1) (tax on admission charges, exception for participant sporting facilities)
• Tax Law § 1105(f)(2) (tax on social/athletic club dues and initiation fees)
• Tax Law § 1107(a) (additional NYC sales tax mirroring § 1105/1110)
• Tax Law § 1212-A(a)(2) (NYC local tax on gymnasiums, health salons, etc.)
• Administrative Code of the City of New York § 11-2002(h) (NYC tax on gymnasiums and similar establishments)
• 20 NYCRR § 527.11(b)(5), (7) (definitions of club/organization and athletic club)
• Town Sports International and Subsidiaries, TSB-A-98(42)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1999.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a99_26s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-99(26)S
Sales Tax
May 19, 1999

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S981224A

On December 24, 1998, the Department of Taxation and Finance received a Petition for
Advisory Opinion from New York Health and Racquet Club, 3 New York Plaza, New York, New
York 10004.
The issue raised by Petitioner, New York Health and Racquet Club, is whether the fees
charged by it for the use of its facilities are subject to New York State and local sales and use tax.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner, a partnership comprised of three corporate members, operates a number of clubs
in New York City at which it provides a variety of participant sporting activities. Petitioner’s club
facilities have in-door swimming pools, tennis, squash, racquetball and basketball courts, in-door
golf and ski simulators, as well as cycling, running, rowing, boxing, martial arts and dancing
facilities. In addition, Petitioner offers traditional training facilities such as weight lifting equipment,
aerobics, stepping machines, saunas and steam rooms along with personal training, nutritional
counseling and spa services. Petitioner offers lessons and free clinics at its club for sports such as
tennis and squash. It organizes tournaments and league play in various sports.
Petitioner charges an initiation fee and a membership fee for use of its facilities. These fees
allow members access to all club and sporting facilities offered by Petitioner. Members have access
to the facilities available at all of Petitioner’s locations (on either an unlimited or off-hour basis,
depending upon a member’s choice of membership plan). Members must pay an extra fee for use
of the squash and tennis courts, lessons, spa facilities and other programs. Petitioner’s members do
not control any social or athletic activities, selection of members or club management, nor possess
any proprietary interest in Petitioner. The number of members is restricted solely because of the
physical size of the facility.
Petitioner included brochures and pamphlets as part of its petition.
Applicable Law & Regulations
Section 1105(f) of the Tax Law imposes sales tax, in part, on:

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Sales Tax
May 19, 1999

(1) Any admission charge . . . except charges to a patron for admission to,
or use of, facilities for sporting activities in which such patron is to be a participant,
such as bowling alleys and swimming pools.
(2)(i) The dues paid to any social or athletic club in this state if the dues . . .
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 1107(a) of the Tax Law provides:
General. On the first day of the first month following the month in which a
municipal assistance corporation is created under article ten of the public authorities
law for a city of one million or more, in addition to the taxes imposed by sections
eleven hundred five and eleven hundred ten, there is hereby imposed on such date,
within the territorial limits of such city, and there shall be paid, additional taxes, at
the rate of four percent, which except as provided in subdivision (b) of this section,
shall be identical to the taxes imposed by section eleven hundred five and eleven
hundred ten. Such sections and the other sections of this article, including the
definition and exemption provisions, shall apply for purposes of the taxes imposed
by this section in the same manner and with the same force and effect as if the
language of those sections had been incorporated in full into this section and had
expressly referred to the taxes imposed by this section.
Section 1212-A(a)(2) of the Tax Law authorizes the City of New York to impose a local sales
tax on "beauty, barbering, hair restoring, manicuring, pedicuring, electrolysis, massage services and
similar services, and every sale of services by weight control salons, health salons, gymnasiums,
turkish and sauna bath and similar establishments and every charge for the use of such facilities;"
such tax to be administered and collected by the Commissioner of Taxation and Finance.
Section 11-2002(h) of the Administrative Code of the City of New York imposes sales tax,
in part, on:
(h) Receipts from . . . every sale of services by weight control salons,
gymnasiums, turkish and sauna bath and similar establishments and every charge for
the use of such facilities. . . .
Section 527.11(b) of the Sales and Use Tax Regulations provides, in part, the following
definitions of terms that are contained in section 1105(f)(2) of the Tax Law:
(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

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Sales Tax
May 19, 1999

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. (Emphasis supplied)
(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.
*

*

*

(7) Athletic club. (i) An athletic club is any club or organization which has
a material purpose or activity the practice, participation in or promotion of any sports
or athletics.
*

*

*

(ii) Athletic activities does not include exercising or calisthenics solely for
health or weight reduction purposes, as contrasted to sports. An establishment that
merely provides steam baths, saunas, rowing machines, shaking machines and other
exercise equipment shall not be considered an athletic club. However, there is a four­
percent local sales tax in the city of New York on every sale of services by weight
control salons, health salons, gymnasiums, Turkish baths, sauna baths and similar
establishments, and on every charge for the use of such facilities.

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Sales Tax
May 19, 1999
Opinion
Petitioner’s charges to its patrons entitle them to use facilities for sporting activities in which
the patron is to be a participant. Petitioner’s charges, therefore, are not subject to the tax on
admission charges under Section 1105(f)(1) of the Tax Law. Petitioner’s charges would be subject
to sales tax under Section 1105(f)(2) of the Tax Law if Petitioner operated an athletic club as defined
in paragraphs (5) and (7) of Section 527.11 of the Sales and Use Tax Regulations.
Petitioner’s members do not control any social or athletic activities, selection of members
or club management, or possess any proprietary interest in Petitioner. Therefore, Petitioner is not
operating an athletic club as defined in paragraphs (5) and (7) of Section 527.11 of the Sales and Use
Tax Regulations. Accordingly, Petitioner’s charges to its members are not subject to tax as dues
paid to an athletic club under Section 1105(f)(2) of the Tax Law.
Since Petitioner provides a variety of sporting activities and facilities to its members,
Petitioner’s facilities are not weight control salons, gymnasiums or other establishments described
in Section 11-2002(h) of the Administrative Code of the City of New York. Petitioner’s charges,
therefore, are not for services provided by, or use of facilities in, weight control salons, gymnasiums
or other establishments described in such Section 11-2002(h) and are thus not subject to that tax.
See Town Sports International and Subsidiaries, Adv Op Comm T&F, July 1, 1998, TSB-A-98(42)S.
Membership charges for the use of Petitioner’s facilities are therefore not subject to any of
the taxes imposed under Sections 1105(f) and 1107 of the Tax Law or Section 11-2002(h) of the
New York City Administrative Code.

DATED: May 19, 1999

NOTE:

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

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