Are membership and initiation fees at a large multi-activity health and fitness club chain subject to New York State's social/athletic club dues tax or New York City's separate gym/health-salon tax?

Plain-English summary

Crunch Fitness International runs health and fitness clubs across New York City offering an unusually broad activity mix -- indoor pools, rock-climbing walls, basketball and racquetball courts, cycling, running, rowing, boxing, martial arts, dance, plus traditional weightlifting, aerobics, saunas, personal training, and various "Lifestyle Clinic" and getaway programs. Its membership and initiation fees give access to some or all of these facilities depending on plan, with extra charges for rock-wall instruction and spa services. Members have no say over club governance, activity selection, or management, and hold no ownership interest; membership caps are set solely by the physical size of the space.

New York imposes two separate, narrower taxes that Crunch's fee structure escapes. First is the state tax on dues paid to a "social or athletic club" -- but that tax requires an actual club/organization structure where members control social or athletic activities, elections, or management, or hold a proprietary interest. Since Crunch's members have none of that (no governance role, no ownership, capped membership purely for physical-capacity reasons -- exactly the kind of restriction the regulations say does NOT create a club), Crunch isn't operating an "athletic club" in the taxable sense, following the Department's own prior ruling on a similar multi-sport facility (New York Health and Racquet Club). Separately, admission-style charges for facilities where the patron is a sports participant (not a spectator) are excluded from the general admissions tax anyway.

Second is New York City's own local tax specifically targeting weight-control salons, health salons, gymnasiums, and "similar establishments" and any charge for using their facilities. That tax is aimed at businesses that are essentially just gyms or health/weight-loss salons. Because Crunch offers a genuine breadth of participant sports and athletic activities -- not just traditional gym equipment -- the Department found it isn't a "gymnasium" or "similar establishment" within the meaning of that narrower local law, again following its own precedent on comparably diverse multi-sport clubs (Town Sports International, New York Health and Racquet Club). So neither tax applies to Crunch's membership charges.

What this means for you

Health club and fitness chain operators

The more genuinely diverse your activity offering -- real sports facilities like pools, courts, and climbing walls, not just weight rooms and cardio machines -- the stronger your case that you're outside New York City's narrower gym/health-salon tax. Keep clear records of your actual activity mix, since the analysis is facility-specific.

Membership-based recreation businesses generally

Avoid giving members any real governance role, election rights, or ownership stake if you want to stay outside the state's "social or athletic club" dues tax -- capping membership purely for physical space reasons is fine and doesn't itself create a taxable club structure.

Accountants and tax professionals

This ruling explicitly follows and extends the Department's own prior New York Health and Racquet Club (TSB-A-99(26)S) and Town Sports International (TSB-A-98(42)S) rulings -- useful as one of a growing line of "multi-sport facility" precedents (a doctrine the Department applied again the following year to Reebok Sports Club/NY and Chelsea Piers). Compare a client's activity list against this line of rulings rather than treating any large gym chain as automatically taxable or exempt.

Common questions

Q: Does capping membership by facility size make a fitness club a taxable "athletic club"?
A: No -- the regulations specifically say restricting membership solely because of physical space does not, by itself, create a club/organization for tax purposes.

Q: Is a large multi-activity gym automatically exempt from New York City's gym/health-salon tax?
A: Not automatically -- it depends on whether the facility offers a genuine variety of participant sports (exempt) versus functioning essentially as a gymnasium or health/weight-control salon (taxable); each facility's actual activity mix controls.

Q: Do extra charges for specialty amenities like rock-wall instruction change the core membership fee analysis?
A: This ruling addresses the general membership/initiation fees; charges for specific instruction or spa services would need their own separate analysis, which the opinion doesn't resolve in detail.

Citations and references

Statutes and regulations:

• Tax Law § 1105(f)(1) (admission charges; participant-sport exclusion)
• Tax Law § 1105(f)(2) (dues and initiation fees paid to a social or athletic club)
• Tax Law § 1107(a) (additional NYC-area taxes identical to §§ 1105/1110)
• Tax Law § 1212-A(a)(2) (NYC local tax authorization for gyms, health salons, etc.)
• Administrative Code of the City of New York § 11-2002(h) (NYC tax on gyms, health salons, etc.)
• 20 NYCRR § 527.11(b)(5), (7) (definitions of club/organization and athletic club)

Prior rulings referenced:

• New York Health and Racquet Club, TSB-A-99(26)S (May 19, 1999)
• Town Sports International and Subsidiaries, TSB-A-98(42)S (July 1, 1998)

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_46s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-99(46)S
Sales Tax
November 10, 1999

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S990722A

On July 22, 1999, the Department of Taxation and Finance received a Petition for Advisory
Opinion from Crunch Fitness International Inc., 88 University Place, New York, New York, 10003.
The issue raised by Petitioner, Crunch Fitness International Inc., is whether fees charged by
Petitioner for the use of its facilities are subject to New York State and local sales taxes.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner, a New York corporation, and its subsidiaries, operate health and fitness clubs
throughout the United States. It operates a number of facilities in New York City at which it
provides a variety of participant sporting and fitness activities. Petitioner’s club facilities have, in
some or all of its facilities, in-door swimming pools, “Rockwalls” for climbers, basketball and
racquetball courts, 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. Also, Petitioner offers personal training, nutritional
counseling, spa services and “Lifestyle Clinics” to motivate members with a “complete mind-body­
fitness” approach to fitness. Petitioner offers swimming lessons, yoga classes, dance instruction and
marathon training. It organizes trips, “Getaway Weekends”, basketball games and other activities
for its members.
Petitioner charges initiation and membership fees 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 per use basis, depending
upon a member’s choice of membership plan. Members must pay an extra fee for climbing
instruction and equipment in connection with the “rockwall”, as well as for 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.
Applicable Law and Regulations
Section 1105(f) of the Tax Law imposes sales tax, in part, on:
(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....

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Sales Tax
November 10, 1999

(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
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:
(5) Club or organization. (1) 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 controls social or athletic

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Sales Tax
November 10, 1999

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 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.
Opinion
Similar to the facts in New York Health and Racquet Club, Adv Op Comm T&F, May
19,1999, TSB-A-99(26)S, 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

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Sales Tax
November 10, 1999

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. The number of members is
restricted solely by the physical size of the facility. 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 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
and New York Health and Racquet Club, supra.
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: November 10, 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.