If a nonprofit employee club buys blocks of admission tickets and resells them to its members at cost, must it collect sales tax on the amounts members pay?

Plain-English summary

The Kermis Club, Inc. is a nonprofit social club whose members are all employees of General Electric's Knolls Atomic Power Laboratory. Employees become members automatically at no charge — the club collects no dues. Its only activity is organizing about one social function a month; for some (a play, an amusement-park outing) it buys a block of admission tickets and resells them to members at actual cost. For years the club had been adding up what members paid for tickets and voluntarily remitting New York sales tax on that total. It asked whether it actually had to.

The answer: no. The club does not have to collect sales tax on the ticket money it takes in from members.

• New York taxes two things under § 1105(f): admission charges over ten cents to a place of amusement (§ 1105(f)(1)), and dues paid to a social or athletic club (§ 1105(f)(2)).
• The money members pay the Kermis Club is not "dues" as defined in § 1101(d)(6) — the club charges no dues at all, it just passes along ticket costs.
• Because those amounts fall outside § 1105(f), the Department treated the club as "acting only as a conduit between its members and the vendors of admission tickets."
• A conduit that simply buys tickets and passes them through at cost is not required to collect tax on what it receives.

What this means for you

Passing costs through at cost isn't the same as making a taxable sale of admissions or charging dues. An employee association or social club that buys tickets in bulk and hands them to members for exactly what it paid is a conduit, not a vendor of admissions and not a dues-charging club.

"Dues" has a specific meaning. Under § 1101(d)(6) dues include any membership fee or assessment and any charge for social or sports privileges. A club with no dues — like the Kermis Club — has nothing to tax under § 1105(f)(2), and reselling tickets at cost doesn't convert those payments into dues.

Voluntarily paying a tax you don't owe doesn't make it owed. The club had been remitting tax for years; the Department still concluded no tax was due going forward. If you have been collecting or paying tax on a pass-through you're unsure about, it's worth checking the actual imposition sections.

Common questions

Q: Does a social club ever owe sales tax on admissions or dues?
A: Yes. Section 1105(f) taxes admission charges over ten cents to a place of amusement, and taxes dues paid to a social or athletic club where an active annual member's dues exceed ten dollars a year. The Kermis Club escaped both because it charged no dues and only passed tickets through at cost.

Q: Why wasn't reselling the tickets a taxable sale?
A: The Department viewed the club as a conduit between members and the ticket vendors, not as the operator of the amusement or a seller marking the tickets up. It received nothing beyond the members' share of ticket cost.

Q: We're a nonprofit employee club — can we rely on this?
A: Not directly. An advisory opinion binds the Department only for the taxpayer and facts it was issued to. It shows how the Department reasons about conduit ticket purchases, but your facts (especially whether you charge dues or add any markup) may differ.

Citations and references

Statutes:

• Tax Law § 1101(d)(1) — defines an "active annual member"
• Tax Law § 1101(d)(6) — defines "dues" (any dues, membership fee, or assessment, plus charges for social/sports privileges)
• Tax Law § 1101(d)(13) — defines a "social or athletic club"
• Tax Law § 1105(f)(1) — taxes admission charges over ten cents to a place of amusement
• Tax Law § 1105(f)(2) — taxes dues paid to a social or athletic club above the statutory threshold

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1980.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/h80_146s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-H-80(146)S
Sales Tax
August 11, 1980

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S800226A

On February 26, 1980, a Petition for Advisory Opinion was received from
Kermis Club, Inc., Box 1072, Schenectady, NY 12301.
The issue raised is whether the Kermis Club must collect sales tax from its
members on admission tickets purchased by the club for the members.
The Kermis Club is exempt from Federal income tax under section 501(c)(4)
of the Internal Revenue Code as a local association of employees.
The Kermis Club is a non-profit organization whose membership is limited
to employees of the General Electric Company Knolls Atomic Power Laboratory. All
employees automatically become members of the club when they come to work at the
laboratory and no dues are charged for membership.
The club is strictly a social organization, and its activities consist of
organizing approximately one social function each month. Some of the functions
involve the purchase of a block of tickets for events such as a play or admission
to an amusement park. The tickets are then resold to members at actual cost. For
several years the Club has been computing the total amount collected from members
for tickets, and then paying New York sales tax on this amount.
Section 1101(d)(l) of the Tax Law defines an active annual member to be "A
member who is not a life member but who enjoys full club privileges as
distinguished from the privileges enjoyed by a person holding a nonresident
membership, an associate membership, or other partial or restricted membership."
Section 1101(d)(6) defines dues to be "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...."
Section 1101(d)(13) defines a social or athletic club to be "Any club or
organization of which a material purpose or activity is social or athletic."
Section 1105(f) imposes a tax on "(1) Any admission charge where such
admission charge is in excess of ten cents to or for the use of any place of
amusement in the state, except charges for admission to race tracks, boxing,
sparring or wrestling matches or exhibitions which charges are taxed under any
other law of this state, or dramatic or musical arts performances, or motion
picture theaters, and except charges to a patron for admissions 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) 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 ... Where the tax on dues applies to any such social or athletic
club, the tax shall be paid by all members ... thereof regardless of the amount
of their dues, and shall be paid on all dues ...."

JAMES H. TULLY, JR., COMMISSIONER
LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

2
TSB-H-80(146)S
Sales Tax
August 11, 1980

Since the amounts received by the Kermis Club do not come within the
definition of dues described in section 1105(f) of the Tax Law, the Kermis Club
is deemed to be acting only as a conduit between its members and the vendors of
admission tickets.
Accordingly, the Kermis Club is not required to collect tax on the amount
received from its members.

Dated: July 15, 1980

s/ LOUIS ETLINGER
Deputy Director
Technical Services Bureau