Are a social club's membership dues taxable when the club is incorporated in New York and meets in New York City but lists an out-of-state address?

Plain-English summary

The New York SKAL Club, Inc. — a strictly social club incorporated under New York law in 1939 (its certificate of incorporation lists a principal office in Manhattan, though its mailing address is in New Jersey) — holds a monthly lunch or dinner meeting in New York. It asked whether its members must pay New York State and local sales tax on their dues.

The Department held the dues (and initiation fee) are taxable, at a combined 8% State and City rate.

• Dues to a social club "in this state" are taxed. Section 1105(f)(2) imposes tax on dues paid to a social or athletic club in this state if an active annual member's dues (excluding the initiation fee) exceed $10 per year, and on the initiation fee alone if it exceeds $10.
• The club is a New York "resident." Any corporation incorporated under New York law is a resident (20 NYCRR 526.15(b)(1)). Because the club was incorporated in New York, it is a resident — hence a club "in this State" — so its dues and initiation fee (when over $10) are subject to State sales tax.
• New York City tax also applies. Because the club's principal activity is monthly meetings in New York City, it operates a social club in the City and is a City resident (20 NYCRR 526.15(c)). The identical City sales tax on social-club dues under § 1107(a) therefore applies.
• Combined rate: 8%. The combined State and New York City sales tax rate on the club's dues is 8 percent.

What this means for you

A New York-incorporated club is taxed on its dues even if it's run from out of state. Incorporation under New York law makes the club a New York "resident," which places it "in this State" for the social-club dues tax — regardless of an out-of-state mailing address.

The $10 thresholds are separate. Annual dues (excluding the initiation fee) are taxed if they exceed $10 a year; the initiation fee is taxed on its own if it exceeds $10. Check each against the threshold.

Where the club actually operates can add local tax. Holding its meetings in New York City made the club a City resident too, layering the City's identical dues tax on top of the State tax for a combined 8% rate. A club's activity location — not just its incorporation — drives local tax.

Common questions

Q: Our club has a New Jersey address — why do we owe New York tax on dues?
A: Because the club is incorporated under New York law, it's a New York "resident" (20 NYCRR 526.15(b)(1)) and thus a social club "in this State" under § 1105(f)(2). The mailing address doesn't change that.

Q: What dues amounts are taxable?
A: Annual dues over $10 (excluding the initiation fee) are taxable, and the initiation fee is taxable on its own if it exceeds $10.

Q: Why is New York City tax added?
A: The club's principal activity is monthly meetings in New York City, so it operates a social club there and is a City resident (20 NYCRR 526.15(c)). The City's identical dues tax under § 1107(a) applies, for a combined 8% rate.

Citations and references

Statutes, regulations and authority:

• Tax Law § 1105(f)(2) — taxes dues paid to a social or athletic club in this state where annual dues (excluding initiation fee) exceed $10, and the initiation fee alone if over $10
• Tax Law § 1107(a) — New York City sales tax, identical to the State tax on social-club dues
• 20 NYCRR 526.15(b)(1) — a corporation incorporated under New York law is a "resident"
• 20 NYCRR 526.15(c) — "resident" for a locality's sales tax is defined the same way as State residency

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1981.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/h81_100s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-H-81(100)S
Sales Tax
May 19, 1981

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S801229B

On December 29, 1980, a Petition for Advisory Opinion was received from the
New York SKAL Club, Box 535, Bloomfield, New Jersey 07003.
The issue raised is whether or not Petitioner's members are required to pay
New York State and local sales taxes on dues paid to Petitioner.
The club was incorporated in the State of New York on January 19, 1939 as
the Skal Club of North America, Inc. As of December 16, 1965, the club's name was
changed to New York SKAL Club, Inc.
Item # 4 in Petitioner's Certificate of Incorporation states that "its
principal business office is to be located in the Borough of Manhattan, City,
County and State of New York."
Petitioner holds a lunch or dinner meeting each month in New York.
Petitioner is strictly a social club.
Section 1105(f) of the Tax Law imposes a tax on "(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, and on
the initiation fee alone, regardless of the amount of dues, if such initiation
fee is in excess of ten dollars...."
The Sales and Use Tax Regulations provide that "Any corporation
incorporated under the laws of New York, and any corporation, association,
partnership or other entity doing business in the State or maintaining a place
of business in the State, or operating a hotel, place of amusement or social or
athletic club in the State is a resident." 20 NYCRR 526.15(b)(1).
The Regulations further provide that "The term 'resident' as it applies to
sales and use tax imposed by a locality shall be defined in the same manner as
resident of the State, with respect to that locality." 20 NYCRR 526.15(c).
Since Petitioner was incorporated under the laws of New York State, it is
a resident of the State. 20 NYCRR 526.15(b)(1). Petitioner is therefore a social
club located "in this State" for purposes of section 1105(f)(2) of the Tax Law.
The annual dues received by Petitioner from its members are, therefore, subject
to the New York State sales tax, whenever the same are in excess of ten dollars.
The same is true with respect to the initiation fee.
It appears from the Petition and the supplemental materials submitted by
Petitioner that the club's principal activity consists of the holding of monthly
meetings in New York City. Petitioner operates a social club in New York City and
is, therefore, a resident of New York City for purposes of the City sales tax.
20 NYCRR 526.15(c). The New York City sales tax on social club dues, imposed
under section 1107(a) of the Tax Law, is identical to the New York State sales
tax. Dues received by Petitioner are therefore subject to the New York City sales
tax.

TP-8 (4/80)

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

2
TSB-H-81(100)S
Sales Tax
May 19, 1981
The combined State and New York City sales tax rate imposed on dues
received by Petitioner is 8 per cent.
DATED: May 4,1981

s/ LOUIS ETLINGER
Deputy Director
Technical Services Bureau