Is a country club's mandatory monthly service charge subject to South Carolina sales tax or admissions tax?

Plain-English summary

The South Carolina Department of Revenue concluded that a country club's mandatory monthly "Standardized Service Charge" was not subject to sales tax because it was billed in advance and did not depend on whether the member bought prepared food or any other tangible personal property.

The same charge was generally subject to the 5% admissions tax, however. It was a mandatory amount paid by members with dining privileges for the right to enter and use a country club, which the ruling treated as a place of amusement. If the club qualified as a nonprofit entity and met the requirements of S.C. Code § 12-21-2420(4), the member charge could be exempt. The Department expressly did not decide whether this club qualified.

What this means for you

Country clubs and member organizations

The label placed on a mandatory charge does not decide its tax treatment. A fee imposed independently of food purchases may fall outside sales tax, yet still be part of the taxable price for access to club facilities. Nonprofit status can matter for admissions tax, but this ruling does not establish that every nonprofit club qualifies.

Restaurants and hospitality operators

The result depended on the fee being separate from actual dining sales. The club billed it before the month began, did not refund it when a member bought no food, and billed food purchases separately afterward. The ruling contrasts that structure with a mandatory gratuity attached to a prepared-food sale, which is included in taxable gross proceeds under Regulation 117-318.6.

Accountants and tax professionals

Analyze the transaction under both tax systems. The sales-tax question turns on whether the charge proceeds from a retail sale of tangible personal property; the admissions-tax question turns on whether it buys the right or privilege to enter or use a place of amusement.

Common questions

Q: Why was the service charge not subject to sales tax?
A: It was imposed without regard to any food sale. It was billed in advance, remained due even if the member made no dining purchases, and was separate from food charges billed after actual purchases.

Q: Why did admissions tax apply?
A: The Department treated the club as a place of amusement and the mandatory charge as part of what a member paid for entry or use of its facilities.

Q: Are charges by nonprofit country clubs exempt?
A: Code § 12-21-2420(4) exempts qualifying charges to members for use of a nonprofit entity's facilities. The ruling did not determine whether the requesting club met that exemption.

Q: Can another club rely on this PLR?
A: No. The ruling binds Department personnel only for the requesting taxpayer and stated facts, and later changes in law or facts can void it.

Citations and references

• S.C. Code § 12-21-2410 ("admissions" means the right or privilege to enter or use a place or location)
• S.C. Code § 12-21-2420 (5% admissions tax; nonprofit-member exemption)
• S.C. Code §§ 12-36-60, 12-36-90, 12-36-910 and 12-36-1110 (sales-tax framework)
• 27 S.C. Regs. 117-318.6 (mandatory gratuities included in prepared-food gross proceeds)
• Columbia Country Club v. Livingston, 252 S.C. 490, 167 S.E.2d 300 (1969)
• M.T. Golf, Inc. v. South Carolina Department of Revenue, Docket No. 95-ALJ-17-0490-CC (S.C. Admin. L. Ct. filed Aug. 16, 1996)

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/PLR11-2.pdf

Original ruling text

State of South Carolina

Department of Revenue
301 Gervais Street, P.O. Box 125, Columbia, South Carolina 29214
Website Address: http://www.sctax.org

SC PRIVATE LETTER RULING #11-2

SUBJECT:

Country Club Service Fee
(Sales and Use Tax, Admissions Tax)

REFERENCES:

S.C. Code Ann. Section 12-21-2410 (2000)
S.C. Code Ann. Section 12-21-2420 (2000 and Supp. 2010)
S.C. Code Ann. Section 12-36-60 (2000)
S.C. Code Ann. Section 12-36-90 (2000 and Supp. 2010)
S.C. Code Ann. Section 12-36-910 (2000 and Supp. 2010)
S.C. Code Ann. Section 12-36-1110 (Supp. 2010)
27 S.C. Regs. 117-318.6 (Supp. 2010)

AUTHORITY:

S.C. Code Ann. Section 12-4-320 (2000)
S.C. Code Ann. Section 1-23-10(4) (2005)
SC Revenue Procedure #09-3

SCOPE:

A Private Letter Ruling is an advisory opinion issued to a specific
taxpayer by the Department to apply principles of law to a specific
set of facts or a particular tax situation. It is the Department’s
opinion limited to the specific facts set forth, and is binding on
agency personnel only with respect to the person to whom it was
issued and only until superseded or modified by a change in
statute, regulation, court decision, or another Departmental
advisory opinion, providing the representations made in the request
reflect an accurate statement of the material facts and the
transaction was carried out as proposed.

Question:
Is a mandatory fee imposed by The Members Club at ABC and XYZ on its members,
designated as a Standardized Service Charge, subject to sales tax or, alternatively,
admissions tax?
Conclusion:
The Standardized Service Charge, imposed by The Members Club at ABC and XYZ on
its members, is not subject to sales tax because it is not associated with the sale of
prepared food or any other tangible personal property. However, as a mandatory fee
imposed on members of a country club, it is subject to admissions tax, unless the Club

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qualifies for the exemption under Code Section 12-21-2420(4) for charges by a nonprofit
entity to its members for use of the nonprofit entity’s facilities. Note: The Department
makes no determination in this advisory opinion as to whether in fact the Club qualifies
for the exemption under Code Section 12-21-2420(4).
Facts:
The Members Club at ABC and XYZ is a country club that offers golf, tennis, swimming
and dining amenities. Members can tailor their memberships to include all amenities, or
only a few; however, the Club does not offer a dining only membership.
Membership dues, if not paid in advance, are billed on a monthly basis. For dining
services, there is no mandatory or minimum charge; instead, dining charges are billed at
the end of the month based on actual purchases during that month. If members
voluntarily add a gratuity at the time of these purchases, the gratuity is reflected
separately on the monthly bill.
Also billed on a monthly basis is a “Standardized Service Charge,” a mandatory fee
applied to the account of each member with dining privileges and an in-state address.
Unlike dining charges, which are billed after purchase, the Standardized Service Charge
is billed in advance of the month to which it applies. The Standardized Service Charge is
not refunded or credited if a member makes no dining purchases during the applicable
month.
The Club maintains a single account to which these mandatory fees are credited. From
this account, the Club pays servers 18% of their dining sales each month as gratuity
regardless of which member made the purchases (voluntary gratuities added at the time
of purchase do not count toward or against this allocation). The Club retains the balance
as income.
Sales Tax:
The issue is whether the Standardized Service Charge is subject to sales tax.
A sales tax equal to 6% of the gross proceeds of sales is imposed “upon every person
engaged or continuing within this State in the business of selling tangible personal
property at retail.” S.C. Code §12-36-910(A) (5% sales tax imposed); see S.C. Code
§12-36-1110 (additional 1% sales and use tax imposed).
Tangible personal property is defined as “personal property which may be seen, weighed,
measured, felt, touched, or which is in any other manner perceptible to the senses.” S.C.
Code §12-36-60. 1 The sale of prepared food, which is tangible personal property, is
subject to sales tax.
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It should be noted that certain intangibles and services are included as tangible personal property under
Code Sections 12-36-60 and 12-36-910. This is noted for the sake of thoroughness; as such intangibles and
services are not at issue here.

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The measure of the tax is the gross proceeds of the sale. “Gross proceeds of sales” means
the proceeds from the sale of tangible personal property without any deduction for the
cost of materials, labor or service, or any other expenses. S.C. Code §12-36-90(1)(b).
Mandatory gratuities are included in the gross proceeds of the sale of prepared food. 27
S.C. Regs. 117-318.6.
Here, the Standardized Service Charge is imposed without respect to any sale of prepared
food. The Standardized Service Charge is billed and paid in advance. By contrast,
dining charges are not incurred unless and until there is actual consumption and so are
billed at the end of month in which they are incurred. Thus, the Standardized Service
Charge is not a service charge associated with the sale of tangible personal property.
For these reasons, the Standardized Service Charge is not included in the gross proceeds
of the sale of prepared food. It is not subject to sales tax.
Admissions Tax:
The question then arises whether the mandatory Standardized Service Charge is subject
to admissions tax.
A 5% admissions tax is imposed "upon all paid admissions to all places of amusement” in
South Carolina. S.C. Code §12-21-2420. The term “admissions” is defined as "the right
or privilege to enter into or use a place or location." S.C. Code §12-21-2410.
Pursuant to longstanding Department policy, country club dues and other charges for the
privilege of using the country club’s facilities are subject to admissions tax unless
exempt. For example, Code Section 12-21-2420(4) exempts from admission tax all
charges to members of a nonprofit entity for the use of the nonprofit entity’s facilities.
See, e.g., Columbia Country Club v. Livingston, 252 S.C. 490, 167 S.E.2d 300 (1969)
(country club dues, which the Tax Commission claimed were subject to the admissions
tax, were exempt by reason of the country club’s nonprofit status); M.T. Golf, Inc. v.
South Carolina Department of Revenue, Docket No. 95-ALJ-17-0490-CC (S.C. Admin.
L.Ct. filed Aug. 16, 1996) (country club dues were subject to admissions tax;
requirements for nonprofit exemption were not met).
Here, the Club is a place of amusement that charges a fee for entry or use. Because the
Standardized Service Charge is mandatory and paid in advance without respect to other
purchases or fees, it is part of the amount paid by a member to enter into and use a place
of amusement. Therefore, the Standardized Service Charge is subject to the admissions
tax. However, if the Club qualifies as a nonprofit entity for admissions tax purposes and
all other requirements for the exemption are met, the Standardized Service Charge would
be exempt from admissions tax as a charge to the members of a nonprofit entity for use of
the nonprofit entity’s facilities under Code Section 12-21-2420(4). Note: The Department
makes no determination in this advisory opinion as to whether in fact the Club qualifies
for the exemption under Code Section 12-21-2420(4).

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SOUTH CAROLINA DEPARTMENT OF REVENUE

s/James F. Etter
James F. Etter, Director
May 23
, 2011
Columbia, South Carolina

CAVEAT: This advisory opinion is issued to the taxpayer requesting it on the assumption
that the taxpayer’s facts and circumstances, as stated, are correct. If the facts and
circumstances given are not correct, or if they change, then the taxpayer requesting the
advisory opinion may not rely on it. If the taxpayer relies on this advisory opinion, and
the Department discovers, upon examination, that the facts and circumstances are
different in any material respect from the facts and circumstances given in this advisory
opinion, then the advisory opinion will not afford the taxpayer any protection. It should
be noted that subsequent to the publication of this advisory opinion, changes in a statute,
a regulation, or case law could void the advisory opinion.

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