Is a refundable country-club or athletic-club initiation fee taxable in Texas, and what about the membership transfer fee?

Plain-English summary

A club (a country club or athletic club) sent the Comptroller a copy of its membership contract and bylaws and asked how its membership charges are taxed. The Comptroller's Tax Policy Committee reviewed the contract and reached two conclusions:

• The refundable initiation fee is not taxable.
• The transfer fee is taxable.

That is the whole holding. The file also contains an earlier acknowledgment letter (May 26, 1988) saying the bylaws had been referred to the Tax Policy Committee, and the member's April 5, 1988 cover letter enclosing the bylaws — the substantive answer is the August 15, 1988 letter.

What this means for you

Clubs charging membership fees

If your club charges a refundable initiation fee — one the member gets back — this letter treats that fee as not taxable. A fee to transfer a membership, by contrast, is taxable. Bill and remit accordingly, and keep the terms of your membership contract clear, because the Committee's answer turned on reviewing the actual contract and bylaws.

The refundable feature mattered

The Comptroller singled out the refundable initiation fee as nontaxable. Don't assume a nonrefundable initiation charge or other membership dues get the same treatment — this letter addresses only the refundable initiation fee and the transfer fee.

Common questions

Q: Is a refundable club initiation fee taxable in Texas?
A: No. The Comptroller's Tax Policy Committee determined that the refundable initiation fee described in the club's contract is not taxable.

Q: Is the membership transfer fee taxable?
A: Yes. The letter states the transfer fee is taxable.

Q: Does this cover all club membership charges?
A: No. The letter addresses only the refundable initiation fee and the transfer fee for this club's contract. It does not decide the treatment of other dues or a nonrefundable initiation charge.

Q: Can I rely on this 1988 letter today?
A: Treat it as guidance only. It is based on the facts presented and can change with different facts; on the STAR system it binds the Comptroller only as to the taxpayer it was issued to and may no longer reflect current policy.

Citations and references

Rules and statutes: The Tax Policy Committee based its determination on a review of the club's membership contract and bylaws; the letter does not cite a specific Tax Code section or Comptroller rule by number.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8808L0898D02

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller August 15, 1988

Dear ***:

As we discussed, the Tax Policy Committee reviewed your contract.
The Committee has determined that the refundable initiation fee is
not taxable. The transfer fee is taxable.

I appreciate your patience.

If you have any questions or need more information, please call
our toll-free number 1-800-531-5441. The regular number is
512/463-4614. You may write me.

Sincerely,
Adina Whittemore
Tax Correspondence

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller May 26, 1988

Dear ***:

Thank you for sending a copy of your club bylaws.

I have referred them to our Tax Policy Committee and will let you know
when
they make a decision.

If you have any questions or need more information, please call our
toll-free
number 1-800-531-5441. The regular number is 512/463-4600. You may
write me
at the Tax Policy Division.

Sincerely,
Adina Whittemore
Tax Policy Division

April 5, 1988

Adina Whittemore
Tax Policy Division
Comptroller of Public Accounts
Austin, Texas 78774

Dear Ms. Whittemore,

In response to your letter of February 2, 1988 concerning
taxability of refundable membership fees, I have enclosed
a copy of our most recent by-laws with the appropriate
sections highlighted and a corrected copy of your summary.
If you need any additional information or clarification,
please contact me at ***.

I appreciate the written response to my inquiries.

Sincerely,