Were a nonprofit shooting club's membership dues, match entry fees, spectator admissions, and exempt-entity range fees taxable?

Plain-English summary

The Comptroller said the Section 501(c)(7) nonprofit club's membership fees, dues, and required assessments became taxable on October 1, 1991 because it provided a recreational shooting range.

Competitor entry fees were nontaxable when they substantially exceeded ordinary range-use charges and helped pay for conducting the match and prizes, or when the participant would not ordinarily use the facility except to compete. Admission charged to spectators was taxable.

Range fees paid by a federal, state, or municipal government entity were nontaxable when the exempt entity itself paid and supplied a valid exemption certificate.

The club could correct tax collected before October 1, 1991 after refunding members, using a current-return adjustment, amended returns, or a state refund request. The letter stated a four-year limitations period from when the tax was due.

What this means for you

Recreational nonprofit clubs

Federal nonprofit status did not preserve the dues exemption once the organization provided recreational facilities under the 1991 change described in the letter.

Competition organizers

Separate competitor entry fees from spectator admission and ordinary facility use. Their purpose and amount drove different results.

Common questions

Were shooting-club dues taxable? Yes, effective October 1, 1991.

Were match entry fees taxable? Not when they met the competition-focused conditions stated in the letter.

Were spectator tickets taxable? Yes.

Were government-paid range fees taxable? No, when the government entity paid and provided an exemption certificate.

Citations and references

• Internal Revenue Code § 501(c)(7) (nonprofit social clubs)
• 34 Tex. Admin. Code Rule 3.325(a) (refunds)
• 34 Tex. Admin. Code Rule 3.298(c) and (g)(6) (amusement services)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9201L1151G10

Original ruling text

January 15, 1992

Dear **:

Your letter concerning the taxability of membership dues, match
fees, and range use fees has been assigned to me for review and
response. COMPANY A, is a Sec. 501 (c)(7) nonprofit organization.
I appreciate your patience and apologize for the delay in responding.

The tax bill passed in the recent special legislative session
removed the sales tax exemption for amusement services provided
by nonprofit organizations such as country clubs and other Sec.
501 (c)(7) organizations that provide recreational facilities for
members. The effective date of this change was October 1, 1991.
Nonprofit social organizations such as fraternities, sororities,
boy scouts, etc., that do not provide recreational/amusement
facilities to members continue to be exempt from sales tax on
their membership dues and fees.

From the context of your questions it is apparent that your
organization provides a shooting range for its members. As such,
effective October 1, 1991, membership fees, dues and other
assessments required for membership will be taxable. Sales tax
collected and reported by COMPANY A, on these charges prior to this
date may be refunded to members, after which you may:

• adjust a current sales tax return for the sales taxes refunded,

• amend the returns in which the refunded sales tax was reported, or

• request a refund from the state for sales taxes refunded to members.
  See section (a) of the enclosed copy of Rule 3.325, Refunds, Interest
  and Payments Under Protest. You should direct this information to the
  attention of: Revenue Accounting Division, Credits Verification.

The statute of limitations on refunds is four years from the date
the tax was due and payable to this office.

You also questioned whether match fees/entry fees charged to
competitors and range fees charged to officers of exempt entities
are subject to sales tax.

Entry fees will not be taxable if the fees substantially exceed
what would normally be paid for using the shooting range and a
person is paying to compete in a match, and part of the fee goes
toward the cost of conducting the match and for prizes; or an
individual would not normally use the facility, or pay a fee
except for the purpose of participating in the match. See
section (c) of the enclosed Rule 3.298, Amusement Services. You
should collect and report sales tax on an admission charged to
spectators for these matches.

Sales tax is not due on the range fees paid by an exempt entity
such as federal, state or municipal governments. The fees must
be paid for by the exempt entity and you should secure a valid
exemption certificate from that entity. See section (g)(6) of
Rule 3.298.

If you have other questions or need more information, you may
call 512/463-4600, or 1-800-252-5555 from outside Austin. You
may write to Tax Administration Division.

Sincerely,

Gilbert Zamora
Tax Administration Division

October 18, 1991

Dear Taxpayer:

Within the tax bill recently passed by the Legislature, they wrote a
provision removing the sales tax exemption and therefore requiring tax
on dues for all 501(c)(7) organizations such as yours.

However, upon my review, I have determined that dues and membership
fees paid by fraternities, sororities, scouts and similar service
organizations such as yours are not subject to this tax recently enacted
by the 72nd Legislature.

I wanted to send you and your organization this letter letting you know
of my ruling and I hope this will answer any questions. I am sure the
Legislature did not intend to extend this tax to your organization!

If you have any questions or need additional information regarding this
matter, please call us toll-free at 1-800-252-5555.

If I can ever be of further assistance, please contact me.

Sincerely,

JOHN SHARP
Comptroller of Public Accounts