Were club memberships tax exempt when a university paid for memberships issued in individual employees' names?

Plain-English summary

A university paid for club memberships issued in its employees' individual names.

The Comptroller said those sales were not exempt. Employees did not become exempt entities solely because they worked for the university, and university payment did not make an individual membership a sale to the university.

If a club sold a membership directly to the university in the university's name, the university could provide its exemption certificate.

The letter separately stated that the university's motor-vehicle purchases were not exempt from tax.

What this means for you

Exempt organizations

The named purchaser mattered. Paying an employee's personal charge did not substitute the organization's exempt status for the employee's.

Clubs and vendors

Verify whether the membership agreement names the exempt institution or a natural person before accepting an exemption certificate.

Common questions

Were employee-named memberships exempt because the university paid? No.

Could a university-named membership be exempt? Yes, with the university's exemption certificate.

Were the university's motor-vehicle purchases exempt? No, according to the letter.

Citations and references

The letter cited no specific statute or rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9201L1158F05

Original ruling text

January 31, 1992

Dear **:

Thank you for your recent letter asking about the purchase of
club memberships by the University in their employees names.

If the club would sell memberships directly to ** in
the name of *, * could issue its exemption
certificate. However, the clubs in question sell only to
individuals (natural persons). These natural persons are not
exempt entities solely because they are * employees.
The fact that * pays for an individuals club membership
does not make the transaction a sale to ****.

The Universities purchases of motor vehicles are not exempt from
tax.

This opinion is based on the facts you presented. Other facts,
though similar, may yield different results.

If you have any questions or need more information, please call or
write. You may reach me by calling toll free, (800) 531-5441.
My direct line number is (512) 463-4680. The number for FAX
transmissions is (512) 475-0900. You may write to me in care of
Tax Administration Division.

Sincerely,

Al Van Allen
Tax Administration Division