Were dues paid by dart clubs to a Section 501(c)(7) association taxable when the association provided no dartboards or amusement facilities?

Plain-English summary

A Section 501(c)(7) association consisted of multiple dart clubs but did not itself provide dartboards or other amusement facilities to members.

Rule 3.298(b) taxed membership dues and fees of private clubs and Section 501(c)(7) organizations if they provided amusements. Because the association supplied no facilities, dues and fees paid to it by member clubs were nontaxable.

Individual member clubs were different. If a for-profit or Section 501(c)(7) club provided facilities and collected dues from individual members, that club had to collect and report sales tax.

What this means for you

Umbrella associations

Organizational dues did not become amusement charges merely because member clubs operated facilities. The association's own activities controlled here.

Local clubs and tax professionals

Analyze each entity separately. A facility-providing club could owe tax even when its dues to the umbrella association were nontaxable.

Common questions

Were dues paid to the association taxable? No.

Why not? The association provided no dartboards or amusement facilities.

Were dues charged by individual facility-providing clubs taxable? Yes, for the for-profit and Section 501(c)(7) clubs described.

Citations and references

• Internal Revenue Code § 501(c)(7) (social club status)
• 34 Tex. Admin. Code Rule 3.298(b) (private-club amusements and membership charges)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9202L1157C05

Original ruling text

February 6, 1992

Dear **:

Your letter concerning the taxability of membership dues and fees
has been assigned to me for review and response. I appreciate
your patience and apologize for the delay in responding.

** is a Section 501(c)(7) non-profit, charitable
association.

Section (b) of the enclosed Rule 3.298, Amusement Services, provides
that ". . . membership dues, initiation fees, and other assessments
and fees charged for a special privilege, status, or membership
classification in a private club or organization, including
organizations described by the Internal Revenue Code of 1986, Section
501(c)(7), if the organizations provide amusements, are taxable"
(emphasis added).

In our conversation of January 17, 1992, you stated that **
did not provide facilities/dart boards for members, but was only an
association of various dart clubs that did provide facilities to
members. As such, the fees and dues paid to **** by member
clubs are not subject to tax. If a member club collects fees and
dues from its individual members, and the club is for-profit or a
Section 501(c)(7) organization, the member club must collect and report
sales tax on fees and dues collected.

This opinion is based on the facts presented. Other facts though
similar may provide a different result.

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