Does a nonprofit private fishing club have to collect sales tax on boat stall and locker rentals, and on membership dues, charged to its members?

Plain-English summary

A tax professional wrote in on behalf of a nonprofit private fishing club (organized under Internal Revenue Code Sec. 501(c)(7)) that operates a private lake, and rents boat stalls and lockers to its members. The letter corrects an earlier, February 10, 1992, ruling and asks whether the club must collect sales tax on those rental charges.

The Comptroller's answer is no. Effective October 1, 1991, nonprofit organizations that provide "amusement services" lost the blanket sales-tax exemption they previously had under Rule 3.298(g)(1)(A). That change might have suggested the club's boat stall and locker rentals were now taxable. But Rule 3.298(a)(2)(H) specifically carves fishing and hunting leases and guide services out of the definition of "amusement services" in the first place. Because the club's rentals fall into that carved-out, non-amusement category, the October 1991 change in the nonprofit exemption never applied to it -- the rentals (and the club's membership fees and dues) simply aren't taxable amusement services at all.

Since the club may have collected and reported tax on these charges before this ruling clarified the issue, the Comptroller told it that it could refund any tax collected within the four-year statute of limitations, either by amending past returns, adjusting a current return, or requesting a refund directly from the Revenue Accounting Division's Credits Section, per the refund procedures in Rule 3.325.

What this means for you

Nonprofit clubs and membership organizations

If your organization is a 501(c)(7) nonprofit that charges members for facilities tied to hunting or fishing -- boat stalls, lockers, lease access, or guide services -- those charges are not automatically swept into tax just because the general nonprofit amusement-services exemption narrowed in 1991. Check whether your activity fits the fishing/hunting leases and guide services carve-out in Rule 3.298(a)(2)(H) before assuming tax applies.

Accountants and tax professionals advising clubs

This letter is a useful precedent for correcting over-collection: if a client nonprofit club has been charging sales tax on hunting/fishing-related rentals or dues out of caution after the 1991 nonprofit amusement-services rule change, the four-year refund window under Rule 3.325 allows the club to unwind that tax through amended returns, a current-period adjustment, or a direct refund request to the Comptroller.

Business owners running amusement-adjacent nonprofits

The core lesson is that "amusement services" is a defined term with specific exclusions -- don't assume every recreational-sounding charge from a nonprofit organization is taxable (or exempt) without checking whether it falls inside a specific carve-out like the one for fishing and hunting leases and guide services.

Common questions

Q: Does this fishing club have to collect sales tax on boat stall and locker rentals to its members?
A: No. The Comptroller ruled these rentals are not taxable because fishing and hunting leases and guide services are excluded from the definition of amusement services under Rule 3.298(a)(2)(H).

Q: What about the club's membership fees and dues?
A: Those are also not taxable, for the same reason -- the club provides non-amusement services, so neither the rentals nor the membership fees and dues are subject to sales tax.

Q: Didn't nonprofit organizations lose their amusement-services tax exemption in 1991?
A: Yes, effective October 1, 1991, 501(c)(7) nonprofits providing amusement services no longer qualify for the exemption in Rule 3.298(g)(1)(A). But that change is irrelevant here because fishing and hunting leases and guide services were never classified as "amusement services" to begin with.

Q: Can the club get back tax it already collected on these rentals?
A: Yes. The letter says the club may refund taxes collected and reported within the four-year statute of limitations, then amend its returns, adjust a current return, or request a refund from the Comptroller's Revenue Accounting Division, Credits Section.

Citations and references

Statutes/Rules:

• 34 Tex. Admin. Code § 3.298(g)(1)(A) (nonprofit organization exemption from amusement services tax)
• 34 Tex. Admin. Code § 3.298(a)(2)(H) (fishing and hunting leases and guide services excluded from definition of amusement services)
• 34 Tex. Admin. Code § 3.325 (refunds)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9205L1172G04

Original ruling text

May 26, 1992

Dear ***:

This is to correct my February 10, 1992, letter to you concerning your client,
***.

*** is an Internal Revenue Code Sec. 501(c)(7) nonprofit private
fishing club providing a private lake, boat stalls and lockers to its members.
The boat stalls and lockers are rented to members. Your question is whether
these rental charges are subject to sales tax.

Effective October 1, 1991, organizations described by the Internal Revenue Code
of 1986, Sec. 501(c)(7) that provide amusements, do not qualify for the
exemption provided under section (g)(l)(a) of Rule 3.298 Amusement Services,
for nonprofit organizations .

However, fishing and hunting leases and guide services are specifically
identified in section (a)(2)(H) of this rule as non amusement services.
Therefore, ***, as a nonprofit club providing non-amusement services,
does not have to collect tax on the rental of lockers and boat stalls to
members or on membership fees and dues.

*** may refund to its members any taxes collected and reported
(within the four year statute of limitations) on locker and boat stall rentals
and on monthly dues and membership fees. ***** may then amend the
returns on which the tax was reported, adjust a current return, or request a
refund from this Department. A request for refund should be directed to:

Comptroller of Public Accounts
Revenue Accounting Division
Credits Section
Austin, Texas 78774-0100

I have enclosed a copy of Rule 3.325, concerning refunds, for your information.

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