Is a country club's 'Non-Resident' membership class — for members who live more than 100 miles from the club, some of them out of state — subject to Texas sales tax on dues and fees?

Subject

Country Club — Non-Resident Membership Class — Dues Taxable Because Club Is Located In Texas

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9310L1273A09

Plain-English Summary

A Texas country club wrote to the Comptroller asking whether a special membership category it called a "Non-Resident membership" was subject to sales tax under Rule 3.298 (Amusement Services). To qualify for this membership class, a member had to live outside a 100-mile radius from the city limits of the city where the club is located; the letter notes that some of these Non-Resident members actually live outside Texas entirely, and on occasion use reciprocal clubs in other parts of the country. Even so, these members are still billed for their membership through the Texas club. The club was already collecting tax on this membership category but wanted a written ruling it could show to members who didn't believe the membership should be taxable.

The Comptroller ruled that the dues were taxable. Under Rule 3.298(e)(1), sales tax applies to the sale of an admission to an amusement service if the event or location of the service is within Texas. Because the club itself is located in Texas, the Comptroller held that sales tax is due on all membership dues, initiation fees, and other assessments and fees charged for any special privilege, status, or membership classification at the club — including the Non-Resident membership class. In other words, the taxability turns on where the club (the location of the service) is, not on where the individual member lives.

What This Means For You

If you operate a Texas club or amusement-service business with special membership tiers for out-of-town or out-of-state members: This letter indicates that residency-based membership categories do not escape Texas sales tax just because the member lives far away or even outside the state. The controlling fact under Rule 3.298(e)(1) is the location of the club/event, not the member's residence.

If you are a member of such a class: Being billed as a "Non-Resident" member of a Texas club does not by itself make your dues exempt from Texas sales tax — according to this letter, dues, initiation fees, and other assessments tied to that membership classification remain taxable because the club is located in Texas.

Note on scope: This letter addresses only the taxability of the Non-Resident membership dues/fees under Rule 3.298(e)(1); it does not address any other membership classifications, exemptions, or use of reciprocal out-of-state clubs beyond noting that reciprocal use does not change the billing (and taxability) through the Texas club.

Q&A

Q: Does living more than 100 miles from the club, or even outside Texas, exempt a member's dues from Texas sales tax?
A: No. The Comptroller ruled that because the club itself is located in Texas, sales tax is due on the Non-Resident membership dues regardless of where the member lives, since Rule 3.298(e)(1) taxes admissions based on the location of the service, not the member's residence.

Q: What rule did the Comptroller rely on?
A: Rule 3.298(e)(1) (Amusement Services), which imposes tax on the sale of an admission to an amusement service if the event or location of the service is within Texas.

Q: Does it matter that some Non-Resident members occasionally use reciprocal clubs in other states?
A: No — the letter notes that even when Non-Resident members use clubs in other parts of the country on a reciprocal basis, they are still billed through their membership at the Texas club, so the dues remain taxable in Texas.

Q: Is only the Non-Resident membership category taxable, or other fees too?
A: The ruling states that sales tax is due on all membership dues, initiation fees, and other assessments and fees charged to members for a special privilege, status, or membership classification at the club, including but not limited to the Non-Resident membership.

Original ruling text

October 28,1993

Dear *:

Thank you for your letter requesting a ruling on sales tax Rule 3.298
Amusement Services. Specifically, your question concerns the taxability of a
special membership class that you have at the ***. This class is
called a Non-Resident membership, that requires that the member must live
outside a 100 mile radius from the city limits of **, Texas. In
some cases,the Non-Resident members live outside of Texas and on occasion may
use clubs in other parts of the country on a reciprocal basis. However, these
members are still billed through their membership at ****. You need
a written response to this inquiry so that you may show to members who do not
feel that this membership is subject to tax. You are currently collecting tax
on this membership classification.

RESPONSE: Section (e)(1) of Rule 3.298 imposes a tax on the sale of an
admission to an amusement service if the event or location of the service is
within the State of Texas. Since *** is located in Texas, sales tax
is due on all membership dues, initiation fees, and other assessments and fees
charged to its members for a special privilege, status, or membership
classification in *****, including the Non-Resident memberships.

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 me at
1-800-531-5441, extension 3-4502. The regular number is 512/463-4502. You may
also write to Tax Administration Division at the above address.

Sincerely,

Gilbert Zamora
Tax Administration Division

NOTE: Previous Accession Number 9311105L.2 and/or 9311105L