If I bought my health club membership in Texas but moved out of state, do I still owe Texas sales tax on my dues?

Subject

Health/Athletic Club — Membership Purchased In Texas But Used Oos In Affiliated Clubs

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9403L1293G13

Plain-English Summary

The taxpayer bought a health club membership at a facility in Arlington, Texas, back in 1982, then moved out of Texas in 1987. The membership gave the taxpayer the right to use affiliated health club facilities across the country, and the taxpayer was apparently using one of those out-of-state affiliated clubs while asking whether the Texas dues were still taxable.

The Comptroller explained that membership fees and monthly dues to privately owned health clubs have been taxable since October 2, 1984. Because the taxpayer's contract was with the Arlington, Texas facility, Texas tax remained due on the dues — even though the taxpayer had moved away and was physically using a different, out-of-state affiliated club. The key factor is who the contract is with, not where the member happens to be exercising. To stop owing Texas tax, the Comptroller said the taxpayer would need to rewrite the membership contract directly with the affiliate located outside Texas.

What This Means For You

If you have a Texas health club membership and move out of state: Your dues stay subject to Texas sales tax as long as your contract remains with the Texas facility, even if you never set foot in Texas again and only use an out-of-state affiliated location.

If you want to stop paying Texas tax on club dues after relocating: You need to actually rewrite your contract with the affiliate facility located outside Texas, rather than simply continuing to pay dues under your original Texas-facility contract while using a different location.

If you run a health or athletic club with an affiliate network: The taxability of a member's dues turns on which facility the member's contract is with, not on which physical location the member actually uses.

Q&A

Q: I bought my membership in Texas but now live out of state and only use an affiliated club elsewhere. Do I still owe Texas sales tax?
A: Yes, according to this ruling — as long as your contract remains with the Texas facility, Texas tax is due on the dues, regardless of where you actually use the membership.

Q: How can I stop owing Texas tax on my dues after I move away?
A: The Comptroller advised rewriting your contract with the affiliate facility located outside Texas, rather than continuing under the original Texas-facility agreement.

Q: Since when have health club membership fees and dues been taxable in Texas?
A: The ruling states that membership fees and monthly dues to privately owned health clubs became taxable as of October 2, 1984.

Original ruling text

March 23, 1994

Dear *:

I have received your letter regarding the health club
membership you purchased at a facility in Arlington, Texas.

You state that you purchased this membership in 1982 and
then moved out of Texas in 1987. You ask about the
taxability of your annual dues.

As of October 2, 1984, membership fees and monthly dues to
privately owned health clubs are taxable. As long as your
contract is with the Arlington facility, Texas tax will be
due. As I understand it, your membership gives you the right
to utilize affiliated health club facilities across the
country; I presume you are using one of the affiliated
clubs. In order for the Texas tax to not be due, you
should rewrite your contract with the/an affiliate located
outside Texas.

This opinion is based on the facts presented. If there are
additional or different facts, the opinion could change.

If you have any questions, please don't hesitate to write
the Tax Administration Division or call one of our tax
specialists toll free at 1-800-252-5555.

Sincerely,

Joan Hale
Tax Administration Division

NOTE: Previous Accession Number 9403200L