Is Texas sales tax due on liquor pool dues and other minimum-spending charges billed by a private club to its members?

Plain-English summary

A private club organized as a Sec. 501(c)(7) nonprofit adopted a minimum-spending policy for its members and asked the Comptroller's office for a ruling on how to treat it for sales tax purposes. The club was already reporting the minimum-spending charges as taxable income and wanted confirmation.

The Comptroller pointed to the amusement services rule (34 Tex. Admin. Code Rule 3.298(b)), which taxes membership dues, initiation fees, and other assessments or fees charged for a special privilege, status, or membership classification in a private club or organization — including Sec. 501(c)(7) organizations that provide amusements. The rule specifically lists "liquor pool dues" among the taxable special-privilege fees, along with boat slip rental fees, golf cart storage fees, locker rental fees, locker room use fees, and restaurant/bar access fees.

The letter also flags a key exception: effective October 1, 1991, food and beverage minimums became subject to sales tax for Sec. 501(c)(7) organizations, but if the beverage minimum is instead subject to the Texas Alcoholic Beverage Commission's gross receipts tax, then it is not also subject to sales tax. The Comptroller noted the opinion was based on the facts presented and that other, similar facts could produce a different result.

What this means for you

Private clubs and Sec. 501(c)(7) nonprofit organizations

If your club charges members liquor pool dues or other minimum-spending fees as a condition of membership or a special privilege, expect those charges to be treated as taxable amusement service fees under Rule 3.298(b) — the same category that covers boat slip rentals, golf cart storage, and locker fees. This applies even though your club is organized as a Sec. 501(c)(7) nonprofit, as long as the club provides amusements.

Clubs with liquor pool or beverage minimum arrangements

Check whether your beverage minimum is already subject to the Texas Alcoholic Beverage Commission's gross receipts tax. If it is, the letter confirms that amount is not also subject to sales tax — but if it isn't captured by that tax, sales tax applies.

Accountants and tax professionals

This letter is a useful, narrow data point on how the amusement services rule treats special-privilege fees at private clubs, and on the interaction (not double taxation) between the TABC gross receipts tax and sales tax on beverage minimums. As with any letter ruling, it's based on the specific facts presented to the Comptroller's office.

Common questions

Q: Are liquor pool dues charged by a private club subject to Texas sales tax?
A: Generally yes — Rule 3.298(b) lists liquor pool dues among the taxable fees for special privileges in a private club or organization, including Sec. 501(c)(7) nonprofit clubs that provide amusements.

Q: Does organizing as a Sec. 501(c)(7) nonprofit exempt a club's minimum-spending fees from sales tax?
A: No. The amusement services rule expressly includes organizations described under Internal Revenue Code Sec. 501(c)(7) if they provide amusements.

Q: What if the beverage minimum is already subject to the Texas Alcoholic Beverage Commission's gross receipts tax?
A: Then it is not also subject to sales tax, according to this letter.

Q: Since when have food and beverage minimums been taxable for Sec. 501(c)(7) organizations?
A: The letter states that food and beverage minimums became subject to sales tax for Sec. 501(c)(7) organizations effective October 1, 1991.

Citations and references

• 34 Tex. Admin. Code Rule 3.298(b) (Amusement Services — taxable special-privilege fees, including liquor pool dues)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9501L1332D10

Original ruling text

January 18, 1995

Dear **:

This is in response to your inquiry regarding a minimum spending policy
that you have recently adopted in your club, a Sec. 501(c)(7) non-profit
organization. You are reporting this as taxable income and would like
an official ruling from this office on this action.

Response: Subsection (b) of Rule 3.298 - Amusement Services, provides:

. . . 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, Sec. 501(c)(7), if the organizations
provide amusements, are taxable. Taxable fees for special privileges in
the organization include, but are not limited to, liquor pool dues, boat
slip rental fees, golf cart storage fees, locker rental fees, locker
room use fees, and fees for access to the restaurant and bar.

Emphasis added.

Effective October 1, 1991, food and beverage minimums became subject to
sales tax for Sec. 501(c)(7) organizations. If the beverage minimum is
subject to the Texas Alcoholic Beverage Commission gross receipts tax,
then it would not be subject to sales tax.

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

You may call me toll-free at 1-800-531-5441, extension 3-4502. The
direct line is 512/463-4502. You may also write to Tax Administration,
Comptroller of Public Accounts.

Sincerely,

Gilbert Zamora
Tax Administration Division

NOTE: Previous Accession Number 9501864L