New York Codes, Rules and Regulations
Title 20 - DEPARTMENT OF TAXATION AND FINANCE
Chapter IV - Sales And Use And Other Miscellaneous Taxes
Subchapter A - Sales And Use Taxes
Part 527 - Taxable Transactions
Section 527.11 - Dues
Current through Register Vol. 46, No. 12, March 20, 2024
Tax Law, § 1105(f)(2)
(a) Imposition.
Example 1:
A social club maintains two types of memberships. Full memberships are $15 per year and limited memberships are $5 per year. Since the dues paid by the full members are in excess of $10 per year, all members' dues are taxable even though some are not more than $10.
Example 2:
An athletic club has two types of memberships: annual membership for $25 per year and life membership for $250. A person purchasing a life membership is required to pay tax on the $250 charge for membership at the time of purchase.
(b) Definitions.
As used in this section, the following terms shall mean:
Example 1:
A social club operates a restaurant and bar for the use of its members. The club requires of each member a minimum expenditure during the year of $200 for food and drink. If a member does not make actual expenditures totaling $200, he is billed for an additional amount equal to the difference between his actual expenditures and $200. The additional amount constitutes taxable dues or membership fees, inasmuch as such charge must be paid for the privilege of being a member of the club.
Example 2:
All members of a social club pay dues of $30 per year. A penalty of $1 is assessed on any member who fails to pay his dues promptly. The penalty is incurred and paid in that particular year by the member. The penalty is considered to be an increase in the amount of the member's dues or membership fees and is taxable as such.
Example 3:
A social club collects no regular dues or membership fees, but meets its operating expenses by levying assessments on its members as funds are required. These assessments constitute taxable dues or membership fees where the fees, combined with annual dues, exceed $10.
Example 4:
A social club wishes to expand its clubhouse by adding a new dining room to it. In order to finance the construction, the club will assess each member $100. The assessment is subject to tax as dues, regardless of the fact that the proceeds will be used for a capital improvement.
Example 5:
A social club collects $10 per year from each of its members as regular dues. Members are entitled to use the clubhouse facilities without payment of an additional charge. However, members who wish to use the golf course may do so only upon payment of an additional charge. Since the golf course is a social or athletic club facility, any charge made by the club to a member for the use of the course constitutes dues. The fact that such charges are made upon the member's election to use the course is immaterial.
Example 6:
A club organized and operated for the promotion of yachting and other aquatic sports, which is a social and athletic club, owns and maintains docking and mooring facilities for the use of its members. The club makes a charge to each member using its facilities. The amount of the charge depends upon the size of the member's boat and the location of the docking and mooring facilities used. The charges made by the club for these facilities constitute taxable dues or membership fees.
Example 7:
A beach club owns a strip of ocean beach, in connection with which it provides and maintains cabanas for rental to its members. The cabanas contain separate sleeping facilities, kitchen and bath. Membership dues do not entitle members to the use of these cabanas. Rental charges are not charges for social or sports facilities, and do not constitute dues.
Example 8:
A member of an athletic club violates the house rules and is suspended until he pays a fine of $15. The fine constitutes dues or membership fees.
Example 9:
A member of an athletic club invites a guest to play a round of golf at his club. The member is charged a $5 greens fee for the guest. Since the greens fee would be exempt as a fee for a participating sport if paid directly by the guest, such fee paid by the member is exempt.
A membership granted in a social or athletic club without payment of dues, which may provide full or partial club privileges. However, where a fee is charged to any honorary member to participate in a club function, such charge is taxable regardless of the designation assigned by the club.
Example 10:
An athletic club annually grants an honorary lifetime membership to the winner of the New York Marathon. The honorary member is entitled to full use of the facilities without payment of fees. Active annual members pay dues in excess of $10 annually. The honorary member is not required to pay any sales tax on the value of the membership.
Example 11:
A country club grants honorary memberships to certain community members in recognition of their civic contributions. The honorary members must each pay the normal greens fee to play golf. The greens fees are considered dues, and are subject to tax.
Any payment, contribution or loan, required as a condition precedent to membership, whether or not such payment, contribution or loan is evidenced by a certificate of interest or indebtedness or share of stock, and irrespective of the person or organization to whom paid, contributed or loaned.
Example 12:
As a condition necessary for membership in a social club, an applicant is required to purchase a $50 bond from the club. This purchase is an initiation fee subject to tax.
Example 13:
A tennis "club" which is owned by an individual provides tennis courts, showers, a sauna and lockers. "Members" pay a seasonal fee to play tennis at a certain time weekly. The "club" provides no other services and has a daily rate for nonmembers who may use a court when there is free time. This "club" is not a club or organization.
Example 14:
A tennis "club" which is owned by an individual provides tennis courts, showers, sauna and lockers. Members pay a seasonal fee to play tennis, any time during the season, without limitation. The club provides no other services and has a daily rate for nonmembers. Since the "club" does not restrict playing to members only and the "club" provides nothing but playing time for its members, charges are for season tickets to play tennis and not for the payment of dues. Therefore, this is not a club or organization.
Example 15:
A tennis "club" which is owned by an individual provides tennis courts, showers, sauna and lockers. The "club" sells season passes only, that are referred to as memberships, which are available to anyone on a first-come, first-served basis. This is not a club or organization.
Example 16:
A club organized as a type A not-for-profit corporation, as described in section 201(b) of the Not-for-Profit Corporation Law (i.e., civic, patriotic, political, social, fraternal, athletic, agricultural, horticultural, animal husbandry, and for a professional, commercial, industrial, trade or service association), is a club or organization and its dues may be subject to sales tax.
Example 17:
A club that is organized and operated exclusively for pleasure, recreation and other nonprofitable purposes, no part of the net earnings of which inures to the benefit of any private shareholder, and is exempt from Federal income tax under section 501(c)(7) of the Internal Revenue Code, is a club or organization and its dues may be subject to sales tax.
Example 18:
A club owned by an individual which attempts to restrict its membership by geographic area, income, race, religion or any other means, is a club or organization. However, a "club" owned by an individual which restricts its membership only because of the physical capacity of its facilities is not a club or organization.
Example 19:
Members of a "club" maintain an advisory committee to make suggestions to the "club" owner. The owner is not obligated to accept any of the suggestions. The members do not control any aspects of the "club's" activities; therefore, this is not a club or organization.
Example 20:
Members of a club maintain an advisory committee and the management of the club is obligated to accept the decisions of the advisory committee. The members do control the club's activities; therefore, this is a club or organization.
Example 21:
Before a person can join a club, he must be sponsored by a member of the club. The management of the club reserves the right to admit the new member. Since members have joint control with management over admission of new members, this is a club or organization.
Example 22:
A tennis "club" which is owned by an individual provides tennis courts, showers, sauna and lockers. Members pay a seasonal fee to play tennis. Nonmembers may use the courts, when there is free time, at a daily rate. Anyone waiting to use the courts must use a sign-up sheet, with the courts being assigned on a first-come, first-served basis. A member may not bump a nonmember who has a previous reservation. This is not a club.
Example 23:
Season-ticket holders at a golf course organize a tournament. The arrangement between the season-ticket holders and the owner of the golf course to hold the tournament is for the reservation of time only. The owner may enter into similar arrangements with non-season-ticket holders. Since the agreement provides for time only, the owner is not operating a club.
Example 24:
The owner of a "club" holds a members-only tournament. Since the tournament is under control of the management and not the members, the fact that the tournament may be restricted to members does not classify the "club" as a club or organization.
Example 25:
The owner of a golf course advertises season tickets which include preferred starting times. This is not a club or organization.
A social club is any club or organization which has a material purpose or activity of arranging periodic dances, dinners, meetings or other functions affording its members on opportunity of congregating for social interrelationship.
Example 26:
A club that is organized for the purpose of holding square dances is a social club.
Example 27:
A club that is organized solely for the purpose of providing facilities for members to play bridge or chess is not a social club.
Example 28:
A club that is organized for the purpose of educating its members in science, literature and art, once a year holds a dinner dance. The club is not a social club, notwithstanding the holding of the annual dinner dance.
Example 29:
Tennis, golf and boxing clubs, athletic or sports boating clubs, and any other organization for the practice or promotion of athletics or sports, are included within the meaning of athletic club or organization.
Example 30:
An association owns land on which it provides tennis courts and bathing beaches with equipment and attendants and parking lots for members and their guests, gives parties for members and guests, provides water to the land of its members and maintains private roads. Only the owners of property in the vicinity of the association's land may be members of the association. The association is an athletic club, as the use of its facilities is restricted to members and a material purpose of it is providing sports privileges and facilities.
Example 31:
Each purchaser of a lot or condominium within a real estate subdivision automatically becomes a member of an association which operates a pool, tennis courts and nature trails within the subdivision. The association assesses each owner an annual charge to provide funds for the operation of these facilities. The association has the right to limit the number of guests of members and to charge reasonable fees for the use of the facilities. The association is an athletic club, as it has a material purpose of providing sports privileges and facilities. The fact that membership is automatic upon purchase of real property has no effect on the association's status as a club.
Example 32:
A figure skating club has members who pay dues. The dues are in excess of $10. Portions of the dues are used for membership in a national figure skating association, for use of an ice skating facility and for other club expenses. The club is an athletic club or organization, the dues of which are subject to tax.
(c) Exceptions.
Example 1:
An organization formed for purely social purposes by Masons of the higher degrees, consisting of local lodges and a grand lodge, qualifies for the exception.
Example 2:
A Young Men's Christian Association or a Young Men's Hebrew Association is not a social or athletic club, since the material purposes of each are philanthropic and religious even though they may have social and athletic activities.
Example 3:
Service organizations, such as Rotary Club or Kiwanis, even though they have social luncheons, are not social clubs.
