Was a private golf club's membership termination fee taxable when departing members could choose continued facility access?

Plain-English summary

A private golf and country club let resigning members pay a termination fee to eliminate future dues, renovation-fund fees, and capital assessments. Some departing members could also elect up to six more months of facility access without new assessments.

Florida split the fee into two treatments based on what the member received:

• Continued access requested: Taxable as an admission because the payment entitled the member to keep using recreational facilities.
• Continued access declined: Not taxable because the only benefit was ending the membership agreement and future financial obligations.

The label "termination fee" did not control. The relevant question was whether payment entitled the member to use the club's recreational facilities.

What this means for you

Document each member's election and apply tax according to the rights purchased. A single exit-fee program can contain both taxable and nontaxable transactions when facility access differs.

Common questions

Was every termination fee taxable? No.

When was the fee taxable? When the member requested continued facility use.

Why was the no-access fee exempt? It purchased only release from future contractual payment obligations, not admission to recreational facilities.

Citations and references

• Fla. Stat. §§ 212.02(1) and 212.04(1) (club fees and admissions)
• Fla. Admin. Code r. 12A-1.005(4)(c)-(f) (facility-access test for club fees)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 08A-017

Original ruling text

SUMMARY

QUESTION: The termination fee allows the member a choice between requesting or
declining further use of the club’s facilities. This choice creates two specific classes:
those members who pay the fee and are allowed access to the facilities without further
monthly obligations, and those who pay the fee and are not allowed access the facilities.
Is the termination fee subject to tax?
ANSWER: When a member requests the opportunity to continue to use the facilities, the
termination fee is a taxable admission. When a member declines the opportunity to
continue to use the facilities, the termination fee is not subject to tax.
June 18, 2008
XXX
Re:

Technical Assistance Advisement 08A-017
Termination Fees
Sales and Use Tax
Section 212.04, Florida Statutes (F.S.)
Rule 12A-1.005, Florida Administrative Code (F.A.C.)
XXX (“Taxpayer”)
FEIN: XXX

Dear XXX:
This is in response to your letter dated March 24, 2008, and other correspondence
provided, requesting this Department’s issuance of a Technical Assistance Advisement
(TAA) pursuant to section 213.22, F.S., and Rule Chapter 12-11, F.A.C., regarding the
above referenced matter and party. An examination of your letter has established that
you have complied with the statutory and regulatory requirements for issuance of a TAA.
Therefore, the Department is hereby granting your request for a TAA.
FACTS
Taxpayer is a private golf and country club. Taxpayer is introducing a new way for
members to resign. They are able to pay a “termination fee” that will absolve them from
any further financial obligations.
The “Membership Termination Agreement” provides in part:
In consideration of the member’s payment of $__ , the club releases the
member from any further obligation to pay dues, monthly renovation fund fees
and monthly capital assessment fees. . . .

Technical Assistance Advisement
Page 2 of 4

Member (circle one) requests/declines opportunity to continue to use the facilities
of the Club to which he is entitled until ___ , 2008. If he elects to
continue using the facilities, Member will not be liable for any new assessments
approved during this period. . . .
The “Membership Revitalization Plan (MERP)” sets forth further guidelines. The MERP
provides in part:
. . . Exiting members may continue to use facilities to which they are entitled for
up to six months, having requested and received BOG approval. Exit fees and
unpaid capital assessments must be paid in advance of the six-month period.
Account must be maintained on a current basis. Privileges will be suspended if
account becomes more than 30 days past due. Member will not have voting rights
or any liability for new assessments authorized during the period. . . .
You have indicated that the option to use the club’s facilities subsequent to terminating a
member was only afforded to those who terminated their memberships by December 31,
2007.
ISSUE
Whether termination fees are subject to Florida sales and use tax as admissions under
Section 212.04, F.S.
APPLICABLE STATUTES AND RULES
Section 212.04(1), F.S., provides in part:
(1)(a) It is hereby declared to be the legislative intent that every person is
exercising a taxable privilege who sells or receives anything of value by
way of admissions.
(b) For the exercise of such privilege, a tax is levied at the rate of 6
percent of sales price, or the actual value received from such admissions,
which 6 percent shall be added to and collected with all such admissions
from the purchaser thereof, and such tax shall be paid for the exercise of
the privilege as defined in the preceding paragraph. . . .

Section 212.02(1), F.S., provides in part:

Technical Assistance Advisement
Page 3 of 4
(1) The term "admissions" means and includes . . . all dues and fees paid
to private clubs and membership clubs providing recreational or physical
fitness facilities, including, but not limited to, golf, tennis, swimming,
yachting, boating, athletic, exercise, and fitness facilities . . . .
Rule 12A-1.005(4), F.A.C., provides in part:
(4) DUES AND INITIATION FEES, EQUITY AND NONEQUITY
MEMBERSHIPS, CAPITAL CONTRIBUTIONS AND ASSESSMENTS,
REFUNDABLE DEPOSITS, AND USER FEES.
(a)1. Dues and user fees paid to any organization, including athletic
clubs, health spas, civic, fraternal, and religious clubs, and organizations
that provide physical fitness facilities or recreational facilities, such as golf
courses, tennis courts, swimming pools, yachting, boating, athletic,
exercise, and fitness facilities, are subject to tax. . . .

(c) Fees paid to private clubs or membership clubs as a condition
precedent to, in conjunction with, or for the use of the club's recreational
or physical fitness facilities are subject to tax. Examples of such fees are:

1. User fees paid by members or nonmembers to an organization that
   entitle the payor to use the organization's recreational or physical fitness
   facilities or equipment.

(d) Fees paid to private clubs or membership clubs that do not entitle
the payor to the use of the club's recreational or physical fitness facilities
are not subject to tax. . . .

(f) Dues and fees paid by persons for membership in clubs that do not
entitle the members to use recreational or physical fitness facilities are not
subject to tax. . . .
DISCUSSION
The termination fee allows the member a choice between requesting and declining further
use of the club’s facilities. This choice creates two specific classes: those members who
pay the fee and are allowed access to the facilities, and those who pay the fee and are not
allowed access.
When members pay the fee and decline access to the facilities, the only benefit is the
termination of the membership agreement. This fee does not entitle the payor to the use
of the facilities. See Rule 12A-1.005(4)(d), F.A.C. The fee is not taxable.
However, Florida law provides that “every person is exercising a taxable privilege who
sells or receives anything of value by way of admissions.” See Section 212.04(1)(a), F.S.
The law further defines an admission as “all dues and fees paid to private clubs and

Technical Assistance Advisement
Page 4 of 4
membership clubs providing recreational or physical fitness facilities.” See Section
212.02(1), F.S. When members pay the fee and request access to the facilities, the
member is entitled to use the facilities for six additional months. Therefore, termination
fees with requested access are taxable admissions. See Rule 12A-1.005(4)(c), F.A.C.
CONCLUSION
When a member requests the opportunity to continue to use the facilities, the termination
fee is a taxable admission. When a member declines the opportunity to continue to use
the facilities, the termination fee is not taxable.
This response constitutes a Technical Assistance Advisement under Section 213.22, F.S.,
which is binding on the Department only under the facts and circumstances described in
the request for this advice as specified in Section 213.22, F.S. Our response is predicated
on those facts and the specific situation summarized above. You are advised that
subsequent statutory or administrative rule changes, or judicial interpretations of the
statutes or rules, upon which this advice is based, may subject similar future transactions
to a different treatment than expressed in this response.
You are further advised that this response, your request and related backup documents are
public records under Chapter 119, F.S., and are subject to disclosure to the public under
the conditions of s. 213.22, F.S. Confidential information must be deleted before public
disclosure. In an effort to protect confidentiality, we request you provide the undersigned
with an edited copy of your request for Technical Assistance Advisement, the backup
material and this response, deleting names, addresses and any other details which might
lead to identification of the taxpayer. Your response should be received by the
Department within 15 days of the date of this letter.
Sincerely,

H. French Brown, IV
Attorney
Technical Assistance and Dispute Resolution
(850) 922-4708
Ctrl# 43780