Could a country club refund admissions tax on old initiation fees after giving existing members contingent purchase credits?

Plain-English summary

Florida refused to let a luxury resort and country club retroactively reduce taxable initiation fees after it introduced a lower-priced membership program.

Existing members had paid roughly $40,000 to $45,000 plus admissions tax for nonequity memberships. When the club later offered new memberships for $25,000, it proposed giving prior members the difference as an account credit usable for discounted future purchases and refunding tax on that difference.

Florida said taxability was determined when the admission was sold. The original tax was correctly collected, the memberships had been used, and the later credit was contingent on members making future purchases—some members might never use it. That was not an overpayment, error, returned unused admission, or absolute refund of the original price.

The club could apply the credits as discounts to future purchases. Tax on those later transactions was based on the reduced amount the member actually paid.

What this means for you

A later customer-retention credit does not necessarily rewrite the taxable price of an earlier completed admission. Refund treatment depends on what existed at the original sale and whether consideration is actually returned.

Common questions

Could the club refund tax on the initiation-fee difference? No.

Why not? The original admission was fully used and correctly taxed, while the later credit was contingent on future purchases.

How were discounted future purchases taxed? On the reduced price paid after the credit.

Citations and references

• Fla. Stat. §§ 212.02, 212.04, 212.06, and 215.26, and Fla. Admin. Code r. 12A-1.018, as quoted and discussed in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 10A-009

Original ruling text

SUMMARY
QUESTION: Whether Taxpayer can recharacterize the price of an admission paid for
initiation fees that is credited to a member’s account after the membership is sold.
ANSWER: No. Section 212.06(1)(a), F.S., requires determination of taxability at the
moment of sale. Also, the credit is contingent on the member actually making purchases
from Taxpayer. Members may never utilize the credit in some instances. Therefore, use
of the credit is a mere contingency and not an absolute credit of the price. In addition,
there was no overpayment of tax or tax paid in error, as required by section 215.26, F.S.
February 12, 2010
XXX
Subject: Technical Assistance Advisement 10A-009
Sales and Use Tax
Admissions
XXXX, Petitioner (“Resort”)
FEI#: XXX
Section 212.04(1), (3), and (5), Florida Statutes (F.S.); Section 215.26, F.S.
Section 212.02(15) and (16), F.S.; Section 212.06(1)(a), F.S.
Rule 12A-1.018, Florida Administrative Code (F.A.C.)
Dear XXX:
This letter is a response to your petition dated June 30, 2009, for the Department’s
issuance of a Technical Assistance Advisement (“TAA”) concerning the above
referenced party and matter. Your petition has been carefully examined, and the
Department finds it to be in compliance with the requisite criteria set forth in Chapter 1211, F.A.C. This response to your request constitutes a TAA and is issued to you under
the authority of s. 213.22, F.S.
FACTS
The Resort, a for-profit entity formed under the laws of XXX, operates a luxury resort
and country club that offers a nonequity and nontransferrable club membership entitling
prospective members to enjoy unlimited access to the private grounds and amenities of
the Resort including, among other things, the golf course(s), tennis court(s), beach
activities, and the spa. In consideration for the right to the enjoyment of the
aforementioned unlimited access, the Resort charges a nonrefundable initiation fee to all
new members, which may be paid either as a lump sum payment or by financing through
the Resort.
Sales tax is collected by the Resort from all members at the time the membership
agreement is entered into, whether the membership is paid in full or financed over a

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period of time. Since 2006, the initiation fee for club membership has generally ranged
between approximately $40,000 and $45,000, exclusive of any sales tax due.
During April 2009, the Resort introduced an incentive program to new members, which
would allow them to pay an adjusted initiation fee of $25,000 plus sales tax, while
enjoying the same rights and privileges as previous memberships sold before the
inducement. However, in order to take advantage of the adjusted rate, such member is
required to pay for the membership in full upon execution of the membership agreement.
As a concession to existing members who paid the higher initiation fee in full prior to the
introduction of the incentive program, the Resort’s board of directors will be adopting a
resolution requiring the Club to offer a credit equal to the difference between the
member’s paid-in-full initiation fee and the $25,000 adjusted initiation fee for new
members. For example, if a member fully paid an initiation fee of $45,000, such member
would be entitled to a credit in the amount of $20,000 ($45,000 initiation fee - $25,000
adjusted initiation fee = $20,000 credit to be applied). In addition to the credit, that
member will also receive a refund of $1,300 for sales tax paid ($20,000 credit * 6.5%
sales tax rate = $1,300). The following example illustrates the calculation of a member’s
account based on the fact pattern referenced above;

Member’s original initiation fee
Incentive program adjustment
Adjustment to be credited to Member’s account

Adjustment

Sales Tax and Surtax @ 6.5%

$45,000
(25,000)
$20,000

$2,925
(1,625)
$1,300 (refund)

The amount credited to the member’s account may be applied against future purchases at
Resort at the various food and beverage, retail, spa, and other outlets. However, the
credit balance will have an expiration date of September 30, 2011, at which time it is
forfeited. The credit will be limited to a percentage (ranging between 20% and 50%) of
each purchase and may not be applied to annual dues, including social, golf, tennis, or
croquet dues. Member spending in all retail outlets will continue to be subject to sales
tax on the gross sales amount before application of the credit. For example, if a member
purchases $1,000 of goods and services in one month, that member’s expense statement
for the month during which the purchase was made will show a debit for the full purchase
price of $1,000 plus sales tax of $65, less a credit of $500. The following example
illustrates the balance of the member’s account after a purchase as referenced above;

Beginning monthly balance of account
Purchase
Ending monthly balance of account

Adjustment

Sales Tax @ 6.5%

$20,000.00
(500.00)
$19,500.00

$1,300.00
(32.50)
$1,267.50

The sales tax account will be set up to ensure that, as the adjustment is utilized, the
correct sales tax will correspond to the unused balance.
The Resort has historically offered and continues to offer internal financing of club
memberships. Those members who financed their membership prior to the adjusted

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pricing arrangement are being offered a one-time option to make a lump sum payment of
the difference between the amounts previously paid and $25,000 which would make the
total amount paid (excluding any interest paid as a result of the financing) equal to
$25,000. For example, if a member that has financed the payment of the initial
membership fee has subsequently made principal payments of $10,000, such member
would have the option of making a lump sum payment of $15,000 ($25,000 adjusted
membership initiation fee - $10,000 principal payments = $15,000) in order to take
advantage of the adjustment.
In the event that a club member who financed the payment of the initiation fee has made
principal payments in excess of $25,000, such member will receive the same credit
described in the illustration above.
ISSUE
The issue is whether The Resort may take a credit for the sales tax refunded to members
as a result of the reduced membership fee.
TAXPAYER’S POSITION
Section 213.756(1), F.S., states that “Funds collected from a purchaser under
representation that they are taxes provided for under the state revenue laws are state funds
from the moment of collection and are not subject to refund absent proof that such funds
have been refunded previously to the purchaser.”
Under Rule 12A-1.061(6)(c)2., F.A.C., a membership agreement which provides for a
member to use a Resort’s facility is subject to sales tax and such tax is to be collected by
the person selling the membership on the total initial membership fee at the time the
membership agreement is entered into, whether the membership is paid in full or financed
over a period of time.
In addition, Rule 12A-1.014(1), F.A.C., states that “[W]hen a dealer refunds the sales,
lease, or rental price of admissions, tangible personal property, transient rentals, real
property, or services upon which tax has been paid by the purchaser or lessee to the
dealer and remitted by the dealer to the state, the dealer shall also refund the tax paid by
the purchaser. If, in lieu of a refund of the sales price, the dealer credits such amount on
the purchaser’s account, a corresponding credit for sales tax previously paid by the
customer shall be made.”
Rule 12A-1.014(3), F.A.C., states that “[W]henever a dealer credits a customer with tax
on returned merchandise or for tax erroneously collected, he must refund such tax to his
customer before his claim to the State for credit or refund will be approved.”
It is clear that regardless of whether a member finances a Resort membership or pays for
it in one lump sum payment, such member has paid sales tax due upon entering into the
membership agreement in accordance with Rule 12A-1.061(6)(c)2., F.A.C.

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Section 213.756(1), F.S., and Rule 12A-1.014(3), F.A.C., prohibit the Department of
Revenue from paying a refund unless the taxpayer provides proof that the tax collected
has been refunded to its customers. The Resort will be able to provide proof that tax has
been collected on the original full membership fee and will be adopting board resolutions
to grant the club members a refund of sales tax paid on the adjusted amount.
Under Rule 12A-1.014(1), F.A.C., “[i]f, in lieu of a refund of the sales price, the dealer
credits such amount on the purchaser’s account, a corresponding credit for sales tax
previously paid by the customer shall be made.” In the case of the Resort, it is also clear
that if a member receives a full refund of the sales tax portion of the payment previously
made as a result of the adjustment, the Resort should be entitled to take a credit for those
payments on its sales tax return for the period during which such payment is made. The
purpose of Rule 12A-1.014(1), F.A.C., is to ensure that the taxpayer does not receive any
money on behalf of its customers that is not immediately returned to its customers. This
is further solidified by Rule 12A-1.014(3), F.A.C., which states that “[W]henever a dealer
credits a customer with tax on returned merchandise or for tax erroneously collected, he
must refund such tax to his customer before his claim to the State for credit or refund will
be approved.”
Based on your analysis of law, if the Resort provides a credit to a member for an
adjustment in membership fee and provides a cash refund for the sales tax previously
paid on the adjusted fee amount, the Resort is entitled to a credit for those payments on
its sales tax return for the period during which such payment is made, because the Resort
has met its obligation for actual repayment of sales tax under Rule 12A-1.014(1), F.A.C.
The Florida Statutes do not address the issue of an expiration date on the credit for the
adjusted membership fee. You believe the expiration date of September 30, 2011, on the
adjustment that has been credited to the member’s account is not a contingency, but
rather ensures that the member will utilize the full credit rather than losing a “cash
equivalent” and that the sales tax was properly refunded to the members.
APPLICABLE STATUTES AND RULES
Section 212.04(1)(b), (3), and (5), F.S., provide in part:
(1)(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….

(3) Such taxes shall be paid and remitted at the same time and in the same
manner as provided for remitting taxes on sales of tangible personal
property, as hereinafter provided….

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(5) All of the provisions of this chapter relating to collection,
investigation, discovery, and aids to collection of taxes upon sales of
tangible personal property shall likewise apply to all privileges described
or referred to in this section, and the obligations imposed in this chapter
upon retailers are hereby imposed upon the seller of such admissions….
When tickets or admissions are sold and not used but returned and credited
by the seller, the seller may apply to the department for a credit allowance
for such returned tickets or admissions if advance payments have been
made by the buyer and have been returned by the seller, upon such form
and in such manner as the department may from time to time prescribe.
The department may, upon obtaining satisfactory proof of the refunds on
the part of the seller, credit the seller for taxes paid upon admissions that
have been returned unused to the purchaser of those admissions….
Section 212.06(1)(a), F.S., provides in part:
(1)(a) The aforesaid tax at the rate of 6 percent of the retail sales price as
of the moment of sale … shall be collectible from all dealers as herein
defined on the sale at retail ….
Section 215.26(1), F.S., provides in part:
(1) The Chief Financial Officer may refund to the person who paid same,
or his or her heirs, personal representatives, or assigns, any moneys paid
into the State Treasury which constitute:
(a) An overpayment of any tax, license, or account due;
(b) A payment where no tax, license, or account is due; and
(c) Any payment made into the State Treasury in error; ….
Section 212.02(15) and (16), F.S., provide in part:
(15) "Sale" means and includes:
(a) Any transfer of title or possession, or both, exchange, barter, license,
lease, or rental, conditional or otherwise, in any manner or by any means
whatsoever, of tangible personal property for a consideration.

(16) "Sales price" means the total amount paid for tangible personal
property …. [D]iscounts allowed and taken at the time of sale shall not be
included within the purview of this subsection.

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Rule 12A-1.018(2) and (4), F.A.C., provides:
(2) Trade-ins or discounts allowed and taken at the time of sale are
deducted from the selling price, and the tax is due on the net amount paid
at the time of sale. Discounts granted for payment within a specified
period or upon a specified later date are not deemed discounts at the time
of sale, and may not be deducted from the selling price for purposes of
computing the tax.

(4) A dealer's discount is a reduction in selling price if taken at the
moment of sale or purchase of a product as illustrated by the following
examples.
(a) Example A: An automobile is sold to a customer for $5,000
with a $500 "dealer's discount." The customer pays $5,000 less the
$500 discount. The dealer receives $4,500. Tax due on $4,500.
(b) Example B: A customer has a coupon issued by the dealer
which allows $.50 off the sales price of a box of soap powder
which retails for $1.50. The dealer collects $1.00 from the
customer along with the coupon. Tax is due on $1.00, since the
redemption of the coupon reduces the sales price of the product to
that amount.
RESPONSE
Here, the sales tax collected on admissions is not refundable as a refund or credit, as
proposed by the request. Section 212.04(1)(b), F.S., requires the sales tax on admissions
to be collected in addition to the sales price or actual amount received from admissions.
Section 212.04(3), F.S., provides that collection and remittance of the tax must be in the
same manner as for sales tax. Section 212.06(1)(a), F.S., applies to the sale of
admissions by virtue of section 212.04(3), F.S. Section 212.06(1)(a), F.S., requires
collection of the tax at the moment of the sale of the admission. Therefore, as required
by section 212.06(1)(a), F.S., the nature of the transaction must be ascertained at the
moment of the sale of the admission (when the transaction occurs), so as to determine
whether the tax must be collected or not. Therefore, a later determination as to the
recharacterization of payment and its taxability is barred by virtue of section
212.06(1)(a), F.S., as to the sales of admissions.
In addition, section 215.26, F.S., only applies to taxes paid in error, when there is an
overpayment of the tax, or when the tax was not due. As the tax was correctly collected
at the moment of the sale of the admission, these provisions are not applicable. As such,
a refund cannot be made on this basis.
The refund of sales price for admissions only applies on tax collected for advanced ticket
sales where the event is not held and the tickets are not used. See section 212.04(5), F.S.
Furthermore, the proposed credit is not absolute, because it is contingent on the member
actually making the discounted purchases from Resort. If no purchases are made, the

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credit will never be used as provided by the proposed resolution. As such, the admission
price may never be refunded in some instances. Also, in this case, the admissions are
fully used by Resort’s members and are not returned in any manner to Resort. As such, a
credit for sales of prior admissions is inapplicable. Therefore, the proposed credit of
$1,300 in your example cannot be taken as credit and is not refundable.
Here, members are only entitled to use of the credit as a discount on purchases from 20 to
50 percent off the regular price paid by newer members who paid a lower initiation fee.
For example, if a $25 meal is purchased by a member entitled to a 20 percent discount,
the $20 paid is the “sales price” upon which the sales tax is determined. Members not
entitled to the discount are required to pay $25, which is the “sale price” upon which the
tax is determined. Rule 12A-1.018, F.A.C. Hence, the Resort may not take a credit or
refund directly against the sales of admission as provided by section 215.26, F.S., and
shall report sales based on the “sales price” or consideration paid on the discounted sales.
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 Section 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 10 days of the date of this letter.
Sincerely,

Charles Wallace
Senior Attorney
Technical Assistance and Dispute Resolution
(850) 922-4734
CW/lp
Record ID: 67355