Is a Manhattan sports club's membership fee subject to New York's social/athletic club dues tax, or to New York City's separate tax on gyms and health salons?

Plain-English summary

The Reebok Sports Club/NY operates a New York City health and fitness club offering a broad range of participant sporting activities -- an indoor swimming pool, volleyball and basketball courts, cycling, running, in-line skating, boxing, and martial arts -- alongside traditional training facilities (weights, aerobics, stepping machines, saunas, personal training, and nutritional counseling). It also offers lessons and organizes tournaments and league play. Members pay a membership fee for facility access, hold no ownership interest in the club, have no say in its management or in selecting other members, and the only cap on membership is the physical size of the facility.

Two separate taxes were at issue. First, New York's state/local tax on "social or athletic club" dues -- which requires real member control over management, activities, or new-member selection, or a proprietary interest, none of which existed here. So the club-dues tax didn't apply. Second, New York City's own local tax targeting gyms, health salons, and similar establishments -- a facility-type test, not a governance test. Because the club offers a genuine variety of participant sporting activities rather than functioning as a plain gym or weight-control salon, the Department found it falls outside that narrower NYC category too, following its own precedent for Town Sports International.

So membership charges at the club escaped every tax theory raised: the admission-charge tax (exempt as participant-sports admission), the state/local social-athletic-club dues tax (no member control), and New York City's separate gym/health-salon tax (too broad a range of activities to be a "gymnasium").

What this means for you

Health clubs and multi-activity sporting facilities

Whether your membership fee counts as taxable "club dues" turns on real governance facts -- do members actually control activities, elect officers, or choose new members? -- not on marketing language or a membership cap tied purely to physical capacity. A broad mix of genuine participant sports (not just workout equipment) also helps you clear New York City's narrower local gym/health-salon tax.

New York City gym and fitness-club operators

If your facility offers a genuine variety of sporting/athletic activities beyond the narrower category of weight-control salons, health salons, or plain gymnasiums, you may fall outside NYC's local tax on those establishment types -- but this depends on your actual activity mix, so compare your own facts to the regulatory definitions.

Accountants and tax professionals

This is one of several near-identical Sports Club Inc.-affiliated rulings issued around the same time (compare TSB-A-00(22)S, Chelsea Piers, and TSB-A-00(26)S, Pontius Realty, both decided the same year) -- all turning on the same two-part test: no member governance/ownership (for the state dues tax) and a broad-enough activity mix (for the NYC gym tax).

Common questions

Q: Is every health club or gym's membership fee exempt from New York sales tax?
A: No. It depends on the specific facts -- genuine lack of member control over the organization (for the club-dues tax) and a broad enough mix of activities (to escape NYC's narrower gym/health-salon tax).

Q: Does restricting membership size make an organization a taxable "club"?
A: Not by itself -- the regulations specifically say restricting membership solely because of the physical size of the facility does not, on its own, make an entity a "club or organization."

Q: Can another fitness facility rely on this ruling?
A: No. It binds the Department only for this petitioner on the facts described. Other facilities should compare their own governance structure and activity mix before assuming the same result.

Citations and references

Statutes and regulations:

• Tax Law § 1105(f)(1) (admission-charge exemption for participant sports facilities)
• Tax Law § 1105(f)(2) (tax on social or athletic club dues and initiation fees)
• Tax Law § 1107(a) (additional New York City sales tax)
• Tax Law § 1212-A(a)(2) (NYC local tax authorization on gyms, health salons, and similar facilities)
• NYC Administrative Code § 11-2002(h) (NYC tax on weight control salons, gymnasiums, and similar establishments)
• 20 NYCRR § 527.11(b)(5), (7) (definitions of "club or organization" and "athletic club")

Prior rulings referenced:

• Town Sports International and Subsidiaries, Adv Op Comm T&F, July 1, 1998, TSB-A-98(42)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2000.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a00_19s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-00(19)S
Sales Tax
April 25, 2000

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S000120A

On January 20, 2000, the Department of Taxation and Finance received a Petition for
Advisory Opinion from The Reebok Sports Club/NY, c/o The Sports Club Inc., 11100 Santa Monica
Blvd., West Los Angeles, CA 90025.
The issue raised by Petitioner, The Reebok Sports Club/NY, is whether certain fees charged
by it for the use of its facility are subject to New York State and local sales taxes.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner operates a club in New York City at which it provides a variety of participant
sporting activities. Petitioner’s club has an indoor swimming pool, volley ball and basketball courts,
as well as cycling, running, in-line skating, boxing, martial arts and other facilities.
In addition, Petitioner offers traditional training facilities such as weight lifting equipment,
aerobics, stepping machines, saunas and spas along with personal training, nutritional counseling and
cardiovascular conditioning. Petitioner offers lessons at its club for sports such as boxing and
martial arts. Petitioner also organizes tournaments and league play in various sports. Petitioner
charges membership fees for the use of its facilities. These fees allow members to use the facilities
at Petitioner’s club. Petitioner’s members do not control any social or athletic activities, selection
of its members or club management, nor possess any proprietary interest in Petitioner. The number
of members is restricted solely because of the physical size of the facility.
Applicable Law & Regulations
Section 1105(f) of the Tax Law imposes sales tax, in part, on:
(1) Any admission charge. . . except charges to a patron for admission to, or
use of, facilities for sporting activities in which such patron is to be a participant,
such as bowling alleys and swimming pools. . . .
(2)(i) The dues paid to any social or athletic club in this state if the dues . . .
are in excess of ten dollars per year, and on the initiation fee alone, regardless of the
amount of dues, if such initiation fee is in excess of ten dollars. . . .

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Sales Tax
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Section 1107 (a) of the Tax Law provides:
General. On the first day of the first month following the month in which a
municipal assistance corporation is created under article ten of the public authorities
law for a city of one million or more, in addition to the taxes imposed by sections
eleven hundred five and eleven hundred ten, there is hereby imposed on such date,
within the territorial limits of such city, and there shall be paid, additional taxes, at
the rate of four percent, which except as provided in subdivisions (b) and (d) of this
section, shall be identical to the taxes imposed by sections eleven hundred five and
eleven hundred ten. Such sections and the other sections of this article, including the
definition and exemption provisions, shall apply for purposes of the taxes imposed
by this section in the same manner and with the same force and effect as if the
language of those sections had been incorporated in full into this section and had
expressly referred to the taxes imposed by this section.
Section1212-A(a)(2) of the Tax Law authorizes the City of New York to impose a local sales
tax on "beauty, barbering, hair restoring, manicuring, pedicuring, electrolysis, massage services and
similar services, and every sale of services by weight control salons, health salons, gymnasiums,
turkish and sauna bath and similar establishments and every charge for the use of such facilities;"
such tax to be administered and collected by the Commissioner of Taxation and Finance.
Section 11-2002(h) of the Administrative Code of the City of New York imposes sales tax,
in part, on:
Receipts from . . . every sale of services by weight control salons,
gymnasiums, turkish and sauna bath and similar establishments and every charge for
the use of such facilities. . . .
Section 527.11(b) of the Sales and Use Tax Regulations provides, in part, the following
definitions of terms that are contained in section 1105(f)(2) of the Tax Law:
(5) Club or organization. (i) The phrase club or organization means any
entity which is composed of persons associated for a common objective or common
activities. Whether the organization is a membership corporation or association or
business corporation or other legal type of organization is not relevant. Significant
factors, any one of which may indicate that an entity is a club or organization, are:
an organizational structure under which the membership controls social or athletic
activities, tournaments, dances, elections, committees, participation in the selection
of members and management of the club or organization, or possession by the
members of a proprietary interest in the organization. The organizational structure
may be formal or informal.

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(ii) A club or organization does not exist merely because a business entity:
(a) charges for the use of facilities on an annual or seasonal basis, even if an
annual or season pass is the only method of sale and provided such passes are sold
on a first-come, first-served basis;
(b) restricts the size of the membership solely because of the physical size of
the facility. Any other type of restriction may be viewed as an attempt at exclusivity;
(c) uses the word club or member as a marketing device;
(d) offers tournaments, leagues and social activities which are controlled
solely by the management.
*

*

*

(7) Athletic club. (i) An athletic club is any club or organization which has
as a material purpose or activity the practice, participation in or promotion of any
sports or athletics.
*

*

*

(ii) Athletic activities does not include exercising or calisthenics solely for
health or weight reduction purposes, as contrasted to sports. An establishment that
merely provides steam baths, saunas, rowing machines, shaking machines and other
exercise equipment shall not be considered an athletic club. However, there is a four­
percent local sales tax in the city of New York on every sale of services by weight
control salons, health salons, gymnasiums, turkish baths, sauna baths and similar
establishments, and on every charge for the use of such facilities.
Opinion
Petitioner’s charges to its patrons entitle them to use facilities for sporting activities in which
the patron is to be a participant. Petitioner’s charges, therefore, are not subject to the tax on
admission charges under Section 1105(f)(1) of the Tax Law. Petitioner’s charges would be subject
to sales tax under Section 1105(f)(2) of the Tax Law if Petitioner operated an athletic club as defined
in paragraphs (5) and (7) of Section 527.11 of the Sales and Use Tax Regulations.
Petitioner’s members do not control any social or athletic activities, selection of members
or club management, or possess any proprietary interest in Petitioner. The number of members is
restricted solely because of the physical size of the facility. Therefore, Petitioner is not operating an

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athletic club as defined in paragraphs (5) and (7) of Section 527.11 of the Sales and Use Tax
Regulations. Accordingly, Petitioner’s charges to its members are not subject to tax as dues paid to
an athletic club under Section 1105(f)(2) of the Tax Law.
Since Petitioner provides a variety of sporting activities and facilities to its members,
Petitioner’s facilities are not weight control salons, gymnasiums or similar establishments described
in Section 11-2002(h) of the Administrative Code of the City of New York. Petitioner’s charges,
therefore, are not for services provided by, or use of facilities in, weight control salons, gymnasiums
or similar establishments described in such Section 11-2002(h), and are not subject to that tax. See
Town Sports International and Subsidiaries, Adv Op Comm T & F, July 1, 1998, TSB-A-98(42)S.
Membership charges for the use of Petitioner’s facilities are therefore not subject to any of
the taxes imposed under Sections 1105(f) and 1107 of the Tax Law or Section 11-2002(h) of the
Administrative Code of the City of New York.

DATED: April 25, 2000

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Division

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.