Does a newly formed golf and social club owned by a for-profit LLC have to charge sales tax on membership dues and a one-time initiation-fee deposit, when members hold no ownership stake in or control over the club?

Plain-English summary

An accounting firm asked the Department, on behalf of a client, whether a planned golf and social club would owe sales tax on its membership dues and one-time initiation-fee deposit. The club will be owned by a for-profit New York LLC that also has common ownership with the developer of nearby condominiums. It plans to sell golf memberships (full golf access plus social privileges) and social-only memberships, both offered first-come, first-served to condo owners and the general public, capped at 350 golfers purely because of the course's physical capacity. New golf members must also pay a one-time initiation-fee deposit, refundable (without interest) 30 years after a member resigns.

New York taxes dues and initiation fees paid to a "social or athletic club," but only if the entity actually qualifies as one under the regulations. The key test isn't the marketing label "membership" -- it's whether members hold a real ownership stake, control the club's management or activities, or have a say in selecting other members. Here, members will have none of that: no proprietary interest, no vote on management or activities, and membership is capped only because the golf course and clubhouse can physically hold no more than 350 golfers, not to keep the club exclusive.

Relying on its own prior rulings for similarly structured golf clubs (Cobleskill Golf and Country Club, Lafayette Golf & Country Club, and the Tax Appeals Tribunal's Antlers Country Club decision), the Department concluded the club isn't a "social or athletic club" within the meaning of the dues tax. So both the annual dues and the initiation-fee deposit are exempt from state and local sales tax.

What this means for you

Developers and owners of golf, country, and social clubs

Structuring a club as a for-profit, developer-affiliated LLC doesn't by itself trigger the dues tax, and neither does capping membership at a facility's physical capacity. What matters is whether members actually get a proprietary interest or a real vote in running the place. If members have no such control, dues and initiation fees can be sold tax-free -- but if you later give members a real governance role (elections, committee seats, approval rights over new members), that could flip the analysis.

Accountants and tax professionals

This is a fact-specific "club or organization" determination under 20 NYCRR § 527.11 and Tax Law § 1101(d)(13), not a categorical exemption for golf clubs. The Department's three cited precedents (Cobleskill, Lafayette, Antlers) all share the same no-ownership/no-control fact pattern -- if your client's club differs (member voting rights, board seats, a real membership-approval process beyond simple physical capacity), the outcome could differ too.

Real estate developers pairing a club with residential sales

Because condo owners here get the same first-come, first-served access as the general public with no special governance rights, the club's tax treatment doesn't hinge on its tie to the adjacent condominium development -- the ownership/control test applies the same way regardless of who the members are.

Common questions

Q: Is every golf or country club's dues income exempt from sales tax?
A: No. It depends entirely on whether the club counts as a "social or athletic club" under the regulations -- if members hold a proprietary interest, control management or activities, or have a say in choosing other members, dues and initiation fees over $10/year are taxable.

Q: Does capping membership at 350 golfers make this an exclusive "club"?
A: No. The regulations specifically provide that restricting membership solely because of a facility's physical capacity does not, by itself, make an entity a taxable club or organization.

Q: Is the refundable initiation-fee deposit treated differently from ordinary dues?
A: No -- both are governed by the same "social or athletic club" threshold question. Since this club doesn't meet that threshold, neither the dues nor the initiation-fee deposit is taxable.

Q: Can another golf club rely on this ruling?
A: No. It binds the Department only for the specific petitioner and facts described. Another club with different governance rights or membership-selection rules could come out differently.

Citations and references

Statutes and regulations:

• Tax Law § 1105(f)(2)(i) (tax on social/athletic club dues and initiation fees)
• Tax Law § 1101(d)(6), (7), (13) (definitions of dues, initiation fee, and social or athletic club)
• 20 NYCRR § 527.11 (dues-tax regulations, including the "club or organization" test)

Prior rulings referenced:

• Cobleskill Golf and Country Club, Inc., Adv Op Comm T&F, Mar. 30, 1994, TSB-A-94(13)S
• Lafayette Golf & Country Club, L.L.C., Adv Op Comm T&F, Apr. 17, 1997, TSB-A-97(23)S
• Antlers Country Club, Inc., Dec Tax App Trib, Nov. 19, 1992, TSB-D-92(79)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_24s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-00(24)S
Sales Tax
May 31, 2000

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S990810A

On August 10, 1999, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Dapolito and Company, CPA’s, 2234 Jackson Ave, Seaford, New York,
11783. Petitioner, Dapolito and Company, CPA’s submitted additional information with respect to
the Petition on March 23, 2000.
The issue raised by Petitioner is whether dues and membership initiation deposits charged
to members as described below are subject to sales tax.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner’s client, a for-profit privately owned business entity doing business as a New York
Limited Liability Company, will own a golf and social facility (“the Club”). Petitioner’s client will
have common ownership with a developer entity which developed and sold approximately 50-100
condominium units which border the Club’s premises. The Club will sell golf memberships, which
will afford members with the full use of the golfing facilities and include social membership
privileges, and will sell social memberships only, which do not include the use of the golfing
facilities.
The members will not own a proprietary interest in the Club, participate in any manner in
management functions or the selection of members, or control social or athletic activities,
tournaments, elections or committees.
Golfing memberships will be available to the owners of the condominium units (the unit
owners) and the general public on a first-come, first-serve basis and are limited to 350 golfers, based
on the physical capacity of the facility. Social memberships will be similarly offered on a first-come,
first-serve basis to the unit owners and the general public. The owners of the Club will maintain sole
control over the acceptance of members. Generally, only members and their guests may use Club
facilities, although the Club may schedule special events for non-members.
As a condition precedent to golfing membership, new members must pay a one-time
membership initiation fee deposit (initiation fee) in addition to their annual dues. The initiation fee
is refundable, without interest, 30 years after the date a member resigns from the club.
The Operating Agreement of Petitioner’s client states in part:
1.3 Purposes. The purpose and business of the Company shall be to (i)
acquire, hold, improve, sell, finance, refinance, lease, manage, exchange, and

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otherwise dispose of real estate and the improvements, fixtures and equipment
thereon (collectively, the “Property”), including but not limited to the property known
as the xxx Country Club, located in xxx, New York; (ii) develop, redevelop, operate,
maintain or otherwise deal with the Property, including the development, operation
and management of recreational facilities, including, without limitation, golf clubs
and golf courses; and (iii) engage in any and all acts necessary, advisable or
incidental to the carrying out of the obligations attendant to the foregoing.
1.4 Powers. The Company shall have the power to do any and all acts
reasonably necessary, appropriate, proper, advisable, incidental or convenient to or
for the furtherance of the purposes and business described herein and for the
protection and benefit of the Company.
Applicable Law and Regulations
Section 1101(d) of the Tax Law provides, in part:
When used in this article for purposes of the tax imposed under subdivision
(f) of section eleven hundred five the following terms shall mean:
*

*

*

(6) Dues. Any dues or membership fee including any assessment, irrespective
of the purpose for which made, and any charges for social or sports privileges or
facilities except charges for sports privileges or facilities offered to members’ guests
which would otherwise be exempt if paid directly by such guests.
(7) Initiation fee. 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.
*

*

*

(13) Social or athletic club. Any club or organization of which a material
purpose or activity is social or athletic.
Section 1105(f)(2)(i) of the Tax Law imposes sales tax on “The dues paid to any social or
athletic club in this state if the dues of an active annual member, exclusive of the initiation fee, 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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Section 527.11 of the Sales and Use Tax Regulations states, in part:
(a) Imposition. (1) A tax is imposed upon the dues paid to any social or
athletic club in this State if the dues of an active annual member, exclusive of the
initiation fee, are in excess of $10 per year.
(2) A tax is imposed on the initiation fee paid to any social or athletic club,
regardless of the amount of dues, if such initiation fee is in excess of $10.
*

*

*

(b) Definitions: As used in this section, the following terms shall mean:
*

*

*

(2) Dues. (i) The term dues includes:
(a) any dues or membership fee;
(b) any assessment, irrespective of the purpose for which made; and
(c) any charge for social or sports privileges or facilities.
*

*

*

(4) Initiation fee. 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.
*

*

*

(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:
*

*

*

(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;
*

*

*

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.
*

*

*

(6) Social club. 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 an opportunity of congregating for social interrelationship.
*

*

*

(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.
Opinion
In Cobleskill Golf and Country Club, Inc., Adv Op Comm T&F, March 30,1994,
TSB-A-94(13)S, it was held that since members in the petitioner’s golf and country club held no
proprietary rights, had no control over its activities or management, and membership was not
restricted, the dues paid by members were not subject to sales tax. See also Lafayette Golf &
Country Club, L.L.C., Adv Op Comm T&F, April 17, 1997, TSB-A-97(23)S, and Antlers Country
Club, Inc., Dec Tax App Trib, November 19, 1992, TSB-D-92(79)S.
Petitioner’s client, an LLC, includes among its purposes the ownership, operation and
management of the Club described in this Petition. The members of the Club possess no proprietary
rights in the Club and have no control over its activities or management. In addition, membership
in the Club is restricted solely because of the physical capacity of the facility. Based on the

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foregoing, the Club is not a “social or athletic club” within the meaning of Section 1105(f)(2) of the
Tax Law. Therefore, dues and initiation fees paid by its members are not subject to State and local
sales taxes.

DATED: May 31, 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.