Do membership fees at two different Manhattan health-club facilities -- one with a full range of participant sports, the other with only traditional gym equipment -- owe New York State club-dues tax or New York City's separate tax on gyms and health salons?

Plain-English summary

Pontius Realty operates two related health-club facilities in Manhattan under The Sports Club brand. The East 61st Street facility offers a full range of participant sports -- tennis, squash, volleyball, basketball, rock climbing, boxing, martial arts, dancing -- plus traditional workout equipment, personal training, and lessons/leagues. The Rockefeller Center facility offers only traditional training equipment (weights, aerobics, stepping machines, saunas) with personal training and counseling, but no participant sports. Both facilities sell three membership tiers: a single-facility "Health Membership," and two multi-facility tiers ("Executive" and "Bicoastal") that include access to East 61st. Members have no ownership stake in, or control over, either club, and membership is capped only by each facility's physical size.

Two separate taxes were at issue. First, New York's state/local tax on "social or athletic club" dues -- which the Department found doesn't apply to either facility's fees, because members hold no proprietary interest and don't control management, activities, or new-member selection at either location (following its own precedent in New York Health and Racquet Club and Donald B. Schwartz). Second, New York City's own local tax on gyms, health salons, and similar establishments -- a narrower, separate NYC-only tax that turns on what kind of facility you actually are, not on club governance.

Here the two facilities came out differently under that second tax. East 61st's broad mix of participant sporting activities takes it outside the "gymnasium" category (following Town Sports International), so none of its membership tiers are subject to the NYC gym tax. Rockefeller Center, by contrast, offers only traditional gym-style equipment and services -- exactly what the NYC tax targets -- so its single-facility Health Membership IS taxable there. But the multi-facility Executive and Bicoastal memberships, even when purchased through Rockefeller Center, also cover East 61st's non-gym activities, so those broader membership fees escape the NYC gym tax too.

What this means for you

Multi-location health club and gym operators

Running one exempt "sports facility" and one taxable "gym" location under a shared membership brand doesn't automatically make everything taxable or everything exempt -- New York City's local gym tax looks at what each specific facility actually offers, and a membership tier that grants access to a non-gym-classified facility can carry that exemption through even if it's sold at a gym-only location.

Accountants and tax professionals

This ruling separates two distinct, independently-analyzed taxes that often get conflated: the STATE/local social-athletic-club dues tax under Tax Law § 1105(f)(2) (a governance/control test, same statewide) versus NEW YORK CITY's own local tax on gyms and health salons under Administrative Code § 11-2002(h) (a facility-type test, NYC-only). A facility can clear one and still be caught by the other, as Rockefeller Center's Health Membership shows here.

New York City gym owners bundling access to a sports facility

If your gym-only location sells a membership tier that also includes access to a genuine multi-sport facility, that bundled tier may escape the NYC gym tax even though a membership limited to the gym-only location would not.

Common questions

Q: Is membership at any New York health club automatically exempt from sales tax?
A: No. It depends on club governance (for the state/local dues tax) and, separately in New York City, on whether the specific facility is more like a gym/health salon or a genuine multi-sport facility (for NYC's local gym tax).

Q: Why does the same company owe NYC tax at one location but not the other?
A: Because NYC's gym tax targets facilities that are essentially weight-control salons, health salons, or gymnasiums. The East 61st facility's broad range of participant sports takes it outside that category; the Rockefeller Center facility, offering only traditional gym equipment, fits squarely within it.

Q: If I buy the broader Executive or Bicoastal membership at the gym-only location, do I owe NYC gym tax?
A: Not under the facts of this ruling -- because those tiers also grant access to the non-gym East 61st facility, the Department treated the whole membership fee as outside the NYC gym tax.

Q: Can another club rely on this ruling?
A: No. It binds the Department only for this petitioner and these facilities' facts. Similar-looking clubs should compare their own activity mix and membership structure before assuming the same result. A later ruling, TSB-A-01(17)S (La Palestra), reached a similar exempt result for a different multi-sport facility using the same reasoning.

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:

• New York Health and Racquet Club, Adv Op Comm T&F, May 19, 1999, TSB-A-99(26)S
• Donald B. Schwartz, Adv Op St Tx Comm, May 14, 1987, TSB-A-87(21)S
• 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_26s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-00(26)S
Sales Tax
May 31, 2000

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S000120B

On January 20, 2000, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Pontius Realty, Inc., c/o The Sports Club Inc., 11100 Santa Monica Blvd.,
West Los Angeles, California 90025. Petitioner, Pontius Realty, Inc., provided additional
information with respect to the Petition on February 25, 2000.
The issue raised by Petitioner is whether fees charged by Petitioner for the use of its facilities
described below located in New York City are subject to New York State and local sales taxes.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner and its subsidiaries operate or will operate health related clubs in New York City.
The facility at 330 East 61st Street (the East 61st Facility) which Petitioner plans to open in June of
2000 provides a variety of participant sporting activities. The East 61st Facility has tennis, squash,
volley ball and basketball courts, as well as cycling, running, boxing, martial arts, dancing facilities
and a rock climbing wall. In addition, the East 61st Facility offers traditional training facilities such
as weight lifting equipment, aerobics, stepping and rowing machines, saunas and spas along with
personal training, nutritional counseling and cardiovascular conditioning. Also, the East 61st Facility
offers lessons at its clubs for sports such as tennis, squash, boxing and martial arts and organizes
tournaments and league play in various sports.
Petitioner also operates a facility located at 630 Fifth Avenue (the Rockefeller Center
Facility). The Rockefeller Center Facility does not provide the participant sporting activities
available at the East 61st Facility, but offers only traditional training facilities such as weight lifting
equipment, aerobics, stepping machines, saunas and spas along with personal training, nutritional
counseling and cardiovascular conditioning.
Petitioner charges three levels of membership fees for the use of its facilities. Petitioner
submitted copies of rate cards with respect to each facility described above which describes the
different levels of membership as follows.
The Health Membership is for use of the specific facility. With respect to the East 61st
Facility such membership is described as “Use of all Club facilities with the exception of Racquet
Sports. Single Club usage.” The Health Membership for the Rockefeller Center Facility is described
as “Use of all Club facilities. Single Club usage.”

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In addition, each of Petitioner’s facilities described above offers Executive Memberships and
Bicoastal Memberships which allow the member to use all facilities operated by Petitioner, including
the East 61st Facility.
Petitioner’s members do not control any social or athletic activities, selection of 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 individual facilities.
Applicable Law and 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....
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.
Section 1212-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.

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Sales Tax
May 31, 2000

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:
(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.
(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.
*

*

*

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(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
With respect to the East 61st Facility, 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 for any
of its three membership levels, therefore, are not subject to the tax on admission charges under
Section 1105(f)(1) of the Tax Law. See New York Health and Racquet Club, Adv Op Comm T&F,
May 19,1999, TSB-A-99(26)S. Petitioner’s membership charges for the Rockefeller Center Facility,
for any of its three membership levels, are also not subject to tax under Section 1105(f)(1). See
Donald B. Schwartz, Adv Op St Tx Comm, May 14, 1987, TSB-A-87(21)S. Petitioner’s charges
for membership in any of its facilities would be subject to sales tax under Section 1105(f)(2) of the
Tax Law if such facilities constituted an athletic club as defined in paragraphs (5) and (7) of Section
527.11 of the Sales and Use Tax Regulations.
With respect to both the East 61st Facility and the Rockefeller Center Facility, 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 individual facilities. Therefore, these facilities are not athletic clubs 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 for any of its three membership levels are not subject to tax as
dues 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 at the
East 61 Street Facility, such facility is not a weight control salon, gymnasium or other establishment
described in Section 11-2002(h) of the Administrative Code of the City of New York. Petitioner’s
charges, therefore, for membership and use of the East 61st Street Facility, for any of the three
membership levels, are not for services provided by, or use of facilities in, weight control salons,
gymnasiums or a similar establishment described in such Section 11-2002(h) and are thus not subject
to that tax. See Town Sports International and Subsidiaries, Adv Op Comm T&F, July 1,1998,
TSB-A-98(42)S and New York Health and Racquet Club, supra. Since the Executive Membership
and Bicoastal Membership fees cover the usage of the East 61st Street Facility, as well as Petitioner’s
other facilities, such membership fees collected by the Rockefeller Center Facility are similarly not
subject to the tax imposed by Section 11-2002(h) of the New York City Administrative Code.
st

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The Rockefeller Center Facility only offers traditional training facilities such as weight lifting
equipment, aerobics, stepping machines, saunas and spas along with personal training, nutritional
counseling and cardiovascular conditioning. This facility, therefore, is a weight control salon,
gymnasium or similar establishment as described in Section 11-2002(h) of the New York City
Administrative Code. See Section 527.11(b)(7)(ii) of the Sales and Use Tax Regulations.
Therefore, the Health Memberships offered by the Rockefeller Center Facility which limit members
to the use of such facility are subject to the tax imposed by Section 11-2002(h) of the New York City
Administrative Code.

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.