Is a health and sporting facility'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

La Palestra, Inc. runs a Manhattan health and sporting facility offering both traditional exercise equipment (weights, aerobics, stepping machines, saunas) with a professional staff of a physician, physiologist, and physiotherapists, and participant sports like fencing, boxing, rope climbing, and indoor baseball, plus customized athletic training programs. Members pay a membership fee for facility access and pay separately for the medical/therapy staff's services. Members have no say in running La Palestra, don't select other members, and don't hold any ownership interest — the only membership cap is the facility's physical size.

New York exempts admission charges for facilities where the patron is a participant in a sporting activity (like bowling alleys), but separately taxes "dues" paid to a social or athletic club. The Department found La Palestra's charges fit the participant-sports exemption for admission purposes, but still had to check whether the club-dues tax applied instead. Under the regulations, an entity only counts as a "club or organization" if members meaningfully control its social/athletic activities, elections, or management, or hold a proprietary interest — none of which was true at La Palestra. So the club-dues tax didn't apply either.

Separately, New York City imposes its own local tax on weight-control salons, gymnasiums, Turkish/sauna baths, and similar establishments. The Department found La Palestra's broad mix of sporting activities and facilities takes it outside that narrower category (following the same conclusion reached for Town Sports International, TSB-A-98(42)S) — La Palestra isn't simply a gym or weight-control salon. So membership charges escaped that NYC tax as well, leaving La Palestra's membership fees untaxed under every theory raised.

What this means for you

Health clubs, sporting facilities, and multi-activity fitness businesses

Whether your membership fee counts as taxable "club dues" turns on real governance facts — do members actually control activities, elect officers, choose new members, or hold ownership stakes? — not on marketing language like calling members "members" or restricting membership size due to physical space. Facilities offering genuine participant sports (not just workout equipment) also have a separate admission-charge exemption to consider.

New York City gym and health-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 specific establishment types — but this depends heavily on your actual activity mix, so review your own facts against the regulatory definitions closely.

Accountants and tax professionals

Three separate questions all had to clear favorably here: (1) the state participant-sports admission exemption under § 1105(f)(1), (2) the state social/athletic club dues tax under § 1105(f)(2) and its regulatory "club or organization"/"athletic club" tests, and (3) the NYC local tax on gyms/health salons under Administrative Code § 11-2002(h). Each has its own separate factual triggers, so a facility could clear one and still be caught by another.

Common questions

Q: Is every health club or gym's membership fee exempt from New York sales tax?
A: No. This result 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). A facility organized more like a true membership club, or one that is simply a gym/weight-control salon, could be taxed differently.

Q: Does restricting membership size make an organization a taxable "club"?
A: Not by itself — the regulations specifically say restricting membership solely due to 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 La Palestra, Inc. 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) (definition of "club or organization")
• 20 NYCRR § 527.11(b)(7) (definition of "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_2001.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a01_17s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-01(17)S
Sales Tax
May 23, 2001

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S001215A

On December 15, 2000, the Department of Taxation and Finance received a Petition for
Advisory Opinion from La Palestra Inc., 11 West 67th Street, New York, New York 10023.
The issue raised by Petitioner, La Palestra, Inc, is whether its charges for the use of its
facilities are subject to tax under Section 1105(f)(2) of the Tax Law or Section 11-2002(h) of the
New York City Administrative Code.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner operates a health and sporting facility that provides traditional exercise and
sporting activities.
As part of its health maintenance program, Petitioner offers traditional training facilities such
as weight lifting equipment, aerobics, stepping machines, bicycles, lateral pull-down and saunas.
It prescribes various diagnostic and therapeutic services focusing on cardiovascular and orthopedic
conditioning, and patient education. Its professional staff includes a qualified physician, a
physiologist and physiotherapists.
In addition, Petitioner offers participant sporting activities that include fencing, boxing, rope
climbing and indoor baseball. It also designs customized training programs for members interested
in participating in athletic activities recreationally or in improving their performance as competitive
athletes.
Petitioner charges a membership fee for the use of the facility. Members pay separately for
the services of the physician, physiologist and physiotherapists.
Members do not control any social or athletic activities, selection of the members, or
management of the facility, 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:

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May 23, 2001

(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 subdivision (b) 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 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:
(h) 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:

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Sales Tax
May 23, 2001

(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.
*

*

*

(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.

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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. Therefore, Petitioner is not
operating an 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 other 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 other establishments 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.
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: May 23, 2001

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist III
Technical Services Division

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