Are a beach club's cabana rentals taxable as club 'dues,' and does it matter that some cabanas have no plumbing?

Plain-English summary

Silver Point Beach Club, Inc., a beach club at Atlantic Beach, New York, offers members beach facilities, a cafeteria, a restaurant, tennis courts, and other amenities, and rents cabanas to members. Seasonal members apply separately for a cabana rental (not required; many don't take one); dues and cabana rental are separately stated and billed, and a renter gets exclusive possession of a specific cabana for the season. The club has 833 cabanas — 716 with plumbing (divided into small rooms, suitable for and used as sleeping facilities) and 117 without plumbing (generally a single room). All are permanent wood structures immovably attached to wood pilings driven into the ground, with electrical power and equipment such as refrigerators. It asked whether the cabana-rental receipts are taxable as "dues."

The Department held the cabana rentals — with or without plumbing — are rentals of real property, not club dues, and are not taxable.

• What's taxed. Section § 1105(f)(2) taxes "dues paid to any social or athletic club," and § 1101(d)(6) defines "dues" broadly to include "any charge for social or sports privileges or facilities."
• Real-property rent isn't taxed. New York imposes no sales tax on receipts from the rental of real property.
• Controlling authority. The circumstances for the plumbed cabanas are "in all essential respects identical" to Breezy Point Surf Club, Inc. v. State Tax Commission, 67 A.D.2d 760, 412 N.Y.S.2d 464, where the court held cabana rentals are receipts from renting real property, not club dues, and thus not taxable.
• Plumbing doesn't matter. The absence of plumbing in the 117 units "does not require a different result." So the receipts from all the cabanas — with or without plumbing — are receipts from renting real property and are not subject to sales tax.

(The Department decided a companion beach-club opinion the same day, TSB-A-82(17)S, reaching the same result.)

What this means for you

A cabana rental can be real-property rent, not a club due. When members separately rent a fixed structure and get exclusive possession, the charge is treated as real-property rent — which New York doesn't tax — rather than a "due" for club privileges.

Amenities inside the unit don't drive the answer. Whether a cabana has plumbing (or is a simple single room) didn't change the outcome. What mattered was that the cabanas were permanent structures affixed to the land, rented for exclusive seasonal possession, optionally, and billed separately from dues.

Dues themselves remain taxable. This opinion doesn't exempt club dues, which are still taxable under § 1105(f)(2). Only the separate real-property cabana rental escapes tax.

Common questions

Q: My club rents cabanas of different types — some without plumbing. Are the rentals taxable?
A: No. Following Breezy Point Surf Club, cabana rentals are rentals of real property, not taxable dues, and the lack of plumbing in some units doesn't change that.

Q: Why aren't these charges "dues"?
A: Because the member rents a permanent, affixed structure with exclusive possession — a rental of real property, which New York doesn't tax — rather than paying for club privileges. Separate billing from dues reinforced that.

Q: Are our membership dues still taxable?
A: Yes. Dues to a social or athletic club remain taxable under § 1105(f)(2); only the separate cabana rental is untaxed here.

Citations and references

Statutes:

• Tax Law § 1105(f)(2) — tax on dues paid to a social or athletic club
• Tax Law § 1101(d)(6) — definition of "dues," including charges for social or sports privileges or facilities

Cases:

• Breezy Point Surf Club, Inc. v. State Tax Commission, 67 A.D.2d 760, 412 N.Y.S.2d 464 — cabana rentals are rentals of real property, not club dues

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1982.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a82_16s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-82(16)S
Sales Tax
May 3, 1982

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S811117B

On November 17, 1981, a Petition for Advisory Opinion was received from Silver Point
Beach Club, Inc., P.O. Box 367, Atlantic Beach, New York 11509.
The issue raised is whether receipts from the rental of the club's "cabanas" are subject to sales
tax as "dues" within the meaning of section 1101(d)(6) of the Tax Law.
Petitioner is a beach club located at Atlantic Beach, New York. It makes available to its
members beach facilities, a cafeteria, a restaurant, tennis courts and other facilities. Additionally, the
club rents out cabanas to its members.
The club operates during the summer season. Individuals may apply for seasonal
membership. A separate portion of the seasonal membership application form contains an application
for rental of a cabana. Season members are not required to rent cabanas. Many do not. The charges
for seasonal membership dues and for rental of cabanas are each separately stated on the application.
Season members who rent cabanas are billed separately for membership dues and for cabana rental.
Each member who rents a cabana is given exclusive possession of a specific cabana for the entire
season.
The club has 833 cabanas of various sizes, 716 units with plumbing and 117 units without
plumbing. All of the cabanas are permanent structures, constructed of wood and immovably attached
to wood pilings driven into the ground. All cabanas have electrical power, and are furnished with
various electrical equipment, including refrigerators. The cabanas supplied with plumbing are
divided into small rooms; the cabanas without plumbing generally consist of a single room. The
cabanas with plumbing are suitable for use as sleeping facilities and are so used by tenants. While
it is possible to sleep in a cabana without plumbing, generally the tenants do not use them for this
purpose.
Section 1105(f)(2) of the Tax Law imposes a sales tax on "the dues paid to any social or
athletic club in this state . . . . " Section 1101(d)(6) of the Tax Law defines the term "dues" as: "Any
dues or membership fee including any assessment, irrespective of the purpose for which made, and
any charge 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." No
sales tax is imposed in New York State on receipts from the rental of real property.

JAMES H. TULLY., COMMISSIONER
TP-8 (4/80)

LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-82(16)S
Sales Tax
May 3, 1982

The circumstance described in this Petition with regard to cabana units containing plumbing
fixtures are in all essential respects identical to the circumstances considered in Matter of Breezy
Point Surf Club, Inc. v. State Tax Commission, 67 A.D. 2d 760, 412 N.Y.S. 2d 464. In that case, the
court held that receipts from the rental of cabanas are not dues paid to a social or athletic club but
are, instead, receipts from the rental of real property and, thus, not subject to tax. The absence of
plumbing fixtures from the 117 units without plumbing does not require a different result.
Accordingly, the receipts from the rental of cabanas by Petitioner, whether with or without
plumbing, are receipts from the rental of real property and are not subject to sales tax.

DATED: April 15, 1982

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau