Are a beach club's separately billed cabana rentals taxable as club 'dues,' or are they untaxed rentals of real property?

Plain-English summary

Sun and Surf 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 also rents cabanas to members. Members apply for seasonal membership; a separate part of the application covers a cabana rental, which members are not required to take (many don't). Dues and cabana rental are separately stated and separately billed, and a renter gets exclusive possession of a specific cabana for the whole season. The cabanas are permanent wood structures immovably attached to wood pilings driven into the ground, roughly 15′×8′×10′, with plumbing, electrical, a shower, and a refrigerator, and are used for sleeping. It asked whether the cabana-rental receipts are taxable as "dues."

The Department held the cabana rentals 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. On circumstances "in all essential respects identical," the Appellate Division held that cabana-rental receipts are not dues to a social or athletic club but are receipts from renting real property, and thus not taxable — Breezy Point Surf Club, Inc. v. State Tax Commission, 67 A.D.2d 760, 412 N.Y.S.2d 464.
• Result. Accordingly, the club's cabana rental receipts are not subject to sales tax.

(The Department decided a companion beach-club opinion the same day, TSB-A-82(16)S, reaching the same result — including for cabanas without plumbing.)

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 looks like real-property rent — which New York doesn't tax — rather than a "due" for club privileges.

Structure and billing matter. The facts that carried the day: the cabanas were permanent structures affixed to the land, each renter had exclusive seasonal possession, renting was optional, and the rental was separately stated and billed from dues. Bundling a mandatory "cabana" charge into dues could produce a different answer.

Dues themselves are still taxable. This opinion doesn't exempt club dues — those remain taxable under § 1105(f)(2). It's the separate real-property rental that escapes tax.

Common questions

Q: My club rents cabanas or lockers to members. Is that taxable as dues?
A: A rental of a permanent structure giving the member exclusive possession is generally a rental of real property, which isn't taxed — as with the cabanas here, following Breezy Point Surf Club. (Note other opinions treat some storage rentals differently; facts control.)

Q: Does it matter that the cabana charge is separate from dues?
A: Yes. Separately stating and billing the optional cabana rental, apart from mandatory dues, supported treating it as real-property rent rather than a taxable "due."

Q: Are the club's 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_17s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-82(17)S
Sales Tax
May 3, 1982

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S811117F

On November 17, 1981, a Petition for Advisory Opinion was received from Sun and Surf
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 cabanas are permanent structures, constructed of wood and immovably attached to wood
pilings driven into the ground. A typical cabana is approximately 15 feet long by 8 feet wide and 10
feet high. Each cabana is divided into small rooms, and is provided with plumbing and electrical
equipment, a shower and a refrigerator. The cabanas are suitable for use as sleeping facilities and are
so used by members.
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.
The Appellate Division has ruled, with respect to circumstances in all essential respects
identical to the circumstances described in the present Petition, 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

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

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

-2­
TSB-A-82(17)S
Sales Tax
May 3, 1982

property and thus not subject to sales tax. (Breezy Point Surf Club, Inc. v. State Tax Commission,
67 A. D. 2d 760, 412 N.Y.S. 2d 464).
Accordingly, the receipts from the rental of cabanas by Petitioner 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