Are a commercial fitness/tennis club's membership fees, court-time charges and room rentals taxable 'dues' of a social or athletic club?

Plain-English summary

Four Seasons Fitness & Racquet Club (d/b/a Village Glen Tennis & Fitness Club), a limited partnership, runs a health-and-fitness and tennis facility — physical-therapy and fitness equipment, a cardiac-rehab center, a track, locker rooms, tennis courts and function rooms. It asked which of six charges are taxable: hourly court time, unlimited summer court time, party-room rentals, and health-club, health-club-plus-tennis, and tennis memberships.

The Department held it is not a social or athletic club, so none of the charges are taxable.

• Only "social or athletic club" dues are taxed. Section § 1105(f)(2) taxes dues paid to a social or athletic club in the State (over $10/year, excluding the initiation fee).
• The test is member control or a proprietary interest. Under 20 NYCRR § 527.11(b)(5), the significant factors are whether the membership controls the social/athletic activities, tournaments, elections, committees, member selection and management, or whether members hold a proprietary interest. Merely charging for facility use on a season/annual pass (sold first-come, first-served), limiting size to the physical facility, using the words "club"/"member" as marketing, or running management-controlled tournaments does not make an entity a club.
• This operation isn't a club. Its structure gives members no control over activities, tournaments, elections, committees, selection or management, and there is no proprietary interest. So it is not a social or athletic club under § 1105(f)(2).
• Result: not taxable. The listed payments are not "dues" subject to tax, and they are not subject to sales tax on any other basis.

What this means for you

A commercial gym or racquet club usually isn't a taxable "club." The dues tax targets member-run clubs — where the members control the organization or own a piece of it. A business that simply sells memberships and court time to the public, keeping control in management's hands, generally falls outside § 1105(f)(2).

Marketing yourself as a "club" doesn't create the tax. Using "club" or "member" language, capping membership to fit the facility, or running management-controlled leagues and tournaments are all expressly listed as things that do not make you a taxable club. What matters is real member control or a proprietary interest.

Here even the à-la-carte charges came out untaxed. The Department found the court-time charges and party-room rentals not taxable "on any other basis" for this petitioner. That turns on these specific facts; a differently structured charge (for example, a straightforward rental of tangible property) can be taxable under other provisions, so analyze each charge on its own footing.

Common questions

Q: We run a commercial fitness and tennis club. Are our membership fees taxable dues?
A: Not if you're not a "social or athletic club." Because members here had no control over the organization and no proprietary interest, the Department held the fees weren't taxable dues under § 1105(f)(2).

Q: What makes a facility a taxable "social or athletic club"?
A: Chiefly member control — over activities, tournaments, elections, committees, member selection and management — or members holding a proprietary interest in the organization.

Q: Does calling ourselves a "club" or capping membership size matter?
A: No. Using "club"/"member" as marketing, limiting size to the physical facility, and running management-controlled tournaments are all listed as things that do not, by themselves, make you a taxable club.

Citations and references

Statutes:

• Tax Law § 1105(f)(2) — tax on dues paid to a social or athletic club

Regulations:

• 20 NYCRR § 527.11(b)(5) — factors identifying a "club or organization" (member control or proprietary interest)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1983.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a83_20s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-83(20)S
Sales Tax
April 28, 1983

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO.S820706A

On July 6, 1982 a Petition for Advisory Opinion was received from Four Seasons Fitness &
Racquet Club d/b/a Village Glen Tennis & Fitness Club, 162 Mill Road, Amherst, New York.
The issue raised is whether any of the following charges made by Petitioner are subject to
sales tax:
1.
2.
3.
4.
5.
6.

Hourly tennis court time
Unlimited summer tennis court time
Party room rentals
Health Club membership
Health Club and Tennis Membership
Tennis Membership

Petitioner, a limited partnership, owns a health and fitness club which offers physical therapy
equipment, a cardiac rehabilitation center, a large track, health and fitness equipment, locker rooms,
tennis courts and function rooms. Individuals may purchase health club memberships, tennis
memberships or a combination of health club and tennis memberships. Whether an individual has
a combination or a tennis membership, there is an additional charge for use of the tennis courts on
an hourly basis. During the summer months members may purchase unlimited court time for an
additional charge.
Section 1105(f)(2) of the Tax Law imposes a 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 . . . . "
Section 527.11(b)(5) of the Sales and Use Tax Regulations provides as follows:
(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:
RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-83(20)S
Sales Tax
April 28, 1983

(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 serve 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.

The organizational structure of Petitioner's business operation does not allow for membership
control of social or athletic activities, tournaments, dances, elections, committees, participation in
the selection of members or management of the club. Neither is there any evidence of possession by
the members of a proprietary interest in the organization. Accordingly, Petitioner is not a social or
athletic club within the meaning of section 1105(f)(2) of the Tax Law, and the payments made
thereto, as listed above, do not constitute "dues" subject to tax. Neither are they subject to sales tax
on any other basis.

DATED: April 12, 1983

s/FRANK J. PUCCIA
Director
Technical Services Bureau