Are a health club's membership fees taxable, and what about its locker rentals and New York City's health-club tax?

Plain-English summary

Manhattan Plaza Associates owns and operates the Manhattan Plaza Health Club (pool, sundeck, gym, sauna, steam rooms, lockers) in New York City. Members and guests use the facilities anytime during operating hours; memberships are sold first-come, first-served; members have no proprietary interest and no control over membership or activities; there are no tournaments, dances or social events. Day lockers are free, but small lockers rent for an annual fee. It asked whether its charges are taxable under the club-dues and amusement taxes.

The Department held the membership fees are not taxable — but flagged two charges that are.

• Not a "social or athletic club," so the fees aren't taxable dues. Under § 1105(f)(2), § 1101(d)(13) and 20 NYCRR § 527.11(b)(5), a "club" turns on member control and proprietary interest. Here the "members" are really just customers of a business, with no ownership stake and no control — so the club isn't a social or athletic club, and the payments aren't taxable dues.
• Not taxable as an amusement admission either. Section § 1105(f)(1) excludes charges to use facilities for participant sporting activities, such as swimming pools. So the facility-use charges aren't taxable under that provision.
• But the annual locker rentals are taxable. Section § 1105(c)(4) taxes storage of tangible personal property and the rental of safe deposit boxes or similar space — so the charges for annual small-locker rentals are taxable.
• And New York City's health-club tax applies. Section § 1212-A lets New York City tax the sale of services by health salons, gymnasiums, sauna baths and similar establishments at 4% (imposed by NYC Administrative Code § A46-2.0(h)). Because the club is in the City, its facility charges are subject to that 4% City tax.

What this means for you

Not being a "club" spares you the dues tax — but not every other tax. A commercial gym or health club whose members are really just paying customers won't owe the State club-dues tax on membership fees. That conclusion, though, doesn't touch other charges, which each get their own analysis.

Locker rentals are taxable as space rental. Charging separately to rent a locker is taxable under the storage/"similar space" rule, even though the base membership isn't. Free day-use lockers aren't a rental; the taxable item is the paid annual locker.

In New York City, health clubs face a special 4% City tax. Beyond the State sales tax rules, New York City imposes its own 4% tax on health salons, gyms, sauna baths and similar establishments. A club that isn't a taxable "club" for dues purposes can still owe this City tax on its facility charges — location matters.

Common questions

Q: We run a health club whose members are basically customers. Are membership fees taxable dues?
A: No. With members holding no proprietary interest and no control, and no member-run activities, it isn't a "social or athletic club," so the fees aren't taxable dues under § 1105(f)(2); nor are they taxable amusement admissions (participant-pool exclusion under § 1105(f)(1)).

Q: We charge an annual fee for small lockers. Is that taxable?
A: Yes. Locker rentals are taxable as the rental of storage/"similar space" under § 1105(c)(4), even when the membership itself isn't taxable.

Q: We're located in New York City. Any extra tax?
A: Yes. NYC imposes a 4% tax on health salons, gyms and sauna baths under § 1212-A (NYC Admin. Code § A46-2.0(h)), which applies to your facility charges.

Citations and references

Statutes and regulations:

• Tax Law § 1105(f)(2) — tax on dues paid to a social or athletic club
• Tax Law § 1105(f)(1) — amusement admissions; exclusion for participant sporting facilities such as swimming pools
• Tax Law § 1101(d)(13) — definition of "social or athletic club"
• Tax Law § 1105(c)(4) — tax on storage and rental of similar space
• Tax Law § 1212-A — New York City 4% tax on health salons, gymnasiums, sauna baths and similar establishments (NYC Administrative Code § A46-2.0(h))
• 20 NYCRR § 527.11(b)(5) — definition of "club or organization"

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_34s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-83(34)S
Sales Tax
September 16, 1983

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S830518A

On May 18, 1983 a Petition for Advisory Opinion was received from Manhattan Plaza
Associates, 484 West 43rd Street, New York, New York 10036.
The issue raised is whether the amounts charged for the use of certain facilities of a health
club are subject to either of the taxes imposed under Section 1105(f)(1) and (2) of the Tax Law.
Petitioner, a partnership, owns and operates facilities under the name of Manhattan Plaza
Health Club, consisting of a swimming pool, sundeck, gym, sauna, steam rooms and lockers. The
facilities are available to members and their guests at any time during normal operating hours
without limitation. Memberships are sold on a first come, first serve basis. Petitioner does not
provide any other services such as social or athletic events, tournaments or dances. Lockers are
available to members and their guests on a daily basis at no charge. However, small rental lockers
are available for an additional fee on a yearly basis. The club members possess no proprietary interest
in the club, and have no control over either club membership or club activities.
Section 1105(f) of the Tax Law imposes taxes on:
"(1) Any admission charge where such admission charge is in excess of ten cents to or for
the use of any place of amusement in the state . . . 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 swimming pools.
(2) 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 1101(d)(13) of the Tax Law defines the term "social or athletic club" to mean "Any
club or organization of which a material purpose or activity is social or athletic."
Section 527.11(b)(5) of the Sales and Use Tax Regulations provides, in part, 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 organi­
zation 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

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

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

-2­
TSB-A-83(34)S
Sales Tax
September 16, 1983

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 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.
Based on the facts set forth hereinabove, it is clear that the Manhattan Plaza Health Club is
not a "club or organization," within the meaning of section 527.11(b)(5) of the Sales and Use Tax
Regulations. The "members" are in reality mere customers of a business entity, such members having
neither a proprietary interest in the club nor the right to control club membership or club activities.
Accordingly, payments made to the club do not constitute "dues" subject to tax under section
1105(f)(2)of the Tax Law. Neither are they subject to sales tax under section 1105(f)(1) of the Tax
Law. However, the following two points should be noted:
(1) Section 1105(c)(4) of the Tax Law imposes a tax on charges for the storage of tangible
personal property not held for sale in the regular course of business, as well as the rental of
safe deposit boxes or similar space. Petitioner's charges for annual rentals of small lockers
are thus subject to tax, under such provision of law.
(2) Section 1212-A of the Tax Law authorizes New York City to impose a 4% tax on the sale
of services by weight control salons, health salons, gymnasiums, turkish baths, sauna baths
and similar establishments located within the City of New York. Such tax has been imposed
under section A46-2.0(h) of the Administrative Code of the City of New York. Accordingly,
the amounts charged for the use of Petitioner's facilities are subject to such 4% New York
City Tax.

DATED: August 31, 1983

s/FRANK J. PUCCIA
Director
Technical Services Bureau