Are membership fees at an owner-operated country club taxable dues when the owner controls all activities and members have no proprietary interest?

Plain-English summary

Dennis Land Development Co., Inc. is the sole owner and operator of the McGregor Links Country Club (Town of Wilton), whose members can use an 18-hole golf course, tennis courts, an outdoor pool, and clubhouse and restaurant facilities, and take part in tournaments, meets, social gatherings and dances run by management. It asked whether the club is a "social or athletic club" so that its membership fees are taxable dues.

The Department held the membership fees are not taxable dues, because the club is not a "social or athletic club."

• The dues tax reaches only a member-run or member-owned "club." Section § 1105(f)(2) taxes dues paid to a social or athletic club. Under 20 NYCRR § 527.11, the significant factors are whether the members control the club's activities, tournaments, dances, elections, committees, member selection or management, or hold a proprietary interest. The regulation says a business is not a club merely because it charges for facilities (even by first-come, first-served pass), limits size to the facility's capacity, uses "club" as marketing, or runs tournaments and activities controlled solely by management.
• Here the owner controls everything and members own nothing. The petitioner has sole ownership of the club and retains control over all tournaments, meets, dinner parties, dances and committee appointments; members are admitted first-come, first-served with identical privileges and have no proprietary interest. So the McGregor Links Country Club is not a social or athletic club, and its membership fees do not constitute dues subject to tax.

What this means for you

A commercially owned "country club" isn't automatically a taxable "club." New York's dues tax targets organizations the members run or own. When one owner holds the club, controls all its activities, and simply sells memberships to whoever pays, the fees are charges for using a commercial facility — not taxable dues — even with golf, tennis and a full social calendar.

Owner control is the deciding fact. Ask who runs the tournaments and committees, who picks members, and who owns the club. If it's management rather than the members, and members hold no ownership stake, the club-dues tax generally doesn't apply. This mirrors New York's fitness-center and swim-club opinions the same year (TSB-A-83(43)S and TSB-A-83(42)S).

Watch the flip side — exclusivity. Restricting membership only to the facility's physical capacity is fine, but other restrictions can be read as an "attempt at exclusivity" that does make a club, even without member control (see TSB-A-83(48)S, a residents-only club). Owner-operated and open to all is what keeps these fees untaxed.

Common questions

Q: We own and run a country club with golf and tennis. Are membership fees taxable dues?
A: Not on facts like these. If you (not the members) control all activities and committees, members have no ownership interest, and membership is open first-come, first-served, it isn't a "social or athletic club," so the fees aren't taxable dues under § 1105(f)(2).

Q: Does running tournaments and dances make us a "club"?
A: No — not when management controls them. The regulation specifically says activities "controlled solely by the management" don't turn a business into a member club.

Q: What would make a country club's dues taxable?
A: Member control or ownership — members electing leadership, choosing members, running committees, or holding a proprietary interest — or a restrictive, exclusive membership. None of those were present here.

Citations and references

Statutes and regulations:

• Tax Law § 1105(f)(2) — tax on dues paid to a social or athletic club
• 20 NYCRR § 527.11 — definition of "club or organization" and the factors distinguishing a member club from a business that merely charges for facilities

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_40s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-83(40)S
Sales Tax
October 11, 1983

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S830722A

On July 22, 1983 a Petition for Advisory Opinion was received from Dennis Land
Development Co., Inc., c/o John Dennis, Esq., 112 State Street, Albany, New York 12207.
The issue raised is whether the McGregor Links Country Club is a social or athletic club
within the meaning of section 1105(f)(2) of the Tax Law such that the fees paid for membership to
such club constitute dues paid to a social or athletic club within the meaning of such provision.
Petitioner is the sole owner and operator of the McGregor Links Country Club, located in the
Town of Wilton, N.Y. Membership in this club entitles the member to the use of an eighteen hole
golf course, tennis courts, outdoor swimming pool, clubhouse and restaurant facilities. Members are
also eligible to participate in any golf tournaments, tennis tournaments, swim meets and various
other social gatherings and dances put on by the management. Members are admitted on a first-come,
first-serve basis. All members enjoy identical membership privileges and use of the facilities.
Members have no proprietary interest in the Dennis Land Development Co., Inc.
Petitioner as the sole owner and operator of the McGregor Links Country Club maintains sole
control and authority over all tournaments, meets, dinner parties, dances, and committee
appointments.
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 527.11 of the Sales and Use Tax Regulations defines the term
"club or organization" as " . . . 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;

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

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

-2­
TSB-A-83(40)S
Sales Tax
October 11, 1983

(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."
Accordingly, inasmuch as Petitioner has sole ownership of the "club" at issue and retains
control over all activities of the club, McGregor Links Country Club is not a social or athletic club
within the meaning and intent of section 1105(f)(2) of the Tax Law and, accordingly, the
membership fees paid by its members do not constitute dues subject to tax.

DATED: September 16, 1983

s/FRANK J. PUCCIA
Director
Technical Services Bureau