Is a company-owned country club a taxable 'social or athletic club,' and are its storage and restaurant charges taxable?

Plain-English summary

Tan Tara Country Club, Inc. is a corporation that solely owns and operates the club. Members get an 18-hole golf course, tennis, clubhouse, and restaurant/bar. New members are admitted first come, first served, with size limited only by the facilities; all members have identical privileges. The corporation retains sole control over the course, facilities, social functions, and tournaments; members have no proprietary interest and no say in selecting members or managing the club. It asked whether it is a "social or athletic club" whose dues are taxable under § 1105(f)(2).

The Department held it is not a taxable club, so dues aren't taxed — but storage and food/drink charges are taxable.

• What makes an entity a "club." Section 1105(f)(2) taxes dues over $10/year paid to a social or athletic club. Under 20 NYCRR 527.11(b)(5), the significant factors are an organizational structure where the membership controls activities/tournaments/elections/member selection/management, or where members hold a proprietary interest. Merely charging for facilities on a seasonal basis (first-come, first-served) or restricting size solely by physical capacity does not make a club — any other restriction may be viewed as exclusivity (Example 18).
• Tan Tara is neither controlled by members nor exclusive. Members have no proprietary rights and no control over activities or management, and membership is not exclusive (first come, first served). So it is not a social or athletic club, and its annual "fees"/"dues" are not taxable under § 1105(f)(2).
• But other charges are taxable. Charges to members for lockers, club storage, and riding-golf-cart storage are taxable storage of tangible personal property under § 1105(c)(4). And charges for food and drink — including any assessment billed for failing to meet the $30/month restaurant minimum — are taxable under § 1105(d).

What this means for you

Not every "club" pays dues tax — it turns on member control and exclusivity. A facility that keeps all ownership and control in the operator and admits anyone first-come, first-served (limited only by physical capacity) generally isn't a taxable social or athletic club. Its dues escape § 1105(f)(2).

The label "club" and calling payments "dues" don't decide it. The Department looks at the actual structure: do members control the organization or hold a proprietary interest? Restricting membership by anything other than physical capacity (geography, income, invitation) can flip it into an exclusive — and therefore taxable — club.

Untaxed dues don't make everything untaxed. Even where dues aren't taxed, the operator still owes tax on separately taxable items — storage of members' property (lockers, cart/club storage) under § 1105(c)(4) and restaurant food and drink (including minimum-charge shortfalls) under § 1105(d). Contrast the taxable-club results in TSB-A-85(9)S (IBM Country Clubs — exclusivity by restriction) and TSB-A-85(28)S/38S (member control).

Common questions

Q: My company owns a golf/country club open to anyone first-come, first-served. Are the dues taxable?
A: Generally no. Without member control or a proprietary interest, and with membership limited only by facility capacity, it isn't a taxable social or athletic club under § 1105(f)(2).

Q: We limit membership because the course can only handle so many players. Does that make us an exclusive club?
A: No. Restricting size solely because of physical capacity isn't exclusivity. Other restrictions (geography, income, invitation) can be, which would make dues taxable.

Q: If dues aren't taxed, are locker/storage and restaurant charges also tax-free?
A: No. Locker, club, and golf-cart storage are taxable under § 1105(c)(4), and food and drink (including minimum-charge assessments) are taxable under § 1105(d).

Citations and references

Statutes:

• Tax Law § 1105(f)(2) — tax on dues to a social or athletic club
• Tax Law § 1105(c)(4) — tax on storing tangible personal property
• Tax Law § 1105(d) — tax on food and drink sold by restaurants and other establishments

Regulations:

• 20 NYCRR 527.11(b)(5) — definition of "club," significant factors, and Example 18

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1984.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a84_19s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-84(19)S
Sales Tax
June 4, 1984

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S840229A

On February 29, 1984 a Petition for Advisory Opinion was received from Tan Tara Country
Club, Inc., 4391 Tonawanda Creek Road North, North Tonawanda, New York 14120.
The issue raised is whether Petitioner is a club or organization as defined under Section
1105(f)(2) of the Tax Law and Section 527.11(b)(5) of the Sales and Use Tax Regulations.
Petitioner, a corporation, is the sole owner and operator of the Tan Tara Country Club.
Membership in the club entitles a member to the use of an eighteen hole golf course, tennis courts,
clubhouse and restaurant and bar facilities. All members are eligible to participate in golf
tournaments and attend social gatherings, dances and other social functions sponsored and controlled
by Petitioner. New members are admitted on a first come, first served basis. The size of the
membership is limited only because of the size of the facilities. All members enjoy identical
membership privileges and use of the facilities.
Petitioner retains sole control and authority over the use of the golf course and facilities. The
membership does not have control over social functions or golf tournaments. Leagues and certain
tournaments may be established by members. These leagues and tournaments are operated at the sole
discretion of the club management.
Club members do not have a proprietary interest in the Tan Tara Country Club, Inc. and are
not permitted to participate in either the selection of new members or management of the club.
Management is not obligated to accept opinions or suggestions from members regarding club
policies and/or rules.
In addition, members are charged a daily green fee for any guests.
A separate charge is made to members for lockers, club storage and riding golf cart storage
when such are available.
Members are required to charge a minimum of $30.00 per month for restaurant food for the
period May 1 thru October 31. In the event a member charges less than the required amount for a
month, the difference between the required amount and the actual amount will be billed to the
member.
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 . . . ." The term "club" is defined as:

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

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

-2­
TSB-A-84(19)S
Sales Tax
June 4, 1984

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 . . . 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 . . . 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;

(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 ....
. . .

Example 18:

A club owned by an individual which attempts to restrict its
membership by geographic area, income, race, religion or any other
means, is a club .... However, a "club" owned by an individual which
restricts its membership only because of the physical capacity of its
facilities is not a club or organization. 20 NYCRR 527.11(b)(5)

Accordingly, inasmuch as (1) the membership of Petitioner's club possess no proprietary
rights therein and have no control over its activities or management, and (2) membership in the club
is not exclusive, with memberships available on a first-come, first-served basis, the subject club is
not a "social or athletic club" within the meaning of section 1105(f)(2) of the Tax Law. Annual
membership "fees" or "dues" are thus not subject to tax imposed under such statutory provision.
Section 1105(c)(4) of the Tax Law imposes a sales tax on the service of storing all tangible
personal property not held for sale in the regular course of business. Accordingly, Petitioner's charges
to members for lockers, club storage and/or riding golf cart storage are subject to State and local
sales taxes.

-3­
TSB-A-84(19)S
Sales Tax
June 4, 1984

Section 1105(d)(i) of the Tax Law imposes a sales tax on the receipts from "every sale of
beer, wine or other alcoholic beverages or any other drink of any nature, or from the sale of food and
drink of any nature or of food alone, when sold in or by restaurants, taverns or other establishments
in this state, or by caterers, including in the amount of such receipts any cover, minimum, enter­
tainment or other charge made to patrons or customers." (Emphasis added) Therefore, Petitioner's
charges to its members for sales of food and drink, including any assessments made against a
member for failure to meet the monthly minimum, are also subject to State and local sales taxes.

DATED: May 14, 1984

s/FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.