Are a country club's membership fees and dues taxable when members have no control or ownership and membership is open to the public?

Plain-English summary

Willows Country Club owns and operates a country club — golf, tennis, pool, and a clubhouse with locker room, restaurant and banquet facilities (also open to the general public for events). Memberships are offered to the general public on a first-come, first-served basis; all members have identical privileges; and members have no control over club activities or management and no proprietary interest in the club. It asked whether it is a "social or athletic club" whose dues are taxable.

The Department held it is not a social or athletic club, so its membership fees and dues are not taxable.

• The dues tax is narrow. Section § 1105(f)(2) taxes dues paid to a social or athletic club (over $10/year). The definition (20 NYCRR 527.11(b)(5)) looks for member control of activities/management and/or a member proprietary interest.
• These features are absent here. Willows' members have no proprietary interest and no control, and membership is not exclusive — it's open first-come, first-served.
• The "not a club" safe harbors fit. An entity isn't a club merely because it sells annual/season passes first-come, restricts size only to the physical capacity of the facility, uses "club" as a marketing term, or runs management-controlled tournaments and activities (Example 18).
• Result. Willows is not a social or athletic club under § 1105(f)(2), so its annual membership "fees" and "dues" are not subject to the dues tax.

What this means for you

Calling something a "club" and charging "dues" doesn't make the dues taxable. New York's dues tax targets true membership clubs — ones the members control or own. A commercial recreation business open to the public, where members have no say and no stake, generally isn't a taxable club.

Control and exclusivity are the tests. Member governance (electing officers, running committees, controlling events) or a proprietary interest points toward "club." Open, first-come membership with management-run operations points away from it.

Capacity limits are fine; exclusivity limits are not. Capping membership to the physical size of the facility doesn't create a club, but restricting membership by geography, income, or other selective criteria signals exclusivity — and can make it one. This mirrors TSB-A-84(19)S (Tan Tara), where a company-owned facility with neither member control nor exclusivity was likewise not a club.

Common questions

Q: We run a country club open to the public. Are our dues taxable?
A: On these facts, no. Because members have no control and no ownership interest and membership is open first-come, the club isn't a "social or athletic club," so its dues and fees aren't taxed under § 1105(f)(2).

Q: What would make our dues taxable?
A: Member control over activities or management, or a member proprietary interest — the hallmarks of a true club. Selective, exclusivity-based membership restrictions also point toward taxable-club status.

Q: We limit membership to the number our facility can hold. Does that make us a club?
A: No. Restricting size solely to the physical capacity of the facility doesn't create a club. Other kinds of restriction may be viewed as an attempt at exclusivity.

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) — definition of "club"; control and exclusivity factors, including 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_7s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-84(7)S
Sales Tax
March 8, 1984

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

PETITION NO. S831019A

On October 19, 1983 a Petition for Advisory Opinion was received from the Willows
Country Club, Riverview Road, Rexford, New York 12148.
The issues raised are (1) whether Petitioner is a social or athletic club within the meaning and
intent of section 1105(f)(2) of the Tax Law and (2) whether fees charged by Petitioner as
membership fees and/or club dues are subject to the sales tax.
Petitioner owns and operates a country club which provides its members with the use of a
golf course, tennis courts, outdoor swimming facilities and a clubhouse. The clubhouse contains
locker room, restaurant and banquet facilities. These facilities are available not only to members but
to the general public as well, for banquets, golf tournaments and other events.
Petitioner offers its memberships to the general public, on a first-come, first-served basis, and
all members enjoy identical privileges. Members have no control over any club activities, do not
participate in the management of the club and have no proprietary interest in the club.
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:
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;

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

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

-2­
TSB-A-84(7)S
Sales Tax
March 8, 1984

(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.

DATED: February 17, 1984

s/FRANK J. PUCCIA
Director
Technical Services Bureau