Are the fees a health club charges for aerobics classes and workout machines taxable as club dues or admission charges?

Plain-English summary

Donald B. Schwartz described a "health club" that offers only aerobic exercise classes and the use of workout machines to dues-paying members. Showers are available; there is no pool, and the members do not participate in managing the club or organizing its activities. He asked whether the members' payments are taxable as club dues or admission charges under § 1105(f).

The Department held the fees are not taxable under either provision.

• Not an "athletic club." An athletic club has as a material purpose the practice of sports or athletics. Under 20 NYCRR 527.11(b)(7), "athletic activities" do not include exercising or calisthenics solely for health or weight reduction, and an establishment that "merely provides steam baths, saunas, rowing machines, shaking machines and other exercise equipment" is not an athletic club.
• Not a "club or organization." The regulation (527.11(b)(5)) looks for member control — members controlling activities, elections, committees, member selection, or holding a proprietary interest. Here the members have no proprietary interest and no right to control the operation; they are mere customers of a business. (Using "club" or "member" as a marketing device, or restricting size to the facility's capacity, does not create a club.)
• Result: no tax under § 1105(f). Because it is neither a social/athletic club nor a club or organization, the members' payments are not "dues" under § 1105(f)(2) and not admission charges under § 1105(f)(1).
• New York City has a separate gym tax. New York City imposes a 4% local tax on health salons, gyms, saunas, and similar establishments under § 1212-A(b)(1) — but this club, in Westchester County, is not subject to it.

What this means for you

A gym isn't automatically a taxable "club." Selling access to exercise classes and machines, without members controlling the operation and without genuine sports/athletics, generally falls outside New York's social/athletic club dues tax. Calling yourself a "club" in your marketing doesn't change that.

Member control is the pivotal fact. The dues tax targets member-controlled clubs. Where customers simply buy access to a business they don't own or govern, their payments aren't taxable "dues." (Contrast clubs whose members elect the governing board — there the dues can be taxable.)

Watch the New York City gym tax. Outside New York City, a plain fitness facility like this one isn't taxed under § 1105(f). Inside New York City, a separate 4% local tax on gyms and health salons under § 1212-A can apply — so location matters.

Common questions

Q: My gym charges membership fees for classes and machines. Are they taxable dues?
A: Generally no, if it's just exercise and equipment and members don't control the operation. That's a business selling access, not a taxable social or athletic club.

Q: We call ourselves a "club." Does that make our fees taxable?
A: No. Using "club" or "member" as marketing, or limiting size to your space, doesn't make you a taxable club. The dues tax turns on member control and genuine sports/athletics.

Q: Are there any gym-specific taxes in New York?
A: Yes — New York City imposes a 4% local tax on health salons and gyms under § 1212-A(b)(1). A facility outside New York City (like this Westchester club) is not subject to it.

Citations and references

Statutes and regulations:

• Tax Law § 1105(f)(1) — taxes admission charges (excluding participant-sports facilities)
• Tax Law § 1105(f)(2) — taxes dues to a social or athletic club
• Tax Law § 1101(d)(13) — defines "social or athletic club"
• 20 NYCRR 527.11(b)(5) — factors for a club or organization, including member control
• 20 NYCRR 527.11(b)(7) — athletic club; exercise/calisthenics for health or weight reduction excluded
• Tax Law § 1212-A(b)(1) — New York City 4% local tax on health salons and gyms

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1987.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a87_21s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TB-A-87(21)S
Sales Tax
May 14, 1987

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S861015A

On October 15, 1986, a Petition for Advisory Opinion was received from Donald B.
Schwartz, 944 The Parkway, Marmaroneck, New York 10543.
The issue raised is whether amounts charged for certain services and facilities offered by an
establishment called a "health club" are taxable either under Section 1105(f)(1) or (2) of the Tax
Law.
Petitioner states that the health club offers solely aerobic exercise classes and the use of
workout machines to dues-paying members. Showers are available, but no swimming pool is
provided.
The members do not participate in the management of the health club or in the organization
of any of its activities.
Section 1105(f) of the Tax Law imposes taxes on:
(1) Any admission charge . . . 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 . . . .
(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 "[a]ny
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:
(5). . .(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.
RODERICK G. W. CHU, COMMISSIONER
GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR
TP-8 (3/83)

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TB-A-87(21)S
Sales Tax
May 14, 1987

(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.
Section 527.11(b)(7) of the Sales and Use Tax Regulations provides, in part, as follows:
(7). . . (i) An athletic club is any club or organization which has as a material
purpose or activity the practice, participation in or promotion of any sports or
athletics.

(ii) [The phrase "athletic activities"] does not include exercising or calisthenics solely
for health or weight reduction purposes, as contrasted to sports. An establishment
that merely provides steam baths, saunas, rowing machines, shaking machines and
other exercise equipment shall not be considered an athletic club. . . .
It appears from the facts presented in the Petition, that the members do not join the health
club to engage in "athletic activities" as the term is defined in the Sales and Use Tax Regulations.
Moreover, they have neither a proprietary interest in the enterprise nor a right to control its operation.
They are mere customers of a business establishment which, therefore, does not meet the criteria of
a "club or organization" or "social or athletic club" contained in Regulation 527.11(b)(5) and (b)(7),
quoted above. Accordingly, the members' payments for participation in exercise classes and use of
workout machines do not constitute "dues" subject to tax under Section 1105(f)(2) of the Tax Law;
neither are they taxable admission charges pursuant to Tax Law 1105(f)(1).
It should be noted that the City of New York imposes a four-percent local sales tax on every
sale of services by weight control salons, health salons, gymnasiums, Turkish baths, sauna baths and
similar establishments, and on every charge for the use of such facilities. Tax Law 1212-A(b)(1).

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TB-A-87(21)S
Sales Tax
May 14, 1987

However, inasmuch as Petitioner's health club is located in Westchester County, it would not be
subject to tax under section 1212-A(b)(1) of the Tax Law.

DATED: May 14, 1987

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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