Are a golf and country club's dues taxable when members have no proprietary interest or control and membership is limited only by facility size, and what about locker and food charges?

Plain-English summary

Bobby O'Brians, Inc., operating Brierwood Golf & Country Club, would take over the country-club operation (golf course, tennis, pool, clubhouse, restaurant/bar) formerly run by Brierwood Village, Inc. Under the setup, the owner keeps sole control of the golf course, tournaments, and social functions; members have no control over activities, management, or the acceptance of new members; new members are appointed from a waiting list; and membership is limited only because of the size of the facilities. Members have no proprietary interest. It asked whether it is a taxable "club" and whether its dues and initiation fees are taxable.

The Department's answer, applying Tax Law § 1105(f)(2) and Regulation § 527.11(b)(5):

• Not a taxable "club" — dues are not taxable. A "club" is indicated by member control of activities, tournaments, elections, committees, selection of members, or management, or by members holding a proprietary interest. A business is not a club merely because it restricts membership solely because of the physical size of the facility (any other restriction is viewed as an attempt at exclusivity). Because Brierwood's members have no proprietary interest, no control, and membership is not exclusive (appointed from a waiting list, capped only by facility size), it is not a social or athletic club, so annual dues and initiation fees are not taxable (citing Brierwood Village, Inc., TSB-A-89(6)S — the same club under its prior operator).
• Locker and storage charges are taxable. Under § 1105(c)(4), charges to members for lockers and golf-club storage (storing tangible personal property not held for sale) are subject to sales tax.
• Food and drink are taxable — including the minimum shortfall. Under § 1105(d)(i), charges for food and drink are taxable, and any assessment billed to a member for failing to meet the $45 monthly food-and-beverage minimum is likewise taxable.

This tracks the Department's exclusivity line: a membership capped only by physical facility size is not a taxable club (as in TSB-A-92(72)S), whereas an "invitation-only" or otherwise exclusive membership is a taxable club (as in TSB-A-92(74)S).

What this means for you

Golf, tennis, and country-club operators

If your members have no proprietary interest and no control over the club's management, activities, tournaments, or member selection, and you cap membership only by the physical size of your facilities, your dues and initiation fees are not taxable as social/athletic-club dues. Owner-controlled, first-come membership is the key.

Facility-size cap is safe; other restrictions signal a taxable club

Limiting membership to what your facilities can hold is a permitted, non-club restriction. Any other limit — geographic, income, invitation-only, or member-approved admissions — is read as an attempt at exclusivity and can make you a taxable club.

Dues untaxed doesn't mean everything is untaxed

Even with nontaxable dues, you still owe sales tax on locker and storage charges and on food and drink — including any amount you bill a member for missing a required monthly food-and-beverage minimum.

Accountants and tax professionals

The opinion applies the § 527.11(b)(5) factors (member control / proprietary interest) and the facility-size safe harbor to defeat "club" status, so § 1105(f)(2) dues tax doesn't apply — but § 1105(c)(4) storage and § 1105(d)(i) food-and-drink taxes still do, and the monthly-minimum shortfall is a taxable food-and-drink receipt. Compare the taxable "invitation-only" club in TSB-A-92(74)S.

Common questions

Q: Are this country club's dues taxable?
A: No. Because members have no proprietary interest, no control over activities or management, and membership is limited only by facility size, the operator isn't a "social or athletic club," so dues and initiation fees aren't taxable.

Q: What makes an organization a taxable "club"?
A: Member control over social/athletic activities, tournaments, elections, committees, member selection, or management — or members holding a proprietary interest in the organization.

Q: Is limiting membership to facility capacity a problem?
A: No. Restricting membership solely because of the physical size of the facility is permitted and does not make you a club. Other restrictions may be seen as attempts at exclusivity.

Q: Are locker and food charges taxable even though dues aren't?
A: Yes. Locker and club-storage charges are taxable under § 1105(c)(4), and food and drink — including any assessment for missing the monthly minimum — is taxable under § 1105(d)(i).

Q: How does this compare to an invitation-only club?
A: An invitation-only or otherwise exclusive membership is treated as a taxable club (see TSB-A-92(74)S), whereas a membership capped only by facility size (like this one and TSB-A-92(72)S) is not.

Citations and references

Statutes and authorities:

• Tax Law § 1105(f)(2) (tax on dues paid to a social or athletic club over ten dollars per year)
• Sales and Use Tax Regulations § 527.11(b)(5) (definition of "club"; control/proprietary-interest factors; facility-size safe harbor; Example 18)
• Tax Law § 1105(c)(4) (tax on storing tangible personal property not held for sale)
• Tax Law § 1105(d)(i) (tax on food and drink sold by restaurants, taverns, and similar establishments, including cover/minimum charges)
• Brierwood Village, Inc., Adv. Op. Comm. of T&F, Feb. 13, 1989, TSB-A-89(6)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1992.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a92_49s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-92 (49)
Sales Tax
June 19, 1992

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S920505B

On May 5, 1992, a Petition for Advisory Opinion was received from Bobby O'Brians, Inc.,
S-5324 Rogers Road, Hamburg, New York 14075.
The issue raised by Petitioner, Bobby O'Brians, Inc., is whether Bobby O'Brians, Inc. D/B/A
Brierwood Golf & Country Club will be 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 and whether its
"Dues and Initiation Fees" will be subject to State and local sales taxes.
Brierwood Village, Inc., (hereinafter "Brierwood") is presently the sole owner and operator
of the Brierwood Country Club which provides its members the use of an eighteen hole golf course,
tennis courts, outdoor swimming facilities, a clubhouse, and restaurant and bar facilities.
All regular general members are eligible to participate in the use of the golf course and golf
tournaments. The tournaments are controlled by Brierwood and are subject to Brierwood's discretion.
The general members and social members are entitled to participate in all social gatherings,
dances and other social functions which are completely sponsored and controlled by Brierwood.
Brierwood retains sole control and authority over the use of the golf course and full facilities.
The membership does not have any control or rights over social functions or golf tournaments.
New members are appointed and accepted from a waiting list. Brierwood approves new
applicants as members to fill vacancies in the membership. Members have no control over the
acceptance of new members. The size of the membership is limited only because of the size of the
facilities.
Club members do not have a proprietary interest in Brierwood and are not permitted by the
owner to participate in either the selection of new members or management of the club. Brierwood
is not obligated to accept opinions or suggestions from members regarding club policies and/or rules.
Members are charged a daily greens fee for guests.
Separate charges are made to members for lockers and club storage.
Members are required to charge a monthly minimum of $45.00 per month for both food and
beverage. In the event a member charges less than the minimum required amount for a month, the
difference between the minimum required amount and the actual amount charged will be billed to
the member.
TP-9 (9/88)

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TSB-A-92 (49) S
Sales Tax
June 19, 1992

Brierwood is a majority stockholder in Petitioner which is presently responsible for all food
and beverage operations at the premises.
As part of a plan to centralize management the country club division and related assets of
Brierwood will be contributed to Petitioner. Petitioner will be responsible for operating a food and
beverage division and a country club division which will include golf, tennis and other recreational
facilities. Petitioner will operate the country club division in the same manner as it is presently
operated by Brierwood.
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 .... "
Section 527.11(b)(5) of the Sales and Use Tax Regulations define the term "club" 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:

(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

*

*

*

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Example 18:

TSB-A-92 (49) S
Sales Tax
June 19, 1992

A club owned by an individual which attempts to restrict its membership by
geographic area, income, race, religion or 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.

Accordingly, inasmuch as (1) the membership of Petitioner's club will possess no proprietary
rights therein and have no control over its activities or management and (2) membership in the club
will not be exclusive, with members being appointed and accepted from a waiting list maintained
by Petitioner, the subject club will not be a "social or athletic club" within the meaning of section
1105(f)(2) of the Tax Law. Annual membership "fees" or "dues" will thus not be subject to tax
imposed under such statutory provision. Brierwood Village, Inc., Adv Op Comm of T&F, February
13, 1989, TSB-A-89(6)S.
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 and golf club storage will be subject to State and local sales taxes.
Brierwood Village, Inc., supra.
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,
entertainment or other charge made to patrons or customers." 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, will also be subject to State and local sales taxes. Brierwood Village,
Inc., supra.

DATED: June 19, 1992

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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