Are golf country club membership dues and initiation fees taxable when members have no control, no proprietary interest, and membership is limited only by the size of the facility?

Plain-English summary

KPMG Peat Marwick asked, for a client, whether membership dues and initiation fees at the client's golf country club are subject to sales tax. Tax Law § 1105(f)(2) taxes dues paid to a social or athletic club. Under the facts, the club would be owned by the client, with a separate not-for-profit Operator (100% owned by the client) running it on a not-for-profit basis under a management contract. Critically:

• Members would not control social or athletic activities, tournaments, dances, elections, or committees;
• Members would not participate in selecting members or managing the club; and
• Members would not possess a proprietary interest in the club.

Membership could be capped, but only because of the physical size of the facility — not as an attempt at exclusivity.

The Department said the dues and fees are not taxable. Regulation § 527.11(b)(5) says the signs of a taxable "club or organization" are member control of activities/management or a member proprietary interest — none of which are present here — and it expressly says a club does not exist merely because an operator restricts membership solely because of the physical size of the facility. Following its earlier Brierwood Village opinion (TSB-A-89(6)S), where a club whose members had no proprietary rights and no control, and whose membership was not exclusive, was held not a social or athletic club, the Department concluded this club is not one either — so the dues and initiation fees are not subject to State and local sales and use taxes.

What this means for you

Club developers and operators

Whether member dues get taxed under § 1105(f)(2) turns on member control, proprietary interest, and exclusivity — not on whether the place is called a "club" or offers golf and tennis. A club that is genuinely operator-run, where members don't control management or hold an ownership stake, and where any membership cap reflects physical capacity rather than exclusivity, can fall outside the taxable "social or athletic club" category, leaving dues and initiation fees untaxed.

The exclusivity line — compare TSB-A-92(74)S

This is a fine line. In a companion 1992 opinion, TSB-A-92(74)S (Cobblestone Creek Country Club), a country club that offered membership "by invitation only" and restricted it to a defined group was held to be a taxable club — because restricting membership that way is an attempt at exclusivity, not a mere physical-capacity cap — so its dues were taxable. The deciding factor between the two is whether the membership restriction is about exclusivity or about the size of the facility.

Accountants and tax professionals

Apply Reg. § 527.11(b)(5)'s factors: member control of activities/management or a proprietary interest points toward a taxable club; a restriction based solely on physical facility size does not. Brierwood Village (TSB-A-89(6)S) is the controlling analogue; contrast the exclusivity-based result in TSB-A-92(74)S.

Common questions

Q: Are golf country club dues automatically taxable in New York?
A: No. They're taxable only if the club is a "social or athletic club" under § 1105(f)(2). If members lack control and any proprietary interest and membership is limited only by facility size, the club isn't one, and the dues aren't taxed.

Q: What made this club non-taxable when other country clubs are taxed?
A: Members had no control over activities or management, no proprietary interest, and the only membership restriction was the physical size of the facility — not exclusivity. That combination keeps it outside the taxable club definition.

Q: How is this different from TSB-A-92(74)S, where the country club dues were taxable?
A: There the club restricted membership "by invitation only," which the Department treated as an attempt at exclusivity, making it a taxable club. Here the only cap was physical capacity, which the regulation says does not make an entity a club.

Q: Can another taxpayer rely on this opinion?
A: No. An advisory opinion binds the Department only as to the petitioner and the facts described; another taxpayer with different facts cannot rely on it.

Citations and references

Statutes and authorities:

• Tax Law § 1105(f)(2) (tax on dues paid to a social or athletic club)
• Sales and Use Tax Regulations § 527.11(b)(5) (definition of "club or organization," including Example 18)
• Brierwood Village, Inc., Adv Op Comm T&F, February 13, 1989, TSB-A-89(6)S (club with no member proprietary rights or control, and non-exclusive membership, is not a social or athletic club)

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_72s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-92 (72) S
Sales Tax
October 26, 1992

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S920428A

On April 28, 1992, a Petition for Advisory Opinion was received from KPMG Peat Marwick,
345 Park Avenue, New York, New York 10154.
The issue raised by Petitioner, KPMG Peat Marwick, is whether membership dues and
initiation fees paid by members of Petitioner's clients golf country club are subject to State and local
sales and use taxes.
Petitioner's client owns a golf country club facility (the "Facility") in the State of New York.
In accordance with local zoning approval requirements, a New York not-for-profit corporation (the
"Operator"), will be established as a separate entity responsible for the operation of the Facility.
Petitioner's client will own one hundred percent of the outstanding stock of the Operator. The
Operator will enter into a long-term management contract with Petitioner's client pursuant to which
the Operator will manage the Facility on a not-for-profit basis. All profits derived from the operation
of the Facility will be retained by the Operator and used to repay any operating deficits funded by
Petitioner's client. If there are no operating deficits funded by Petitioner's client, all profits derived
from the operation or any excess funds are to be used for future operating shortfalls.
Petitioner's client will appoint all members of the Board of Directors of the Operator. This
Board will be responsible for the administration of the Facility and has authority to control the
management and affairs of the Facility. An advisory Board of Governors will also be appointed by
Petitioner's client to act as liaison between the members of the Facility and the Operator. The Board
of Governors will serve only in an advisory capacity with no duty or power to negotiate or otherwise
act on behalf of the Facility members.
Under this structure, Petitioner's client would continue to own and control the Facility
through the Operator.
Each person who acquires a domestic membership in the Facility is required to pay an
initiation deposit and is entitled to its return in full and without interest, 30 years from the date of
admission to the Facility or 30 days after resignation and resale of membership, whichever occurs
first. In addition, each member will be required to pay annual dues to the Facility.
The members of the Facility would not: (1) have control over social or athletic activities,
tournaments, dances, elections or committees; (2) be entitled to participate in the selection of
members and management of the Facility; or (3) possess a proprietary interest in the Facility.
Petitioner's client or the Operator may restrict the size of the membership. However, this
restriction would be solely because of the physical size of the Facility, and not as an attempt at
exclusivity.

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TSB-A-92 (72) S
Sales Tax
October 26, 1992
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 defines the term "club or
organization" as follows:
(5) Club or organization. (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.
(ii) A "club or organization" does no exist merely because a business entity:
(a) charges for the use of facilities or 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 or
organization". 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.

In Brierwood Village, Inc., Adv Op Comm T&F, February 13, 1989, TSB-A-89(6)S, the
Commissioner advised that inasmuch as (1) the membership of the club possessed no proprietary
rights therein and had no control over its activities or management and (2) membership in the club
was not exclusive, with members being appointed and accepted from a waiting list maintained

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TSB-A-92 (72) S
Sales Tax
October 26, 1992
by Petitioner, the subject club was not a "social or athletic club" within the meaning of section
1105(f)(2) of the Tax Law. Annual membership "fees" or "dues" were thus not subject to the
imposition of sales tax.
Accordingly, pursuant to Section 1105(f)(2) of the Tax Law, Section 527.11(b)(5) of the
Sales and Use Tax Regulations and Brierwood Village, Inc., supra, since membership will not be
exclusive, members will not possess a proprietary interest in the Facility and will not have control
over the activities or management of the Facility, Petitioner's client and the Operator will not be
deemed a social and athletic club and, therefore, membership dues and initiation fees paid by
members will not be subject to State and local sales and use taxes.

DATED: October 26, 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.