Is a yacht club condominium a taxable social/athletic club, is the sale of a boat-slip condo unit itself taxable, and can the condo buy maintenance services tax-free for resale when it bills unit owners for maintenance?

Subject

Whether the Petitioner is a social or athletic club.

What this means for you

The Anchorage Yacht Club Condominium sold 460 boat "Slip Units" under a Condominium Act offering plan -- each owner holds fee title to their own slip (assessed separately for real estate tax) plus an undivided common interest in shared elements: land, an outdoor pool, two outdoor tennis courts, a snack bar, and common bathroom facilities. Unit owners elect a Board of Managers at annual meetings and are billed their proportionate share of "Common Expenses" for operating and maintaining those shared facilities.

The Department found this arrangement meets the "club or organization" definition: the ownership structure gives unit owners a proprietary interest and voting control (electing the Board), and since owners also fund shared recreational facilities (pool, tennis courts) and meet at least annually, it further qualifies as a social AND athletic club -- following the Department's own regulatory example that a condominium association operating a pool/tennis courts/trails is an athletic club regardless of automatic membership upon purchase. So Common Expense assessments billed to unit owners are taxable "dues" under Tax Law § 1105(f)(2). That said, the SALE of an individual slip unit -- fee title to real property, separately taxed for real estate purposes -- is a real property sale, not subject to sales tax at all (following Breezy Point Surf Club, Inc. v. State Tax Commission). And there's an important resale-purchasing wrinkle: if the condo bills a specific owner for repairs/maintenance to THAT owner's own unit, that's a resold real-property-maintenance service (taxable to the owner under § 1105(c)(3)), and the condo can buy the underlying repair work tax-exempt using a resale certificate. But shared Common Expense maintenance work -- billed to all owners collectively as part of their dues, not resold service-by-service -- can't be purchased tax-exempt for resale, since the condo isn't "reselling" that work; it's absorbing the cost into its own taxable dues.

Q&A

Q: Our condo/HOA operates shared recreational amenities (pool, tennis courts, marina, etc.) and bills owners a common-charge assessment -- are those assessments taxable dues?
A: Per this opinion, yes, if the association meets the club-or-organization criteria (member voting/proprietary interest) and its shared facilities include recreational/athletic amenities -- following the Department's regulatory example that automatic membership upon purchasing real property doesn't change the club analysis.

Q: Does that mean selling a unit itself is taxable too?
A: No -- per this opinion, the sale of the real property unit itself (fee title, separately taxed for real estate purposes) stays a real property transaction, outside sales tax entirely, regardless of the club-dues analysis for ongoing assessments.

Q: Can our condo buy repair/maintenance services tax-exempt for resale if we bill owners for maintenance?
A: It depends on WHAT you're billing for. Per this opinion, maintenance/repair work specific to one owner's own unit (resold service-by-service to that owner) can be bought tax-exempt for resale with a resale certificate. But general Common Expense maintenance absorbed into dues billed to all owners is NOT a resale of that specific service, so the condo can't buy that underlying work tax-exempt.

Citations

• Tax Law § 1105(c)(3) -- imposes sales tax on maintaining, servicing, or repairing tangible personal property or real property.
• Tax Law § 1105(f)(2) -- imposes sales tax on dues paid to a social or athletic club, including assessments.
• 20 NYCRR § 527.11(b)(5) -- defines "club or organization."
• 20 NYCRR § 527.11(b)(6) -- defines "social club."
• 20 NYCRR § 527.11(b)(7) -- defines "athletic club," including the example that a real estate subdivision association operating a pool/tennis courts/trails is an athletic club regardless of automatic membership.
• Breezy Point Surf Club, Inc. v. State Tax Commission, 67 A.D.2d 760, aff'd 48 N.Y.2d 776 -- cited for treating a slip/unit sale as an untaxed real property transaction.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1994.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a94_38s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-94 (38)S
Sales Tax
September 7, 1994

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S940601A

On June 1, 1994 a Petition for Advisory Opinion was received from The Anchorage Yacht
Club Condominium, 401 East Shore Road, Lindenhurst, New York 11757.
The issues raised by Petitioner, The Anchorage Yacht Club Condominium, are:

1. Whether the Petitioner is a social or athletic club. If yes, whether the sale of a slip unit
   is considered to be a sale of real property or are the receipts from such sale considered to be taxable
   dues.
2. Whether maintenance services may be purchased tax exempt as purchases for resale in
   instances where Petitioner collects sales tax on maintenance fees billed to members.
   Petitioner is a yacht club condominium operating a yacht club at 401 East Shore Road,
   Lindenhurst, New York.
   The Introduction of Petitioner's Condominium Offering Plan states, in part:
   Purpose of the Plan
   Anchorage Associates (the "Sponsor") presents this Offering Plan (the "Plan")
   for the condominium ownership of the premises known as 401 East Shore Road,
   Lindenhurst, New York (the "property") under the provisions of the Condominium
   Act.
   The purpose of this Plan is to set forth all of the material terms of the offer
   to establish the Property as a condominium and to sell 460 Slip Units therein.
   *

*

*

Interest in the Property to be Submitted to Condominium Act
A condominium will be created and established by submitting fee title to the
Property to the provisions of the Condominium Act ... in accordance with the
Declaration and By-Laws set forth in Part II of the Plan. The Condominium will be
known as The Anchorage Yacht Club Condominium and will be subject to the
Condominium Act and all laws regulating condominiums.
*

*

*

-2­
TSB-A-94 (38)S
Sales Tax
September 7, 1994
Offer of Sale of Condominium Units
The Sponsor hereby offers for sale 460 Slip Units on the terms and conditions
set forth in the plan.
*

*

*

Features of Condominium Ownership
The ownership of a Slip Unit is similar in many respects to the ownership of
a parcel of ocean front property. Each Slip Unit Owner owns fee title to his Slip Unit
and is entitled to the exclusive possession thereof.
*

*

*

Each Slip Unit Owner also owns in common with other Unit Owners an
undivided interest in the Common Elements known as his Common Interest. The
Common Elements, as described in "Description of the Property" ... and in the
Declaration ... include portions of the Land, the central and appurtenant installations
for services such as power, the outdoor pool, two outdoor tennis courts, the snack bar
kiosk, and the common bathroom facilities ....
*

*

*

The Sponsor will make application to divide the Property into separate tax
lots for each Unit and its Common Interest, which will then be taxed as a separate tax
lot for real estate tax purposes. Once a separate tax lot is established for a Unit a
Unit Owner will then be responsible for the payment of the real estate taxes on his,
but not any other, Unit and his Unit will not be affected by virtue of nonpayment of
real estate taxes by any other Unit Owner. The amount of the tax assessed against
any Unit will depend upon various factors affecting value, including but not limited
to square footage location, purchase price and other factors taken into consideration
by the taxing authorities.
Definitions
"Board" means the Board of Managers of the Condominium.
*

*

*

"Common Charges" means any charges assessed by the Board of Managers
against any Unit Owner.
"Common Expenses" means all costs and expenses incurred or paid generally
by the Board in connection with the operation of the Condominium which, pursuant
to the Plan, the Declaration and By-Laws, are to be paid by the Unit Owners in
proportion to their Common Interests....

-3­
TSB-A-94 (38)S
Sales Tax
September 7, 1994
The By-Laws of Petitioner state, in part:
Article II
Board of Managers
Section 1. Number and Term of Office. As more particularly set forth in
these By-Laws and the Declaration, the affairs of the Condominium shall be
governed by a board of managers of the Condominium (the "Board of Managers").
The Board of Managers shall be composed of five (5) members. Until the first
meeting of the Unit Owner, the members of the Board of Managers shall consist of
five (5) persons appointed by the Declarant. Each member of the Board of Managers
shall serve for a term of one (1) year or until their respective successors shall have
been duly elected....
*

*

*

Article III
Unit Owners
Section 1. Annual Meetings. Within forty-five (45) days after the date the
Declarant conveys title to the first Unit pursuant to the Condominium Offering Plan
proposed by the Declaration for the Property (the "Plan"), the first meeting of Unit
Owners shall be held. At such meeting the incumbent Board of Managers shall
resign and a new Board shall be elected by the Unit Owners as provided in the ByLaws. Thereafter, annual meetings shall be held.... At such meetings the Unit
Owners shall elect members of the Board of Managers to fill vacancies or to succeed
retiring members of the Board of Managers as provided in Article II of these ByLaws and shall also transact such other business of the Condominium as may
properly come before the meeting.
Section 1105 of the Tax Law states, in part:
Imposition of sales tax.--... there is hereby imposed and their shall be paid a tax ... upon:
(c) The receipts from every sale, except of resale, of the following services:
(3) Installing tangible personal property, ... or maintaining, servicing or
repairing tangible personal property, ... not held for sale in the regular course of
business, whether or not the services are performed directly or by means of coin­
operated equipment or by any other means, and whether or not any tangible personal
property is transferred in conjunction therewith ....
(f)(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, and on the initiation fee alone, regardless of the amount of dues, if such
initiation fee is in excess of ten dollars, except that the tax shall not apply to a

-4­
TSB-A-94 (38)S
Sales Tax
September 7, 1994
fraternal society, order or association operating under the lodge system or any
fraternal association of students of a college or university. Where the tax on dues
applies to any such social or athletic club, the tax shall be paid by all members, other
than honorary members, thereof regardless of the amount of their dues, and shall be
paid on all dues or initiation fees for a period commencing on or after August first,
nineteen hundred sixty-five. In the case of a life membership, the tax shall be upon
the amount paid as life membership dues, however, a life member, other than an
honorary member, paying an annual sales tax, based on the dues of an active annual
member, shall continue such payments until the total amount of such tax paid is equal
to the amount of tax that would have otherwise been due had the tax been imposed
at the time such paid life membership has been purchased and at the then applicable
rate.
Section 527.11 of the New York State Sales and Use Tax Regulations states, in part:
Dues. [Tax Law, §1105(f)(2)]

(a)

Imposition.

(1) A tax is imposed upon 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 $10 per year.
(2) A tax is imposed on the initiation fee paid to any social or athletic club,
regardless of the amount of dues, in such initiation fee is in excess of $10.
(b) Definitions. As used in this section, the following terms shall mean:
(2) Dues. (i) The term dues includes:
(a)
(b)
(c)

any dues or membership fee;
any assessment, irrespective of the purpose for
which made; and
any charge for social or sports privileges or
facilities.

Example 3: A social club collects no regular dues or membership fees, but meets its
operating expenses by levying assessments on its members as funds are required.
These assessments constitute taxable dues or membership fees where the fees,
combined with annul dues, exceed $10.
(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

-5­
TSB-A-94 (38)S
Sales Tax
September 7, 1994
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.
(6) Social club. A social club is any club or organization which has a
material purpose or activity of arranging periodic dances, dinners, meetings or other
functions affording its members an opportunity of congregating for social
interrelationship.
(7) Athletic club. (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.
Example 31: Each purchaser of a lot or condominium within a real estate
subdivision automatically becomes a member of an association which operates a
pool, tennis courts and nature trails within the subdivision. The association assesses
each owner an annual charge to provide funds for the operation of these facilities.
The association has the right to limit the number of guests of members and to charge
reasonable fees for the use of the facilities. The association is an athletic club, as it
has a material purpose of providing sports privileges and facilities. The fact that
membership is automatic upon purchase of real property has no effect on the
association's status as a club.
In the instant matter, the activities and status of the Unit Owners as described in the Offering
Plan and in the Bylaws are such that Petitioner is considered to be a club as defined under Section
527.11(b)(5) of the Sales and Use Tax Regulations.
Since Petitioner bills each Unit Owner a share of the Common Expenses incurred in
connection with the Common Elements which include portions of the land, the outdoor pool, two
outdoor tennis courts, the snack bar kiosk, etc. and since the Unit Owners meet at least annually,
Petitioner is considered to be a social or athletic club as defined under Section 527.11(b)(6) and (7)
of the Regulations. (Also see Section 527.11(b)(7), Example 31 of the Regulations.) Accordingly,
any assessment made by Petitioner to the Unit Owners will be construed as dues, including expenses
incurred in connection with the Common Elements. (See Section 527.11(b)(2) of the Regulations.)
However, the sale of a slip unit, which the Slip Unit Owner owns fee title to and which is assessed
for real property tax purposes, is considered to be a sale of real property and the receipts from such
sale will not be subject to sales or compensating use tax. (See Breezy Point Surf Club, Inc. v State
Tax Commission, 67 AD2d 760, affd 48 NY2d 776.)
Any expenses billed to a Unit Owner which were incurred by Petitioner because of
maintenance or repairs to a slip unit will be considered as expenses from services for maintaining
or repairing real property. The receipts from such services will not be considered as dues but instead
as receipts from maintaining, servicing or repairing real property and will be subject to the tax

-6­
TSB-A-94 (38)S
Sales Tax
September 7, 1994
imposed under Section 1105(c)(3) of the Tax Law. Petitioner may purchase such services tax
exempt as services for resale by giving the supplier of such services a properly completed form ST­
120, Resale Certificate.
However, when Petitioner bills a unit owner for the Unit Owner's share of Common
Expenses, such charges are considered to be dues and the receipts from such charges will be subject
to the tax imposed under Section 1105(f)(2) of the Tax Law. When Petitioner incurs such expenses,
the charges to Petitioner will be considered to be charges for maintaining, servicing or repairing real
property and will be subject to the tax imposed under Section 1105(c)(3) of the Tax Law. Since
Petitioner will not be reselling such services to Unit Owners, Petitioner may not purchase such
services tax exempt as purchases for resale.

DATED: September 7, 1994

/s/
PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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