Once a homeowners association acquires a swimming pool and tennis courts for its members, does any part of its monthly association fee become subject to the club dues sales tax?

Plain-English summary

The Antler's at Diamond Point Homeowners Association is a not-for-profit association that owns, operates, and maintains common property for a defined residential development; anyone who buys a home there automatically becomes a member. It charges homeowner members a monthly fee for area maintenance (lawn care, snowplowing, and similar upkeep), part of which is set aside in reserve for capital purchases. The developer was about to transfer ownership of the complex's swimming pool and tennis courts to the association, which would then be used by resident members and their guests. The association asked whether any part of its monthly fee would become subject to sales tax once it took on that swimming pool and tennis-court ownership.

Tax Law § 1105(f)(2)(i) generally taxes dues paid to a "social or athletic club." But § 1105(f)(2)(ii)(C) -- effective December 1, 1995 -- carves out an exclusion specifically for a "homeowners association": one whose membership consists exclusively of owners or residents of homes (including condominium unit owners and co-op shareholders) in a defined geographical area like a housing development, and which operates social or athletic facilities in that area for those owners/residents. The Department found this association fits that definition exactly -- membership limited to homeowners in a defined area, now operating a swimming pool and tennis courts for those members -- so its monthly fees fall within the homeowners association exclusion and are not subject to the club dues tax, even though the association will soon be running genuinely "athletic" facilities.

What this means for you

Homeowners associations acquiring recreational facilities

Taking on ownership of a pool, tennis courts, or similar recreational amenities doesn't automatically convert your association fee into taxable "club dues," as long as membership stays limited to owners/residents of homes in your defined development and the facilities serve that membership. Confirm your association's structure matches the statutory definition (membership exclusively homeowners/residents in a defined area) before relying on this exclusion.

Condo and co-op boards

The exclusion explicitly extends to condominium unit owners and cooperative housing/apartment corporation shareholders, not just single-family homeowners -- so a condo or co-op association acquiring similar amenities can potentially rely on the same exclusion.

Accountants and tax professionals

This is a clean, fact-clean application of the (then-new) December 1, 1995 homeowners association exclusion under § 1105(f)(2)(ii)(C) -- useful precedent for any client HOA weighing whether adding recreational facilities will trigger dues tax exposure.

Common questions

Q: Does adding a pool or tennis courts ever push an association fee into taxable territory?
A: Not under this exclusion, as long as the association's membership stays limited to owners/residents of homes in a defined geographical area and the facilities serve that membership -- the exclusion specifically covers associations that "operate social or athletic facilities."

Q: When did this exclusion take effect?
A: December 1, 1995, per the statute cited in the opinion.

Q: Can another homeowners association rely on this ruling?
A: No. This advisory opinion binds the Department only with respect to this specific association and the facts it described, though the statutory exclusion itself is generally available to associations meeting its definition.

Citations and references

Statutes and regulations:

• Tax Law § 1105(f)(2)(i) (tax on dues paid to a social or athletic club)
• Tax Law § 1105(f)(2)(ii)(C) (homeowners association exclusion, effective December 1, 1995)
• 20 NYCRR § 527.11(b)(2) (definition of dues)

Prior rulings and cases referenced:

• None cited in this opinion.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1996.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a96_86s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-96 (86) S
Sales Tax
December 30, 1996

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S961002A

On October 2, 1996, a Petition for Advisory Opinion was received from The Antler's at
Diamond Point Homeowners Association, Inc. c/o Nathaniel H. Daffner, CPA, 740 Union Street,
Schenectady, New York 12305.
The issue raised by Petitioner, The Antler's at Diamond Point Homeowners Association, Inc.,
is whether any portion of the monthly homeowners association fee will be subject to sales tax when
Petitioner acquires a swimming pool and tennis courts.
Petitioner submits the following facts.
Petitioner is a not-for-profit homeowners association formed to own, operate and maintain
association property. Membership is limited to purchasers and subsequent owners of homes who
automatically become members of the association. The homes of association members are located
in a defined area. Petitioner charges its homeowner membership a monthly fee for maintenance of
the area (lawn care, snowplowing, etc.). A portion of the monthly fee is put into a reserve for the
purchase of capital items. The developer of the complex will be relinquishing title to the swimming
pool and tennis courts located on the complex to the homeowners association. These facilities will
be used by the resident members of the homeowners association and their guests.
Section 1105(f)(2) of the Tax Law imposes a tax on:
(i) 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 .
(ii) Dues and initiation fees paid to the following shall not be subject to the tax
imposed by this paragraph:
(A) A fraternal society, order or association operating under the lodge system;
(B) Any fraternal association of students of a college or university;
(C) A homeowners association. For purposes of this subparagraph, a homeowners
association is an association (including a cooperative housing or apartment
corporation) (I) the membership of which is comprised exclusively of owners or
residents of residential dwelling units, including owners of units in a condominium,

-2­
TSB-A-96 (86) S
Sales Tax
December 30, 1996

and including shareholders in a cooperative housing or apartment corporation. where
such units are located in a defined geographical area such as a housing development
or subdivision and (II) which operates social or athletic facilities located in such area
for use (whether or not exclusive) by such owners or residents. (Emphasis added.)
Section 527.11 of the Sales and Use Tax Regulations provides:
(b) Definitions. As used in this section, the following terms shall mean:
*

*

*

(2) Dues. (i) The term dues includes:
(a) any dues or membership fee;
(b) any assessment, irrespective of the purpose for which made; and
(c) any charge for social or sports privileges or facilities.
In this case, Petitioner is a not-for-profit homeowners association formed to own, operate and
maintain association property. Membership is limited to purchasers and subsequent owners of
homes who automatically become members of the association. Residences in the homeowners
association are located in a defined area. Petitioner charges its homeowner membership a monthly
fee for maintenance of the area (lawn care, snowplowing, etc.). A portion of the monthly fee is put
into a reserve for the purchase of capital items. Petitioner will be accepting ownership of the
swimming pool and tennis courts from the developer. The swimming pool and tennis court facilities
will be available for use by Petitioner's membership and their guests. Accordingly, the monthly fees
charged to Petitioner's membership fall within the exclusion from sales tax under Section
ll05(f)(2)(ii)(C) of the Tax Law, which became effective December 1, 1995.

DATED: December 30, 1996

/s/
JOHN W. BARTLETT
Deputy Director
Technical Services Bureau

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