Do league fees paid to a nonprofit that organizes recreational softball, volleyball, and table tennis leagues count as taxable 'club dues'?

Plain-English summary

WANY Sports, Inc. is a Type A not-for-profit corporation (Section 501(c)(7) federally tax-exempt) that runs annual softball, volleyball, and table tennis leagues in New York, with roughly 350 participants a year across six to sixteen teams per league. A self-perpetuating Board of Executives -- which nominates and elects its own members, not chosen by teams or players -- arranges playing venues, hires umpires and officials, sets schedules, collects league fees from teams, and controls all finances and policy. Teams and players have no vote, no seat on the Board, and no say in how the organization is run; membership/participation is completely open. Each team pays a league fee the Board sets and uses to cover field rental, officials, trophies, and similar expenses.

Tax Law § 1105(f)(2)(i) taxes dues paid to a "social or athletic club" once they exceed $10/year. But under Tax Law § 1101(d)(13) and 20 NYCRR § 527.11(b)(5), an entity is a "club or organization" for this purpose largely based on whether its membership actually controls the organization's social or athletic activities, elections, and management, or holds a proprietary interest in it -- not merely because it offers leagues or charges facility-use fees. The regulation specifically says an entity is NOT a club or organization merely because it charges for facility use or offers leagues/tournaments/social activities that are controlled solely by management.

Because WANY Sports' membership is open and non-exclusive, and because members have no proprietary interest in the organization and no control over its governance or operations (which rest entirely with the self-perpetuating Board), the Department concluded WANY Sports isn't a "social or athletic club" within the meaning of § 1105(f)(2) -- citing its own earlier ruling on a similarly structured entity, Brierwood Village, Inc. As a result, the league fees WANY Sports collects from teams aren't subject to state and local sales tax.

What this means for you

Recreational league organizers and similar nonprofits

The dispositive factor isn't whether you call your fees "dues," but whether your membership actually controls the organization -- elects its leadership, votes on activities, or holds a proprietary stake. If a self-perpetuated board or management alone runs everything and membership is open to anyone, you may be able to collect participation/league fees without charging sales tax, following this and the Brierwood Village precedent.

Athletic and social clubs with member-controlled governance

If your members DO elect the board, vote on club matters, or hold a genuine ownership/proprietary interest, this exception doesn't apply -- your organization is more likely to be treated as a taxable "social or athletic club" under § 1105(f)(2).

Accountants and tax professionals

This opinion, read together with Brierwood Village, is a useful two-ruling line establishing that membership control (not merely offering athletic/social activities) is the key factor separating a taxable "club" from an untaxed open-participation league organizer.

Common questions

Q: Does charging a fee for using playing facilities automatically make an organization a taxable club?
A: No -- the regulation expressly says charging for facility use, or offering leagues/tournaments/social activities controlled solely by management, does not by itself create a "club or organization."

Q: What if some members later gained voting rights or board seats?
A: That would be a different fact pattern than the one ruled on here, where the Board is entirely self-perpetuating and members have no governance role.

Q: Can another sports league organizer rely on this ruling?
A: No. This advisory opinion binds the Department only with respect to WANY Sports, Inc. and the specific governance structure it described.

Citations and references

Statutes and regulations:

• Tax Law § 1105(f)(2)(i) (tax on dues paid to a social or athletic club)
• Tax Law § 1101(d)(6) (definition of dues)
• Tax Law § 1101(d)(13) (definition of social or athletic club)
• 20 NYCRR § 527.11(b)(5) (definition of club or organization)

Prior rulings and cases referenced:

• Brierwood Village, Inc., Adv Op Comm T&F, February 13, 1989, TSB-A-89(6)S (the source text renders this citation as "TSB-A-89(6)5S," most likely a pdftotext/typesetting artifact; preserved verbatim in the Original ruling text section below)

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_92s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-96 (92) S
Sales Tax
December 30, 1996

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S960325A

On March 25, 1996, a Petition for Advisory Opinion was received from WANY Sports, Inc.,
800 Lexington Avenue, New York, New York 10021.
The issue raised by Petitioner, WANY Sports, Inc., is whether it is subject to sales tax under
Section 1105 (f)(2) of the Tax Law, on monies collected from members to fund its operations.
Petitioner' makes the following submission of facts.
Petitioner was incorporated in 1981 and is a Type A corporation, as described in Section
201(b) of the Not-for-Profit Corporation Law of New York State, established under Section 402 of
the Not-for-Profit Corporation Law. Petitioner's certificate of incorporation provides that its purpose
is "[t]o provide for the mutual assistance, enjoyment, entertainment and improvement of its members
socially and physically by encouraging them in participation of such forms of athletics, physical
recreation and athletic competition." The organization is exempt from Federal income taxation
under Section 501(c)(7) of the Internal Revenue Code.
Petitioner currently operates annual softball, volleyball, and table tennis leagues. The number
of teams in each league may vary each year; usually each league contains between six and sixteen
teams. Annually, an average of about 350 people participate in these sports leagues.
In accordance with its By-Laws, Petitioner is governed by a Board of Executives comprising
a President, Vice President, Treasurer, Secretary, Special Projects Coordinator, Public Relations
Director, and General Board members whose numbers may vary. The Board of Executives carries
out the following activities:
a)
b)
c)
d)
e)

f)
g)

arranges for playing venues for the leagues;
arranges for umpires, referees, and other officials, as needed, to oversee each sporting
event;
devises playing schedules for each league and team;
collects monies from teams;
expends monies received for such operational expenses as field permits, gym space,
payment of officials, trophies, and other items incidental to the conducting of the
sports leagues;
conducts all financial and administrative business of the
organization; and
sets policy, as needed, to further the purposes of the organization.

Under the By-Laws, the Board of Executives alone has purview over all decisions affecting
the governance, management, operation, and control of Petitioner's organization. Each team must
pay a league fee which is used by the Board of Executives toward funding the costs of playing space,

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officials, trophies, and other incidental expenses; the final amount of the league fee is set by the
Board of Executives.
The teams and their player-participants are not involved to any extent in the governance,
management, or control of Petitioner's operations, and decisions about the operations of programs
and the organization are made solely by the Board. Membership or participation in leagues is
completely open. Teams and players do not nominate or elect members of the Board of Executives;
the Board is self-perpetuated, i.e., it is nominated and elected by its own Board members.
The membership of Petitioner's organization, which is open and non-exclusive, does not
possess any proprietary rights or interests in the activities and management of the organization.
Petitioner does not directly own the athletic facilities used by its participants. Petitioner's participants
or members have no voice or interest in the management of its organization, which is carried out by
a distinct Board of Executives.
Section 1105(f)(2)(i) of the Tax Law imposes sales 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, and on
the initiation fee alone, regardless of the amount of dues, if such initiation fee is in
excess of ten dollars. 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 ll01(d)of the Tax Law defines "dues" and "social or athletic club" for purposes of
imposition of sales tax under section 1105(f)(2) of the Tax Law as follows:
(6) Dues. Any dues or membership fee including any assessment, irrespective of the
purpose for which made, and any charges for social or sports privileges or facilities
except charges for sports privileges or facilities offered to members' guests which
would otherwise be exempt if paid directly by such guests.
(13) Social or athletic club. Any club or organization of which a material purpose or
activity is social or athletic.

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Sales Tax
December 30, 1996

Section 527.11(b)(5) of the Sales and Use Tax Regulations defines "club or organization",
in part, as follows:
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 not exist merely because a business entity:
(a) charges for the use of facilities on an annual or seasonal basis.
*
*
*
(d) offers tournaments, leagues and social activities which are
controlled solely by the management.
In this case, Petitioner was organized as a Type A corporation, as described in Section 201(b)
of the Not-for-Profit Corporation Law of New York State, established under Section 402 of the Not­
for-Profit Corporation Law. A Type A not-for-profit corporation may be formed for any lawful non­
business purpose including, but not limited to, any one or more of the following non-pecuniary
purposes: civic, patriotic, political, social, fraternal, athletic, agricultural, horticultural, animal
husbandry, and for a professional, commercial, industrial, trade or service association. Section
1105(f)(2) of the Tax Law is only applicable to social or athletic clubs.
Brierwood Village. Inc., Adv Op Comm T&F, February 13, 1989, TSB-A-89(6)5S,
concluded that since (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 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 and Section 527.11(b)(5) of the
Sales and Use Tax Regulations, since membership in Petitioner is not exclusive, members possess
no proprietary interest and have no control over its activities or management, Petitioner is not

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a social or athletic club. Therefore, league fees paid to Petitioner by teams are not subject to State
and local sales taxes.

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.