Are membership dues and an initiation fee paid to a recreational boating club subject to New York's club dues tax?

Plain-English summary

Binghamton Boating Club is a 55-family nonprofit organization built around promoting safe recreational boating and fishing. Members' boats range from small 14-foot aluminum boats to 21-foot runabouts, and the club owns lakefront property with campsites, a boat launch, docking facilities, and a clubhouse (with restrooms but no restaurant or bar) that doubles as winter boat storage. The club is run by an elected Board of Directors and holds regular meetings, but its activities are strictly recreational -- no fishing or boating tournaments, no contests of any kind. It holds two summer barbecues, but only for members and their guests, not as fundraisers or public events. Its certificate of incorporation states its purpose as fellowship among boating/camping enthusiasts, promoting safe boating, and maintaining boating facilities -- organized as a 501(c)(7) nonprofit. The club charges a $350 initiation fee and $300 in annual dues, and asked whether those charges are subject to New York's tax on club dues.

New York taxes dues and initiation fees paid to "social or athletic clubs" -- specifically, clubs whose material purpose or activity is either arranging periodic dances, dinners, or other social-gathering functions (a social club), or the practice, participation in, or promotion of sports or athletics (an athletic club). The Department found Binghamton Boating Club doesn't fit either category: its material purpose is facilitating members' own recreational boating and fishing, not organizing periodic social functions for their own sake, and it doesn't sponsor tournaments or otherwise promote competitive athletics. Because the club isn't a social or athletic club within the meaning of the statute, its dues and initiation fees aren't subject to sales tax at all.

What this means for you

Recreational, hobby, and special-interest clubs (boating, camping, fishing, similar)

A club focused purely on facilitating members' own recreational activity -- without organized tournaments/competitions (athletic) or a material purpose of hosting periodic social functions (social) -- generally isn't a taxable "social or athletic club," even if it charges substantial dues and an initiation fee and holds occasional member-only gatherings like barbecues.

Marina, boat club, and similar membership organizations structuring their activities

Occasional member-only social events (like a couple of summer barbecues) don't automatically make a club "social" for tax purposes if they aren't a material, recurring purpose of the organization -- but adding a bar, restaurant, formal entertainment committee, or dining privileges could change that analysis, as illustrated by the companion TSB-A-97(81)S ruling on a different yacht club that WAS found taxable.

Accountants and tax professionals

This ruling and its same-day companion, TSB-A-97(81)S, together sketch both sides of the 20 NYCRR § 527.11(b)(6)-(7) social/athletic-club line: no dining/entertainment infrastructure and no tournaments here means no tax, while a clubhouse restaurant/bar and a dedicated Entertainment Committee in the companion ruling tips the balance toward taxable social-club status.

Common questions

Q: Are all boating or recreational club dues exempt from New York sales tax?
A: No -- it depends on whether the club's material purpose involves organized social functions or athletic competition. This particular club escaped tax because it had neither; a similarly structured club with more social infrastructure could be taxed.

Q: Does hosting a couple of member-only barbecues each year make a club "social" for tax purposes?
A: Not by itself, if those events aren't a material, ongoing purpose of the organization and the club has no broader social-function infrastructure (like a bar, restaurant, or dedicated entertainment committee).

Q: Does not sponsoring tournaments matter for the "athletic club" test?
A: Yes -- the athletic-club test looks for the practice, participation in, or promotion of sports or athletics; a club whose boating and fishing activities are purely recreational with no organized competition doesn't meet that test.

Q: Does this ruling apply to my recreational club's dues structure?
A: Not automatically. An Advisory Opinion binds the Department only for the taxpayer and facts it was issued to, and it can't be relied on by anyone else. Whether your club's material purpose is social or athletic depends on your own facts.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1997.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a97_80s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-97(80)S
Sales Tax

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S970613A

On June 13, 1997, the Department of Taxation and Finance received a
Petition for Advisory Opinion from Binghamton Boating Club, Inc., c/o James W.
Jephson, 1300 Seymour Road, Vestal, NY 13850.
The issue raised by Petitioner, Binghamton Boating Club, Inc., is whether
the membership dues and initiation fees paid by members for membership in
Petitioner are subject to State and local sales taxes.
Petitioner submits the following facts as the basis for this Advisory
Opinion.
Petitioner currently consists of fifty-five member families which share a
common interest in promoting safe and recreational boating activities. Fishing
is one of the primary recreational boating activities which is enjoyed by nearly
all the member families in Petitioner. Members' boats range from 14' aluminum
boats to 21' runabout pleasure boats.
Petitioner is run by a Board of Directors which meets at least eight times
a year. Petitioner has an annual meeting for the purpose of electing officers
and directors. In addition, Petitioner typically holds general meetings for all
of its members on a bi-monthly basis.
Petitioner owns property on the west shore of Seneca Lake near Dresden, New
York where nearly all of its boating activities are held. This property contains
campsites, a boat launch and docking facilities. There is also a clubhouse on
the property which serves as a meeting room and, in the winter, a boat storage
facility. The clubhouse contains restrooms, but no restaurant or bar. All of
the boating and fishing activities are recreational only. Petitioner does not
sponsor any fishing or boating tournaments or any other type of contests.
Petitioner typically holds two barbecues over the summer months which are
intended for members and their guests only. They are not intended to be fund
raisers and are not open to the general public.
Petitioner's corporate purposes are set forth in its Certificate of
Incorporation as follows:
2(A). The purpose of this organization is to conduct, operate and
maintain an organization exclusively for pleasure, recreational and
other non-profitable purposes within the intent and meaning of
Section 501(c)(7) of the Internal Revenue Code of 1954 (or the
corresponding provision of any future United States Internal Revenue
Law), and in furtherance of such purposes:
(a)
To enjoy the fellowship and personal contact among persons
interested in family boating and camping activities.
(b)

To encourage and promote safe boating.

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TSB-A-97(80)S
Sales Tax

(c) To arrange for, promote and sponsor meetings and gatherings of
persons interested in boating and recreational equipment and
facilities.
(d) To provide and improve camping and boating facilities for the
members of the organization.
(e) To collect and distribute information and data in reference to
boating.
Petitioner charges its members an initiation fee of $350.00, and annual
dues of $300.00.
Applicable Law and Regulations
Section 1105(f)(2) 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, except that the tax shall not apply to a
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(b) of the Sales and Use Tax Regulations provides, in part:
(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.
*

*

*

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TSB-A-97(80)S
Sales Tax

(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. (emphasis
added)
Opinion
Petitioner currently consists of fifty-five member families which share a
common interest in promoting safe and recreational boating activities. Fishing
is one of the primary recreational boating activities which is enjoyed by nearly
all of Petitioner's member families. All of the boating and fishing activities
are recreational only.
Petitioner does not sponsor any fishing or boating
tournaments nor any other type of contests.
Petitioner typically holds two
barbecues over the summer months which are intended for members and their guests
only.
A material purpose or activity of Petitioner is not the arranging of
periodic dances, dinners, meetings or other functions to afford its members an
opportunity of congregating for social interrelationship, nor is it the practice,
participation in or promotion of any sports or athletics.
Accordingly,
Petitioner is not a social or athletic club, and its dues and initiation fees,
therefore, are not subject to sales tax.

DATED: December 18, 1997

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

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