Are membership dues at a member-governed golf and tennis country club subject to New York sales tax, even though it's a not-for-profit corporation?

Plain-English summary

Skaneateles Country Club is a not-for-profit corporation set up to run a golf course, tennis grounds, and other recreational amenities, and it's exempt from federal income tax as a social club under IRC § 501(c)(7). It asked whether its membership dues are subject to New York's separate sales tax on dues paid to a "social or athletic club."

The Department's test for that tax doesn't care whether an organization is for-profit or not-for-profit, or how it's legally structured -- it looks at whether the membership actually governs the entity. Significant factors include: do members elect the board or officers, control social or athletic activities and tournaments, participate in selecting new members, sit on committees, or hold a proprietary (ownership-like) interest in the organization? Skaneateles checked every one of those boxes: its members elect an eight-person board (plus one seat from a special membership category), Full and Associate Members serve on committees (membership, food and beverage, entertainment), new members need current-member recommendations, and if the club ever dissolved, all members in good standing would share in the distributed net assets. The Department's own regulations even give an on-point example: a club organized as a Type A not-for-profit corporation (the category covering social, athletic, and similar purposes) is exactly the kind of entity the regulations already recognize as a taxable "club or organization." So Skaneateles's dues are taxable, full stop -- its not-for-profit status and federal tax exemption don't matter to this particular state sales tax question.

What this means for you

Country clubs and other member-governed recreational organizations

Don't assume not-for-profit or federal tax-exempt status shields your dues from New York sales tax -- it doesn't. The controlling question is whether your members actually run the place: electing the board, sitting on committees, approving new members, or holding a stake in the assets on dissolution. If yes, dues (above the statutory $10 thresholds) are taxable.

Boards and club administrators drafting bylaws

The governance features that make membership meaningful to your members (voting rights, committee seats, a say in admissions, a share of assets on winding up) are the same features that trigger this tax. There's no way to have genuine member governance and also escape this tax by restructuring paperwork alone.

Accountants and tax professionals

This ruling is the direct mirror-image of the same-day Health and Racquet Club opinion (TSB-A-99(26)S): there, the absence of member governance, ownership, or a role in selecting members kept dues out of this same tax; here, the presence of all those factors pulls dues in. Read the two together as a clean before/after illustration of the governance test in 20 NYCRR § 527.11(b)(5).

Common questions

Q: Does a club's not-for-profit or federal § 501(c)(7) tax-exempt status exempt its dues from New York sales tax?
A: No -- this tax turns on the club's governance structure (member control, committee participation, selection of new members, proprietary interest), not its corporate form or federal tax status.

Q: What specific facts made Skaneateles's dues taxable?
A: Members elect the board, serve on committees, participate in admitting new members, and share in the club's net assets upon dissolution -- all recognized governance/ownership factors under the regulations.

Q: Would a club with no elected board and no member say in new admissions reach a different result?
A: Likely yes -- see the same-day companion ruling on New York Health and Racquet Club (TSB-A-99(26)S), where the absence of those governance features kept dues out of this tax entirely.

Citations and references

Statutes and regulations:

• Tax Law § 1101(d)(13) (definition of social or athletic club)
• Tax Law § 1105(f)(2)(i) (tax on social/athletic club dues and initiation fees)
• 20 NYCRR § 527.11(b)(5) (definition of club or organization, Examples 16 and 17)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1999.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a99_27s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-99(27)S
Sales Tax
May 19, 1999

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S990222A

On February 22, 1999, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Skaneateles Country Club, Inc., West Lake Road, Skaneateles, New York
13152. Petitioner, Skaneateles Country Club, Inc., furnished additional information with respect to
the Petition on March 10, 1999.
The issue raised by Petitioner is whether dues paid by its members are subject to sales tax
under Section 1105(f)(2) of the Tax Law.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner is a not-for-profit corporation created under the former Membership Corporations
Law for the purpose of establishing and maintaining a golf links, tennis grounds and other lawful
amusements. Petitioner is exempt from Federal income tax under Section 501(c)(7) of the Internal
Revenue Code. Petitioner operates pursuant to a constitution and by-laws duly adopted by Petitioner
and its members. Petitioner submitted a copy of its constitution and by-laws, which are the source of
the information below.
Petitioner has Full Memberships and Associate Memberships. Full Memberships are limited
to 300 persons, unless changed by a majority vote of the Board of Directors. Full Members and, for
the most part, Associate Members are entitled to vote, hold office and share in the ownership of
Petitioner. A person must have written recommendations from current members in order to apply for
membership to the membership committee.
The Board of Directors of Petitioner consists of eight directors who are elected by the
membership entitled to vote at the annual meeting of the membership, as well as one director
nominated and appointed from a particular category of Associate Memberships. Full Memberships
have one vote and Associate Memberships have a one-half vote. The Board of Directors is
responsible for the care and management of the property and directs the affairs of Petitioner, and has
the power and authority to make rules and regulations, consistent with the by-laws, as may be
necessary to conduct the affairs of Petitioner. If a vacancy arises within the Board of Directors, the
Board may elect any member of Petitioner eligible to hold elective office to fill the vacancy.
The Board elects a President, Vice-President, Secretary and Treasurer. The President, subject
to a majority vote of the Board of Directors, appoints members of Petitioner to committees to assist
in the operations of Petitioner. Such committees include a membership committee, a food and
beverage committee, and an entertainment committee.

-2­
TSB-A-99(27)S
Sales Tax
May 19, 1999

Authorization for the dissolution of Petitioner may only be made by an affirmative two-thirds
vote of the membership in attendance at a special meeting called for this purpose. Upon the
dissolution of Petitioner or distribution of its assets, all persons who hold Full or Associate
Membership at the record date and who have paid the required initiation fee and all other indebtedness
to Petitioner will be entitled to a full share of the net assets to be distributed.
Applicable Law and Regulations
Section 1101(d) of the Tax Law provides, in part:
When used in this article for purposes of the tax imposed under subdivision (f)
of section eleven hundred five, the following terms shall mean:
*

*

*

(13) Social or athletic club. Any club or organization of which a material
purpose or activity is social or athletic.
Section 1105(f)(2)(i) of the Tax Law imposes sales tax on the following:
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. . .
Section 527.11(b)(5) of the Sales and Use Tax Regulations provides, in part:
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 control 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.
*

*

*

-3­
TSB-A-99(27)S
Sales Tax
May 19, 1999

Example 16: A club organized as a Type A not-for-profit corporation as
described in section 201(b) of the Not-For-Profit Corporation Law (i.e., civic,
patriotic, political, social, fraternal, athletic, agricultural, horticultural, animal
husbandry, and for a professional, commercial, industrial, trade or service association)
is a "club or organization" and its dues may be subject to sales tax.
Example 17: A club that is organized and operated exclusively for pleasure,
recreation, and other nonprofitable purposes, no part of the net earnings of which
inures to the benefit of any private shareholder and is exempt from Federal income tax
under section 501(c)(7) of the Internal Revenue Code is a "club or organization" and
its dues may be subject to sales tax.
Opinion
Petitioner is a club or organization as described under Section 527.11(b)(5) of the Sales and
Use Tax Regulations since it has an organizational structure whereby the members elect the Board of
Directors, members participate on committees, participate in the selection of members and have a
proprietary interest in the assets of Petitioner upon its dissolution. It should be noted that as a not-for­
profit corporation established under the former Membership Corporations Law, Petitioner is similar
to a Type A not-for-profit corporation under Section 201(b) of the Not-For-Profit Corporation Law
which is considered a "club or organization" in Example 16 of Section 527.11(b) of the Sales and Use
Tax Regulations. Given the recreational purposes for which Petitioner was formed, Petitioner is a
social or athletic club for purposes of Section 1105(f)(2)(i) of the Tax Law. Therefore, the dues paid
by members for membership in Petitioner are subject to sales tax under Section 1105(f)(2)(i).

DATED: May 19, 1999

NOTE:

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

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