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Ezel / Tax Rulings / TX
TX 8409L0591B05 Sales and/or Use Tax (State,Local,MTA) 1984-09-11

When did Texas begin taxing initiation fees and monthly dues charged by privately owned racquetball clubs, and how were earlier contracts treated?

Short answer: The letter says initiation fees and monthly dues for privately owned racquetball clubs became taxable amusement-service receipts on October 2, 1984, subject to 4.125% state tax plus applicable city and Metropolitan Transit Authority taxes. Contracts entered before that date stayed untaxed for their full term, and payments made before that date for later-starting contracts were not taxed; later payments under those contracts were taxable.

Apply this to your situation

This page answers the general question as of 1984. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1984
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

Texas treated membership initiation fees and monthly dues charged by privately owned racquetball clubs as taxable amusement-service receipts beginning October 2, 1984.

The letter states a 4.125% state sales-tax rate, plus applicable city and Metropolitan Transit Authority taxes.

It also gives two transition rules:

  • A membership contract entered into before October 2, 1984 was not subject to state sales tax for the contract's full term.
  • A payment made before October 2 for a contract beginning on or after that date was not taxed, but payments made on or after October 2 under the same contract were taxable.

Source-text caution: The first operative-date sentence prints the year as "198%". Later sentences in the same letter repeatedly print October 2, 1984; this page preserves the source error rather than silently changing it.

What this means for you

Privately owned racquetball clubs

The historical tax applied to initiation fees and monthly dues as amusement-service charges.

Holders of 1984 membership contracts

The contract date and payment date controlled the transition treatment described in the letter.

Common questions

Q: What charges did the letter tax?
A: Membership initiation fees and monthly dues charged by privately owned racquetball clubs.

Q: What state rate did the letter state?
A: 4.125%, plus applicable city and Metropolitan Transit Authority taxes.

Q: Were contracts signed before October 2, 1984 taxed?
A: No. The letter says they remained untaxed for the full contract term.

Citations and references

The letter does not cite a statute or administrative rule.

Source

Original ruling text

September 11, 1984

Dear **:

Thank you for your letter of September 4, 1984, regarding the taxation
of membership initiation fees and monthly dues to your racquetball club.

As of October 2, 198% membership fees and monthly dues to privately owned
racquetball clubs are subject to state sales tax (4.125%) as well as
applicable city and Metropolitan Transit Authority taxes, as a taxable
amusement service.

I would mention that membership contracts (and concomitant initiation fee
and monthly dues) entered into prior to October 2, 1984, will not be
subject to state sales tax for the entire term of the contract. Also,
payments made prior to October 2, 1984, on membership contracts that
begin on or after October 2, are also not subject to sales tax, however,
payments made on or after October 2 in relation to the some contract
will be subject to sales tax.

This opinion is based upon the facts you presented. If there are
additional or different facts, this opinion may change.

Please feel free to contact me if you have additional questions. You may
write me, call toll free 1-800-252-5555 from anywhere in Texas or phone
512/475-1931.

Sincerely,

Miss Jeannon Kralj
Tax Policy Section
Tax Administration Division

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