Are membership dues paid to a private hunting and fishing club subject to Texas sales tax as an amusement service?

Plain-English summary

A taxpayer wrote in confused about earlier Comptroller correspondence: a May 8, 1992 letter had said that dues for a private hunting club (an IRC 501(c)(7) nonprofit with a leased hunting property in Mexico) were not taxable, but the taxpayer had separately received literature saying nonprofit private clubs must collect tax on "dues, initiation fees and other fees charged to members for special privileges and on other amusement services." The taxpayer had a second client with facilities located in Texas and had already been charging sales tax on dues and other services. This May 22, 1992 letter (which reproduces the earlier May 8 and May 13 correspondence) resolves the confusion.

The Comptroller's answer: hunting club membership dues are not taxable, because hunting itself is not an amusement service under Texas law. This is true "whether or not" the club is organized as a 501(c)(7) nonprofit -- the October 1, 1991 Tax Code change affecting 501(c)(7) organizations only reaches organizations that actually provide amusement services, and a hunting club does not. The letter draws a direct analogy to sororities and fraternities, which are also 501(c)(7) organizations but don't have to collect tax on dues because they aren't providing amusements either.

The ruling draws an important line, though: if the same club puts on a genuine amusement -- a dance, or use of an archery range, shooting range, skeet shooting, golf, tennis, or swimming facilities -- and charges separately for it, that specific charge is a taxable amusement service. So a hunting club's core membership dues are exempt, but any add-on recreational amenities it operates and charges for are not. The letter also touches on direct hunt costs (tangible personal property purchased in Texas is taxable unless exported to Mexico with proof under Rule 3.323) and confirms that indirect-cost fees charged to cover overhead are not taxable.

Finally, the letter walks through the refund mechanics: because the tax was collected from individual members, the state can only refund the business after the business has first refunded the tax to the members who paid it. Once that's done, the filer can adjust a current return, amend prior returns, or request a direct refund warrant through the Comptroller's Credits Verification Section.

What this means for you

Hunting and fishing club operators

If your club charges membership dues or annual fees and doesn't sell separately-priced amusement services, those dues are not subject to Texas sales tax -- regardless of whether the club is a 501(c)(7) nonprofit. But if the club also operates and charges for things like a shooting range, golf, tennis, or swimming, tax the amusement charges specifically; don't extend the dues exemption to those add-on services.

Business owners who may have over-collected tax

If you've been charging and remitting sales tax on hunting club dues based on general "private club" literature, this letter is a reminder that hunting-specific dues fall outside the amusement-services tax. Before you can get a refund from the state, you must first refund the erroneously collected tax to the individual members who paid it -- the state will not refund a business for tax that was actually borne by members unless those members have already been made whole.

Accountants and tax professionals

Note the layered analysis: (1) classify the underlying activity (hunting is not an amusement; archery/shooting/golf/tennis/swimming are); (2) the 501(c)(7) nonprofit designation is irrelevant on its own -- what matters is whether amusement services are actually provided; and (3) for out-of-state or out-of-country club facilities (here, a hunting property in Mexico), amusement services performed entirely outside Texas are not subject to Texas tax at all, though tangible personal property purchased in Texas is taxable unless proven exported under Rule 3.323.

Common questions

Q: Are membership dues for a hunting club subject to Texas sales tax?
A: No. Hunting is not an amusement service, so dues and annual fees to belong to a hunting club are not taxable, even if the club is an IRC 501(c)(7) nonprofit organization.

Q: Does it matter that the club is a 501(c)(7) nonprofit?
A: No by itself. The Tax Code change effective October 1, 1991 for 501(c)(7) organizations only applies to those that provide amusement services -- a hunting club doesn't, just like sororities and fraternities (also 501(c)(7) entities) don't have to collect tax on their dues.

Q: If the hunting club also has a shooting range or hosts a dance, is that taxable?
A: Yes. Charges for genuine amusement services -- an archery range, shooting range, skeet shooting, golf, tennis, swimming, or an admission fee to a dance -- are taxable amusement services, even at a club whose core membership dues are exempt.

Q: If I already collected and paid tax on dues in error, how do I get a refund?
A: You must first refund the erroneously collected tax to the individual club members who paid it. Only after that can you recover the money from the state, either by adjusting a current sales tax return, amending the returns on which the tax was originally reported, or requesting a refund warrant directly from the Comptroller's Credits Verification Section.

Citations and references

Statutes/rules:

• 34 Tex. Admin. Code § 3.323 (acceptable proof of export for tangible personal property purchased in Texas)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9205036L

Original ruling text

May 22, 1992

Dear **:

Thank you for your recent letter asking about the taxability of dues for
membership in a hunting club. The hunting club is an Internal Revenue Code
501(c)(7) organization.

Response: As I stated in my May 8th letter, membership dues for private hunting
clubs are not taxable because hunting is not an amusement service. The fact
that the hunting club is a nonprofit 501 (c)(7) organization does not change
the answer.

The change in the Tax Code regarding IRC 501 (c)(7) organizations that became
effective October 1, 1991, affected only those organizations that provide
amusement services.

Regarding the information you received, look at the discussion of sororities
and fraternities. Sororities and fraternities are also 501 (c)(7)
organizations, but sororities and fraternities do not have to collect sales tax
on their dues because the sororities and fraternities are not providing
amusements.

Like the sororities and fraternities, if the hunting club puts on a traditional
amusement, such as a dance, and charges a fee for admission, the admission fee
to the dance will be taxable.

If the hunting club charges for using an archery range, a shooting range, skeet
shooting, golf, tennis, swimming, etc. these are all taxable amusement
services. Such charges are taxable.

You asked how to apply for a refund of previously paid taxes. Sales tax
collected from members on membership dues and annual fees to be a member of the
hunting club can be refunded by the state only after the tax has been refunded
to the persons from whom it was collected. After the tax has been refunded to
the individual members, the person who reported the tax to this office may
either:

** adjust a current sales tax return for the sales tax refunds:

** amend the returns in which the refunded sales tax was reported; or

** request that a refund warrant be issued directly from the state for sales
taxes refunded to members. If you choose this method of obtaining a refund of
taxes paid in error, you may call the Credits Verification Section in our
Revenue Accounting Division for assistance. They can tell you what you need to
provide to have a refund warrant issued. The Credit Verification Section may
be reached by calling the toll-free number in the last paragraph at extension
3-4545. Their regular number is 512/463-4545.

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

If you have any questions or need more information, you may call me toll free
at 1-800-252-5555, extension 3-4633. The regular number is 512/463-4633. You
may also write to the Tax Administration Division.

Sincerely,

Wanda Hutcheson
Tax Administration Division

May 13, 1992

Ms. Wanda Hutcheson
Tax Administration Division
Controller of Public Accounts
Austin, Texas 78774

Dear Ms. Hutcheson:

Thank you for your letter of May 8, 1992. I am confused with respect to your
comment that dues are not taxable because hunting is not an amusement service.
In the literature we received from your office, it clearly states that
non-profit private clubs and other similar organizations must collect tax on
"their dues, initiation fees and other fees charged to members for special
privileges and on other amusement services". The facts I gave you in my letter
were related to a hunting club with facilities located in Mexico. I also have
another client with facilities owned and located in Texas. Based upon the
enclosed literature from your office, we have charged members sales tax on dues
and other services provided by the private non-profit hunting club.

From your letter it would appear that, because it is a private hunting club,
such dues and special services provided by the club would not be taxable. Is my
interpretation correct? If so, how do I apply for a refund of previously paid
taxes?

Yours very truly,

May 8, 1992

Dear **:

Thank you for your recent letter asking about the sales tax responsibilities of
a 501(c)(7) organization.

You stated that the organization is a hunting club with leased property in
Mexico. A Mexican citizen is the manager of the club and purchases most of the
club's supplies in Mexico, although some of the supplies are purchased in
Texas. Members of the club are charged for all of the client expenses of each
hunt as well as a fee to cover indirect costs. Finally, members, who are U.S.
Citizens, are charged annual dues. Members for the most part are Texas
residents although some are residents of other states. You questioned the
taxability of the following charges to members:

1. Direct costs incurred for a hunt by the members and member quest.

Response: All tangible personal property purchased in Texas will be subject to
Texas sales tax unless the person making the purchases can show that the items
were exported to Mexico before use. See Rule 3.323 for acceptable proof of
export.

2. Fees to cover indirect cost.

Response: Not taxable.

3. Annual dues.

Response: Private club memberships in hunting clubs, whether or not 501 (c)(7)
organizations, are not taxable because hunting is not an amusement service. In
addition, a private club membership is not subject to Texas tax when all
amusement services are performed outside Texas.

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

If you have any questions or need more information, you may call me toll free
at 1-800-252-5555, extension 3-4633. The regular number is 512/463-4633. You
may also write to the Tax Administration Division.

Sincerely,

Wanda Hutcheson
Tax Administration Division