A country club imposes a one-time mandatory assessment on its members to pay for a special county road assessment, and passes the money on to the county for use on previously dedicated and accepted roads. Is that mandatory assessment subject to Texas sales tax?

Plain-English summary

A country club asked the Comptroller about the taxability of a one-time mandatory assessment charged to its members to cover a special county road assessment. The money collected from members would be passed on to the county for use on previously dedicated and accepted roads.

The Comptroller ruled the assessment is taxable. Under 34 Tex. Admin. Code Rule 3.298(b), "other assessments and fees charged for a special privilege, status, or membership classification in a private club or organization" are subject to sales tax. The Comptroller compared this charge to property taxes assessed against a club that get indirectly passed on to members as fees or dues — even though the club itself is just passing the money through to the county, the mandatory charge to members is still a taxable club assessment.

What this means for you

Country clubs and private clubs

If your club passes along a mandatory, one-time cost (such as a special assessment from a local government) to members as an assessment or fee, that charge is likely taxable as a membership-related fee under Rule 3.298(b) — even if the club is merely a pass-through and the underlying money is ultimately paid to a government entity like a county.

Club members and club administrators

Don't assume that a charge is untaxed just because it is a one-time, mandatory pass-through of a government assessment rather than a regular recurring due. The Comptroller treated this one-time mandatory assessment the same as ordinary dues/fees for purposes of the private-club assessment rule.

Accountants and tax professionals

This letter is a useful example of how broadly the Comptroller reads "other assessments and fees charged for a special privilege, status, or membership classification" under Rule 3.298(b) — it extends to one-time, mandatory, pass-through charges, not just regular periodic dues.

Common questions

Q: Is a one-time mandatory assessment charged to country club members taxable in Texas?
A: Yes, according to this letter — it is taxable under Rule 3.298(b) as an assessment or fee charged for a special privilege, status, or membership classification in a private club.

Q: Does it matter that the club is just passing the money on to the county rather than keeping it?
A: No. The letter treats the assessment as taxable even though the funds collected from members are passed on to the county for use on previously dedicated and accepted roads.

Q: Is this similar to how club dues are taxed?
A: Yes — the Comptroller compared the assessment to property taxes assessed against a club that are indirectly passed on to members as fees or dues, which are also taxable.

Q: What rule did the Comptroller rely on?
A: 34 Tex. Admin. Code Rule 3.298(b), covering assessments and fees for a special privilege, status, or membership classification in a private club or organization.

Q: Can another country club rely on this letter for its own similar assessment?
A: No. This opinion is based on the facts presented, and other facts, though similar, may produce a different result. Only the taxpayer who received this letter can rely on it.

Citations and references

• 34 Tex. Admin. Code Rule 3.298(b) — assessments and fees charged for a special privilege, status, or membership classification in a private club or organization.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9207L1185D10

Original ruling text

July 14, 1992

Dear **:

Thank you for your recent letter regarding the taxability of a one time
mandatory assessment on members of a country club to pay for a special county
road assessment. The money will be passed on to the county for use on
previously dedicated and accepted roads.

The one time mandatory assessment is taxable as ". . . other assessments and
fees charged for a special privilege, status, or membership classification in a
private club or organization . . ." [Rule 3.298 (b)]. This charge is similar to
property taxes assessed against a club that are indirectly passed on to members
as fees or dues.

This opinion is based on the facts presented. Other facts though similar may
provide a different result.

If you have other questions or need more information, you may call me at
1-800-252-5555, extension 3-4502. The regular number is 512/463-4600. You may
also write to Tax administration Division at the above address.

Sincerely,

Gilbert Zamora
Tax Administration Division