Is the $10-a-year membership fee for a private anti-crime organization subject to Texas sales tax, and what about the tangible items it gives out?

Plain-English summary

A private anti-crime organization wrote to the Comptroller asking how sales tax applies to its $10-per-year membership dues. The organization is a private membership club (not an insurance company) that helps people who have had to, or may have to, defend their family, home, or personal property against crime. People convicted of felonies are ineligible for membership because felony convictions prohibit firearm possession, and law enforcement members are also ineligible to avoid a conflict of interest. As a private club, the organization reserves the right to refuse membership to anyone.

Membership benefits described in the letter include: $5,000 paid out if a member kills someone in accordance with Texas Penal Code 9.42 while that person is committing a crime against the member, their family, or their property (payable only after a complete police investigation confirms compliance with that statute); free firearms/safety classes taught by a certified instructor; newsletters with updates on firearms classes and membership news; and a choice of two organization stickers included with membership, with additional stickers available for $1.00 each.

The Comptroller responded that the membership dues themselves are not taxable. However, the organization must collect and remit sales tax on any tangible personal property it sells — such as the stickers — unless that sale is otherwise exempt. The letter notes this opinion is based on the facts submitted and that other, similar facts could yield different results.

What this means for you

Nonprofit and membership organizations

If you run a membership-based organization and charge annual dues, this letter indicates that Texas sales tax does not apply to the dues themselves, even where membership comes with benefits like access to classes, newsletters, or a payout under certain conditions.

Selling merchandise alongside membership

Even though dues are not taxable, this letter makes clear that any tangible personal property the organization sells — here, additional stickers beyond the two included with membership — is subject to sales tax collection and remittance unless an exemption applies. Track and tax merchandise sales separately from membership dues.

Accountants and tax professionals

This letter draws a clean line between a nontaxable membership fee and taxable sales of tangible personal property by the same organization. When advising membership-based clients, separate revenue streams (dues vs. merchandise) for sales tax purposes, since one may be taxable while the other is not.

Common questions

Q: Are the organization's $10 annual membership dues subject to Texas sales tax?
A: No. The Comptroller stated the membership dues are not taxable.

Q: Does the organization have to collect sales tax on anything?
A: Yes. Sales tax must be collected and remitted on the sale of any tangible personal property sold by the organization, such as additional stickers sold for $1.00 each, unless otherwise exempt.

Q: Does the free firearms/safety class or the $5,000 benefit affect the taxability of dues?
A: The letter does not tie the nontaxable treatment of dues to any specific benefit; it simply states the membership dues are not taxable after describing the facts, including the classes and the conditional $5,000 benefit.

Q: Can other organizations rely on this letter?
A: This opinion is based on the specific facts submitted by this taxpayer. The letter itself notes that other facts, though similar, may yield different results, and STAR letters generally can be relied on as the basis of a detrimental reliance claim only by the taxpayer to whom they were issued.

Citations and references

No specific statutes or administrative rules are cited in the text of this letter regarding the sales tax treatment; the letter references Texas Penal Code 9.42 only in describing the facts of when the $5,000 membership benefit would be paid.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9501L1333B11

Original ruling text

January 27, 1995

Dear ***:

Thank you for your letter postmarked January 21, 1995, regarding sales tax
as it applies to membership dues in a private anti-crime organization.

FACTS: **** is an anti-crime organization that offers a private
membership for $10.00 per year. Anyone convicted of a felony is ineligible
for membership (felony convictions prohibit the possession of firearms).
Any member of law enforcement is ineligible for membership (creates conflict
of interest).

The organization is designed to help anyone who has had to, or will have to
DEFEND their family, home, or personal property against any crime being
committed against them. Payment will be made after a complete police
investigation concludes that Texas Penal Code 9.42 was complied with.
** is a private membership club, not a type of insurance.
** is not responsible for any legal action that may be taken
against a person that does not follow the law. Since you are a private
membership club, you reserve the right to refuse membership to anyone.

MEMBERSHIP BENEFITS:

1. $5,000.00 in the event a member kills someone in accordance with Texas
   Penal Code 9.42 while they are in the process of committing a crime against
   you, your family, or your property.

2. Free firearms/safety classes by a certified instructor. If the member
   needs to learn how to shoot your firearms or if you just need to brush-up
   on your technique.

3. Newsletters updating members on: Firearms classes, membership news, etc.

4. Choice of 2 **** stickers. Each member will receive 2
   stickers with their membership. Additional stickers are available for
   $1.00 each.

RESPONSE: The membership dues are not taxable. Sales tax must be collected
and remitted on the sale of any tangible personal property sold by the
organization unless otherwise exempt.

This opinion is based on the facts you submitted. Other facts, though
similar, may yield different results.

You may call me toll free at 1-800-531-5441, ext. 5-0330. The direct line
is 512/475-0330. You may also write to Tax Administration, Comptroller of
Public Accounts.

Sincerely,

Bettie Peterson
Tax Administration Division

NOTE: Previous Accession Number 9501853L