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Sales and Use Tax – TAA 14A-028 - Admissions

QUESTION: ARE DUES CHARGED BY CLUB SUBJECT TO TAX AS ADMISSIONS?


ANSWER: YES. THE CLUB HOUSE USED BY CLUB IS A RECREATIONAL FACILITY. AS SUCH, INITIATION FEES AND DUES PAID TO CLUB ARE SUBJECT TO TAX AS ADMISSIONS.

October 30, 2014

Re: Technical Assistance Advisement – TAA 14A-028 Sales and Use Tax – Admissions
Sections: 212.02, 212.04, Florida Statutes (F.S.)
Rule: 12A-1.005, Florida Administrative Code (F.A.C.) Petitioner: XXXX [hereinafter “Club”]

FEI: XXXX Dear XXXX:

This letter is a response to your petition dated XXXX, for the Department's issuance of a Technical Assistance Advisement ("TAA") concerning the above referenced party and matter. It follows Letter of Technical Advice 13A-1138, dated October 9, 2013, which was issued in response to your previous correspondence dated August 19, 2013. Your petition has been carefully examined and the Department finds it to be in compliance with the requisite criteria set forth in Chapter 12-11, Florida Administrative Code. This response to your request constitutes a TAA and is issued to you under the authority of Section 213.22, F.S.

Issue

Whether dues charged by Club are subject to tax as admissions.

Facts

Your petition sets forth the following information:

  • [Club] is organized as a not-for-profit corporation with the Florida Division of Corporations, and [it] has applied with the IRS [] for tax-exemption as a [501(c)(7)] organization. . . .
  • As defined in Sections 4 and 6 of the [] By-Laws, membership in the club is limited to persons over 18 years of age. New members must be sponsored by an existing member and approved by a majority of the club board. Members are required to pay an [] initiation fee ($200) then an annual membership fee ($55 individual, $75 family) to participate in club functions and events. Membership does not include any equitable ownership in the organization, and [it] is not transferable to another person. Participation in club functions and events is limited to club members, their guests, and potential new members.
  • The club provides no boats or other recreational or physical fitness facilities to its members as part of their membership. All members are provided a key for access to the clubhouse for members and their guests as noted in Section 5 of the [] By-Laws. The clubhouse is owned by the City [] and provides the club members access to the facility through a Use Agreement. The club is responsible for minor maintenance, upkeep, supplies, and utilities for the building. Membership dues and initiation fees are used, in part, to support these operational costs. The city is responsible for large capital expenditures such as roofing, etc. The building has no air conditioning or heat. Facilities include restrooms, storage, tables & chairs, refrigerator, microwave, and a TV used to view educational and informational videos. There is also a bar-b-que grill on the city property adjacent to the building available for use by those organizations authorized by the city to use the club house facility (including [Club] members) and a second grill located in the nearby public park.
  • All facilities at the ‘clubhouse’ are available for other authorized organizations operating for the good of the community. Presently 6 different organizations which are [] tax-exempt organizations under [either 501(c)(3) or 501(c)(7)], as well as being used by the City [] for city operated programs.

You cite a Technical Assistance Advisement (TAA 98A-0032), wherein the Department found that certain dues were not paid for the right to use recreational facilities.1

In addition to the presented facts, a review of the public federal form 990-EZ, Return of Organization Exempt From Income Tax (2007), for Club, indicates the organization’s primary exempt purpose as, “provides social and boating activities.”

Further, the web site for Club indicates, in its 2014 calendar, a super bowl party, spaghetti dinner, movies and pizza, and FuFu party, as included in its scheduled events. Further, the web site indicates Club members are entitled to utilize facilities of “over 700 yacht clubs across America.”

Determination

Section 212.02(1), F.S., defines the term “admissions” as follows:

The term “admissions” means and includes the net sum of money after deduction of any federal taxes for admitting a person or vehicle or persons to any place of amusement, sport, or recreation or for the privilege of entering or staying in any place of amusement, sport, or recreation, including, but not limited to, theaters, outdoor theaters, shows, exhibitions, games, races, or any place where charge is made by way of sale of tickets, gate charges, seat charges, box charges, season pass charges, cover charges, greens fees, participation fees, entrance fees, or other fees or receipts of anything of value measured on an admission or entrance or length of stay or seat box accommodations in any place where there is any exhibition, amusement, sport, or recreation, and all dues and fees paid to private clubs and membership clubs providing recreational or physical fitness facilities, including, but not limited to, golf, tennis, swimming, yachting, boating, athletic, exercise, and fitness facilities, except physical fitness facilities owned or operated by any hospital licensed under chapter 395. (Emphasis Supplied)

Section 212.04, F.S., generally imposes tax on the sale of admissions. Section 212.04(2)(a)2.a., Florida Statutes, provides a specific exemption on admission charges made by section 501(c)(3), I.R.C., sponsoring organizations.

Rule 12A-1.005(4), Florida Administrative Code, states in pertinent part as follows:

DUES AND INITIATION FEES, EQUITY AND NONEQUITY MEMBERSHIPS, CAPITAL CONTRIBUTIONS AND ASSESSMENTS, REFUNDABLE DEPOSITS, AND USER FEES.

(a)1. Dues and user fees paid to any organization, including athletic clubs, health spas, civic, fraternal, and religious clubs, and organizations that provide physical fitness facilities or recreational facilities, such as golf courses, tennis courts, swimming pools, yachting, boating, athletic, exercise, and fitness facilities, are subject to tax. . . . (Emphasis Supplied)

Because no definition of "recreational facility" is provided by statute, it is necessary to look to principles of statutory construction. Words of common usage, when used in a statute, should be construed in their plain and ordinary sense. Pederson v. Green, 105 So.2d 1 (Fla. 1958).

The word "recreation" is defined in Merriam-Webster’s Collegiate Dictionary (Tenth Edition, 1999) as meaning:

... refreshment of strength and spirits after work; also: a means of refreshment or diversion: HOBBY – recreational ... adj

Merriam-Webster’s defines the word “facility” as meaning:
... something (as a hospital) that is built, installed, or established to serve a particular purpose. Id.

The club house does represent a facility and dues permit Club members to participate in recreational activities. The facility is recreational, since it contains televisions and facilitates recreational activities. Further, activities relating to boating are described as its primary exempt purpose on Club’s federal return. Further, the web site suggests access to recreational facilities all over the United States.

As such, initiation fees and dues paid to Club are subject to tax as admissions.

As to your contention regarding TAA 98A-032, it is important to note that a Technical Assistance Advisement has no precedential value except to the taxpayer who requests the advisement. Moreover, such an advisement is not an order or rule or policy of general applicability. See Section 213.22(1), F.S. Notwithstanding the cited TAA’s lack of precedential value, it is not on point with the facts in this case.

In that instance, the dues did not provide access to a recreational facility. Rather, the payments for the usage of the subject facility were included in the tenant’s rent (as opposed to dues). Here, the admittance to Club’s Clubhouse is only permitted through Club dues.

Please note, if Club charges admissions or other fees to participate in any activities, such as cruises or races, these admission fees are also subject to sales tax. The Club is required to collect and remit tax on such admissions.

Conclusion

This response constitutes a Technical Assistance Advisement under Section 213.22, F.S., which is binding on the Department only under the facts and circumstances described in the request for this advice, as specified in Section 213.22, F.S. Our response is predicated upon those facts and the specific situation summarized above. You are advised that subsequent statutory or administrative rule changes or judicial interpretations of the statutes or rules upon which this advice is based may subject similar future transactions to a different treatment from that which is expressed in this response.

You are further advised that this response, your request, and related backup documents are public records under Chapter 119, F.S., and are subject to disclosure to the public under the conditions of Section 213.22, F.S. Confidential information must be deleted before public disclosure. In an effort to protect confidentiality, we request you provide the undersigned with an edited copy of your request for Technical Assistance Advisement, the backup material and this response, deleting names, addresses, and any other details which might lead to identification of the taxpayer. Your response should be received by the Department within 10 days of the date of this letter.

Sincerely,

R. Clay Brower
Revenue Program Administrator
Technical Assistance and Dispute Resolution

Control # 158440

End Notes:

1 The cited Technical Assistance Advisement determined the subject dues did not provide a right to use recreational facility.

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