87-0212 - Sales





Petitioner, :





: Serial No. XXXXX

Respondent. :


This matter came before the Utah State Tax Commission for a formal hearing XXXXX. James E. Harward, Hearing Officer, heard the matter for and in behalf of the Tax Commission. XXXXX appeared representing the Petitioner. XXXXX appeared representing the Respondent. The Tax Commission after reviewing the evidence and arguments presented at the hearing makes its


1. The tax in question is sales tax.

2. The period in question is XXXXX.

3. The Petitioners are a private club.

4. The private club consists of two classes of membership. Class A members are classified as "pay as you go." Class B members pay an annual fee up front.

5. Club dues are used for the support, salaries, and personnel expenses of running the club. In addition, clubs dues are used to hire entertainment.

6. Class A membership upon a payment of a $$$$$ fee entitles you to enter the club and pay a pro rata portion of any entertainment. The Class B membership for a payment of $$$$$ allows you access to the club at any time and for any event.

7. Special assessments are made for any given entertainment event. Special assessments are calculated by taking 2/3 of a full house and dividing that into the cost of entertainment to come up with the assessment which is charged any member who wishes to attend the entertainment.


1. Utah Code Ann. 59-12-1031(F) requires the imposition of a tax on "admission to anyplace of amusement, entertainment, or recreation, including seats and tables reserved or otherwise, and other similar accommodations."

2. Rule R865-33S Defines admission as "the right or privilege to enter into a place."

3. "Dues paid to a club or other organization are sums paid toward the support of the society and to retain membership therein. They are the obligation into which members enter to pay a sum to be fixed, usually by bylaws, at recurring intervals, for the maintenance of the organization." Northland Country Club v. Com'r of Taxation 241 N.W. 2nd 806, 808.

4. If operating expenses of a club are shared by its members without insistence upon equivalence between a proportion of an individuals contribution and a proportion of benefits he receives, the payments which a member makes are dues. XXXXX Pool Corp. v. Comptroller of Treasury, 333 Atlantic 2nd 49, 53.

5. If a membership charge is proportionate to admission to particular events, part of the charge for admission may be taxed. It is up to the fact finder to decide whether admission to the club is reasonably related or functionally subordinate to the price of admission. Washington National Arena Ltd. Partnership v. Comptroller of Treasury. 519 Atlantic 2nd 1277, 1281.


Petitioner has two classes of members. Class A pays a $$$$$ membership fee. Each time he wishes to enter the club he pays an additional assessment which is attributable to the cost of the entertainment which he or she will view. The Class B membership pays a $$$$$ annual fee. This membership fee allows the member to participate in any and all entertainment activities without paying an additional assessment.

The Tax Commission finds the reasoning of the Maryland Supreme Court in Twinbrook Swimming Pool Corp. v. Controller Treasury and Washington Nat. Arena v. Comptroller persuasive in the facts before it. In Twinbrook, the Court concluded that the dues are not taxable. The Court stated "it is this very fact, which distinguishes annual dues from guest charges, green fees, or tennis fees, where payment is fixed by each occasion of actual use. . . . Dues paying members are entitled to use it as often as they wish, the dues paid by members are no more subject to admissions tax than dues paid to club with single recreational facility. . . of course, the guest charges remain subject to tax. . . . " Twinbrook supra pg. 54. In discussing the distinction between dues and other charges which are taxable, the court in Washington National Arena stated "in XXXXX we held the clubs dues that are not proportionate to admission to the club i.e. charged whether or not the member ever uses the club are not taxable. . . . but if the membership charges proportionate to admission to particular events, Twinbrook does not prohibit taxing membership as part of the charge for admission. Once again it for the fact finder to decide whether admission in a club is reasonably related or functionally subordinate to price of admission."

In reviewing the facts, The Tax Commission, finds that the assessment made to the Class A membership is proportionate to admission to particular events. It was clearly conceded by all parties that the cost of the entertainment was divided by the expected attendance and that amount was then charged each Class A club member who wished to attend that entertainment event. The Commission finds that this is a charge proportionate to admission to a particular event and, therefore, is distinguishable from dues, which are required whether or not a member uses the club. Thus, the class B $$$$$ membership dues are nontaxable, and the $$$$$ class A dues are nontaxable. However, the special assessment made to Class A members who attend entertainment events is taxable as an admission to a place of entertainment.

The Tax Commission in reviewing these facts, finds that there is sufficient cause to make the imposition of this determination prospective, rather than retrospective. Therefore the Petitioners request is denied in part and granted in part in that the special assessment is taxable, yet it will only be prospectively applied from the date of this decision. It is so ordered.

DATED this , 22 day March, 1989.


R. H. Hansen Roger O. Tew

Chairman Commissioner

Joe B. Pacheco G. Blaine Davis

Commissioner Commissioner