BEFORE THE UTAH STATE TAX
COMMISSION
_____________________________________
XXXXX
Petitioner, :
v. : FINDINGS OF FACT,
: CONCLUSIONS
OF LAW
AUDITING
DIVISION OF THE : AND FINAL DECISION
STATE TAX
COMMISSION OF UTAH, ) Appeal No. 87-0212
: 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
FINDINGS OF FACT
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 $$$$$ fee entitles you to enter the club
and pay a pro rata portion of any entertainment. The Class B membership for a payment of $$$$$ allows you access
to the club at any time and for any event.
7.
Special assessments are made for any given entertainment event. Special
assessments are calculated by taking 2/3 of a full house and dividing that into
the cost of entertainment to come up with the assessment which is charged any
member who wishes to attend the entertainment.
CONCLUSIONS OF LAW
1.
Utah Code Ann. §59-12-1031(F) requires the imposition of a tax on
"admission to anyplace of amusement, entertainment, or recreation,
including seats and tables reserved or otherwise, and other similar
accommodations."
2.
Rule R865-33S Defines admission as "the right or privilege to enter into a
place."
3.
"Dues paid to a club or other organization are sums paid toward the
support of the society and to retain membership therein. They are the obligation into which members
enter to pay a sum to be fixed, usually by bylaws, at recurring intervals, for
the maintenance of the organization."
Northland Country Club v. Com'r of Taxation 241 N.W. 2nd 806, 808.
4.
If operating expenses of a club are shared by its members without insistence
upon equivalence between a proportion of an individuals contribution and a
proportion of benefits he receives, the payments which a member makes are
dues. XXXXX Pool Corp. v. Comptroller
of Treasury, 333 Atlantic 2nd 49, 53.
5.
If a membership charge is proportionate to admission to particular events, part
of the charge for admission may be taxed.
It is up to the fact finder to decide whether admission to the club is
reasonably related or functionally subordinate to the price of admission. Washington National Arena Ltd. Partnership
v. Comptroller of Treasury. 519 Atlantic 2nd 1277, 1281.
DECISION AND ORDER
Petitioner
has two classes of members. Class A
pays a $$$$$ membership fee. Each time
he wishes to enter the club he pays an additional assessment which is
attributable to the cost of the entertainment which he or she will view. The Class B membership pays a $$$$$ 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.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco G.
Blaine Davis
Commissioner Commissioner
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