Request

April 21, 1994

XXXXX

Utah State Tax Commission

Heber M. Wells Bldg.

160 East Third South

Salt Lake City, Utah 84134

RE: Taxability of Memberships

Request for Advisory Opinion

Dear XXXXX:

As Director of Taxes, I hereby request a written opinion on behalf of XXXXX. Below is the question and a statement of the facts.

Question: Would a membership fee subject to Utah sales tax based on the following facts?

Facts: The business operates on a membership basis only. Membership will not be opened to the general public, but will be limited to certain individuals based on established criterion. The basic membership cost is $$$$$. Two types of membership will be available XXXXX Membership and XXXXX Membership. The XXXXX Membership is for qualifying individuals and are required to pay applicable Sales Tax on all merchandise. The XXXXX Membership is for business's and organizations. XXXXX Members may purchase items tax exempt.

The membership fee does not entitle the member to anything other than the privilege of purchasing at the stated price, a copy of a monthly newsletter, and a ID badge which is used to gain entrance to the store. The membership fee is not credited to the customer's account or applied in any way toward the purchase price of tangible personal property. The membership fee is the same if the customer does not purchase any merchandise, or if the customer purchases $1,000,000 worth of merchandise. The membership fee is a fixed amount for a one-year period, renewable each year for the same fixed amount.

There are occasions in our business where we will offer a 30 day free pass to non-members. The 30 day free passes are usually given during the Grand Opening of a facility. These non-members will pay the listed shelf price plus a 5% up charge.

Thank you for your time. Should you need additional information, please contact me.

Sincerely,

XXXXX

April 21,1994

XXXXX

Utah State Tax Commission

Heber M. Wells Bldg.

160 East Third South

Salt Lake City, Utah 84134

RE: Taxability of Memberships

Request for Advisory Opinion

Dear XXXXX:

Earlier this year XXXXX. acquired the XXXXX units in State of Utah. Prior to purchase we contacted XXXXX concerning the taxability of memberships. XXXXX verbally informed us that memberships were taxable based on statute R865-7-62S. We have been charging tax on memberships. The opportunity arises from our members complaining to us that memberships are not taxable. Several members have told us that they have called the State of Utah and were told memberships were not taxable. Our competition XXXXX is not charging tax on memberships. Our members are continually questioning why is XXXXX charging tax when XXXXX isn't.

Attached is a formal request for a Advisory Opinion concerning the taxability of memberships. If you would please respond promptly by both fax and mailing of the hard copy we would post your response in our clubs. Your response would document to our members that we are complying with State law.

Thank you for your cooperation and courtesy in this matter. Should you need additional information, please contact me.

Sincerely,

XXXXX

August 23, 1994

Re: Advisory Opinion - Sales Tax Application to “Membership Fees” Charged by XXXXX.

Dear XXXXX:

Your request (copy attached) for an advisory opinion as to sales taxability of membership fees charged by XXXXX was referred to the Auditing Division for their analysis.

The division's staff recommendations are as follows:

Charges for nonequity membership fees which entitle the purchaser to discounted or free merchandise or services of a type subject to the sales tax are considered taxable as part of the sales price of merchandise or service provided.

Both fees for the XXXXX and fees for the XXXXX are considered taxable since customers in both classes may be making taxable purchases.

The “5% up charge” associated with the 30-day free passes is, of course, subject to the sales tax at time of sale if the sale is taxable.

Based upon the facts presented in your letter, we are in agreement with the Auditing Division's recommendations. Obviously, if there are deviations from these facts, this opinion may be negated.

If you do not agree with this determination, you may appeal to the Tax Commission for a formal hearing. The results of that hearing would constitute a declaratory judgment and be appealable to the Utah State Supreme Court. A Notice of Appeal Rights and a copy of the Utah Taxpayer Bill of Rights are attached.

For the Commission,

Alice Shearer