98-017
Response February 21, 1998
February
2, 1998
Dear
NAME:
Please issue a written advisory
opinion regarding the taxability of private club membership dues based upon the
following information.
-COMPANY A associates have recently incorporated a Utah
non-profit corporation to operate a restaurant as a private club.
-At least one member of a dining party must be a club
member to gain access.
-Club members must pay an annual due which allows access
to the facility for one year.
-There are no cover charges or other admissions fees
charged.
-Club members vote to determine the Board of Trustees
who, in turn, set the annual club
membership dues.
Utah statute 59-12-102 states that
"admission or user fees does not include annual membership dues to private
organizations." Annual membership dues are therefore, not taxable as they
are not considered admission or users fees.
Additionally, Utah State Tax
Commission Rule R865-195-33 states
"annual membership dues paid to a private organization includes only
those dues paid by the members who, directly or indirectly, establish the level
of the dues." Therefore, we feel that the membership dues charged for
access to the restaurant are not taxable. We feel that the membership fee is an
annual
membership due paid to a private organization where the members indirectly
establish the level of the dues through the voting rights that they have been
granted.
Please provide us with a written
opinion regarding the taxability of the club membership dues. Feel free to contact me at ##### if you have
any questions or concerns.
Respectfully,
NAME
February
21, 1998
NAME
ADDRESS
CITY
STATE ZIP
RE:
Advisory opinion - membership dues for private club
Dear
NAME,
We received your request regarding
whether annual membership dues charged by a recently incorporated private club
are subject to sales tax. Utah Code
Ann. §59-12-103(f) imposes sales tax on admission or user fees. Admission or user fees, as defined by Utah
Code Ann. §59-12-102(1)(b), do not include annual membership dues paid to
private organizations. Annual
membership dues paid to a private organization, as further defined in Utah
Administrative Code R865-19S-33(B), include only those dues paid by members
who, directly or indirectly, establish the level of the dues.
From these sources, the Tax
Commission has established that nontaxable memberships may be evidenced by
either of the following:
1. The club has an organizational
structure under which the membership shares internal operational control of the
club, as demonstrated by membership participation in operational decisions,
such as selecting officers and committees, setting club dues, or controlling
other club activities; or
2. Members own a proprietary interest (equity)
in the club or its facilities or other assets.
From the facts you provided, we
assume that the bylaws of your private club allow all club members who pay the
annual membership fee to determine the Board of Directors by vote. This board then sets the annual membership
dues. Given these facts, it would
appear that the club has an organizational structure that allows its members
who pay an annual membership fee to select officers (the board) and, thus, indirectly
set club dues. As these conditions
satisfy the first factor listed above, the Tax Commission would consider the
private club’s annual membership fees nontaxable.
Please contact us if you have any
other questions.
For
the Commission,
Joe
B. Pacheco,
Commissioner
^^