Section 1105(f)(2)(i) of the Tax Law imposes sales tax on the dues paid to any social or athletic club in this State if the dues of an active annual member, exclusive of the initiation fee, are in excess of ten dollars per year. Tax Law section 1101(d)(6) defines “dues” as any dues or membership fee including any assessment, irrespective of the purpose for which made. Tax Law section 1101(d)(13) defines “social or athletic club” as any club or organization of which a material purpose or activity is social or athletic. Sales tax regulation section 527.11(b)(5)(i) defines “club or organization” as follows:
The phrase club or organization means any entity which is composed of persons associated for a common objective or common activities. Whether the organization is a membership corporation or association or business corporation or other legal type of organization is not relevant. Significant factors, any one of which may indicate that an entity is a club or organization, are: an organizational structure under which the membership controls social or athletic activities, tournaments, dances, elections, committees, participation in the selection of members and management of the club or organization, or possession by the members of a proprietary interest in the organization.
The organizational structure may be formal or informal.
Regulation section 527.11(b)(6) defines “social club” as any club or organization which has a material purpose or activity of maintaining quarters for arranging periodic dances, dinners, meetings, or other functions affording its members an opportunity of congregating for social interrelation.
The test of taxability is not whether a club has any social features at all, but whether or not such activities, viewed in the light of all the circumstances of its existence, including the declared purpose of the organization as shown by its constitution and by-laws (if their provisions are enforced), provide the real reason for its existence and enable it to secure members and retain them. Another way to put the issue is whether the social features of the club involved are merely incidental or, on the other hand, are a material purpose of the organization. Union League Club of Chicago v. United States, supra. [Ct. Cl., 4 F. Supp. 929 [1933 CCH ¶9576].
Members are required to attend a minimum number of meetings. When they attend meetings, members are required to describe their business and business leads/introductions they are seeking. In addition, members must provide business leads to other members. In sum, businesses pay Petitioner to become members in its organization solely in order avail themselves of the business promotional opportunities that Petitioner provides.
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