The information on this page has not yet been updated to reflect
the change in the Sales Tax rate from 7% to 6.875% that took effect January 1, 2017.
Note: Updated by Bulletin S&U-11, Admission Charges.
On and after October 1, 2006, the law (P.L. 2006, c. 44) imposes sales and use tax on the charges for initiation fees, membership fees or dues for access to or use of the property or facilities of a health and fitness, athletic, sporting or shopping club or organization in New Jersey, unless the club or organization’s members are predominantly age 18 or under.
Initiation fees, membership fees and dues are charges for the right, privilege or entitlement to use the club or organization’s facilities, paid by those who have met the requirements for membership, which includes the mere payment of fees, dues, or similar charges. A membership conveys a right, privilege or entitlement which is not available to a non-member, other than as a guest. Under the statute, the fact that one of the rights or privileges is actual participation in the sporting activities does not affect the taxability of the membership.
Charges in the Nature of Initiation Fees, Membership Fees or Dues
Any fee that is required to be paid in order to gain access to or use of the property or facilities of a health and fitness, athletic, sporting or shopping club or organization in New Jersey is subject to tax as a "charge in the nature of..." Examples include, but are not limited to, joining fees, registration fees, sign-up fees, enrollment fees, etc.
A separately stated charge for a class where an instructor is present is not subject to tax (i.e., karate, jazzercise, dance class, pilates, yoga, etc.). Charges for personal instruction are not subject to tax. See N.J.S.A. 54:32B-2(e)(4)(A).
Charges Made by Governmental Agencies and Exempt Organizations
As of July 1, 2007, the law was amended (P.L. 2007,c.105) to exclude charges for initiation fees and membership fees or dues for access to property or facilities of:
- The State of New Jersey, or any of its agencies, instrumentalities, public authorities, public corporations or political subdivisions; for example, municipal and county pools, golf courses, tennis clubs and similar facilities; or
- Religious, charitable, scientific, literary or educational organizations which applied to the Division of Taxation and were granted sales tax exemption. Such organizations qualify for exemption under Internal Revenue Code Section 501(c)(3) and have been issued an Exempt Organization Certificate (ST-5); for example, YMCAs and YWCAs.
Note: The newly enacted exclusion for memberships sold by an organization described in #2 above is not based on the status of the seller as a “non-profit” organization. Rather, it is limited to organizations that are qualified under IRC Section 501(c)(3) and which have been issued an ST-5 Certificate.
For additional information concerning these exemptions and the availability of a refund of sales tax paid for periods after June 30, 2007, see the Division's Notice
The provisions of the recently enacted law are not retroactive; thus, the above described fees/dues are subject to 7% sales tax for the period between October 1, 2006 and June 30, 2007.
Predominantly Age 18 or Under
For purposes of the exception for clubs and organizations whose members are predominantly age 18 or under, the term “predominantly” means 51% or more of the total membership.
If the club or organization sells family memberships, it may count each person that is included in the family membership for purposes of determining whether the exception for clubs and organizations where the members are “predominantly age 18 or under” applies. For example, for a family membership comprised of two parents and two adolescent children, the two children count as age 18 or under, and also as part of the total membership. An existing club or organization should make this determination on an annual basis, based on its membership in the previous year of operation.
Separately stated charges assessed against members for the purpose of making improvements to the facility are not deemed to be membership dues or fees and thus, are not subject to sales tax.
Admissions Charges for Participation Sports
The law still contains an exemption for admissions charges to or for the use of any facility where the patron will be a participant in sporting activities. Admissions to bowling alleys, swimming pools, golf courses, baseball batting cages, and pool halls remain exempt from tax. The taxability of such admission charges are unaffected by the new law. However, the new law does impose tax on membership fees or dues paid to the same type of facilities.
A club or organization may allow limited or occasional use of the property or facilities to non-members. Fees charged to non-members such as guest fees are not membership fees and are not subject to tax; for example, a fee charged to a non-member to play a round of golf or a one day pass to a fitness center.
A business may sell season passes which entitle the purchaser to a reduced rate, but not to any right, privilege or entitlement not also available to the general public. The charge for the season pass is not a membership fee, since it merely allows a discounted rate which the general public is also entitled to. The only advantage of a season pass is economic.
Transitional Rules for Initiation Fees, Membership Fees and Dues
Charges that allow the member access to or use of such clubs and facilities are taxable for periods on and after October 1, 2006. Since such charges are not subject to tax prior to October 1, the following transitional rules apply:
– Initiation fees are fees generally paid in advance of membership, at the time the member joins. Initiation fees are paid in addition to the actual membership dues or fees. If an initiation fee is paid in full prior to October 1, 2006, there is no tax due because the sale of the initiation is deemed to have taken place prior to October 1. However, all initiation fees paid on or after October 1 are subject to tax, including all installment payments of an initiation fee imposed prior to October 1 but paid after October 1.
– Membership fees are subject to tax on and after October 1. If a membership fee is paid in full prior to October 1, 2006, the fee must be allocated and tax is due for all periods on and after October 1. If the membership fee is paid monthly, then to accommodate monthly billings, the fee is subject to 7% tax for the first billing period that begins on or after October 1.
Frequently Asked Questions
A non-profit golf organization does not own, lease, or rent any real property or facilities, other than an administrative office. Members get together and play golf at courses that are approved and recognized by the organization. The organization charges a one time initiation fee and annual membership dues. Are these charges subject to tax?
The fact that the club is a non-profit has no bearing on the taxability of the membership fees. If the organization does not maintain “property or facilities” as the statute requires, tax is not due on membership fees/initiation dues charged to join. In this case, since the members meet at publicly accessible areas in order to engage in athletic activities and the club does not own any facilities, sales tax is not due on membership fees charged to join the organization.
An age restricted active adult community owns and operates a golf course within the community. The course is owned by all the residents and a separate greens fee must be paid each time the course is played. Is the general membership fee subject to tax?
If only certain residents of the adult community pay the separately stated membership fee for access to or use of the golf course, sales tax is due. However, if all of the residents of the community are assessed a fee which allows them access to or use of the golf course as part of the community or association dues which are required as a condition of ownership, New Jersey sales tax is not due. Note that in order for the membership fee to be exempt from tax, all residents of the community must be paying the membership fee as part of their annual or monthly community or association dues.
A private country club sells a share of stock in the corporation as a membership and/or initiation fee. The club charges annual dues to each member as well. Which fees are subject to tax?
Since the stock purchase in this case is “in the nature of” an initiation fee because it is a condition precedent to membership, both fees are subject to tax.
A condominium association levies an association fee on all owners of property in the complex for the upkeep of the grounds, which includes facilities such as a swimming pool, clubhouse with fitness equipment, tennis or basketball courts. All owners must pay the fee as a condition of ownership. Is the association fee a taxable membership fee?
No. The association fee is a condition of ownership in the community and does not merely entitle members access to or use of the facilities. However, if the association charged an additional fee to those residents who actually used or wished to use the sporting facilities, such additional fee is a taxable membership fee.
A social organization sells memberships which entitle its members to engage in dining and social activities while at the club. The organization also maintains a swimming pool or other health, fitness or sporting facility that is available to members for an additional membership fee. Which fees are subject to tax?
The membership which allows access to only the dining and social facilities is not subject to tax; however, a separate fee to access the health, fitness or sporting facility is taxable. If both fees are not separately charged and stated to members, the entire charge is a taxable membership.