Document Number
85-198
Tax Type
Retail Sales and Use Tax
Description
Membership and annual dues; Camping resort
Topic
Exemptions
Date Issued
10-15-1985


  • October 15, 1985

    RE: Request for Ruling/Sales and Use Tax


    Dear ****

    This is in reply to your letter of May 24, 1985, on behalf of ***** (hereinafter "Corporation"), for a ruling concerning the Virginia sales and use tax consequences arising from the sale of memberships in its organization.

    FACTS

    Corporation is a Washington corporation with its principal offices in the State of Washington. It is engaged in the business of selling memberships in camping resorts which it acquires, develops, and operates. The membership contract provides that membership is "merely a contractual license to use such facilities" and "does not constitute an interest in, is not secured by, and does not entitle member to any recourse against any particular real property or facilities..." Furthermore, the contract provides that a member is not entitled to participate in any income or distribution of or any ownership of its facilities.

    The purchase of a membership by payment of the initiation fee and annual dues entitles the purchaser to the use of all campground resorts of Corporation, including two locations in Virginia, without additional charges, except for charges for use of certain amenities, such as golf courses, or for equipment, such as campers, trailers, and canoes. The membership contract provides that members' use of the resorts is subject to the guidelines set forth in the Member Handbook.

    Corporation offers two basic types of memberships - a "Vacation" type of membership which entitles the member to either free or reduced rates on the use of a trailer. There are several different types of "Vacation" memberships which allow the member either "Regional", "System wide", or "Unlimited" use of the facilities for differing periods of time. The second basic type of membership is the "Camping" membership which is designed for the member who has no need for a trailer. Again, there are variations on this type of membership, either "Regional" or "System wide". The member has the option of upgrading his membership type and all "Vacation" memberships convert to "Camping" memberships after a specified number of years, depending on the type of "Vacation" membership purchased.

    You ask that the department rule that the sale of memberships and annual dues is not subject to the Virginia Retail Sales and Use Tax because you contend that:
      • (1) Furnishing of accommodations is only an incidental part of the rights of Corporation's members.
      • (2) The camping resorts are not open to the general public and are not used by "transients."
      • (3) Members in Corporation should be treated like members in golf clubs and country clubs.
      • (4) No "sales or charges" arise as a result of the payment of fees and dues that have no relation to actual use of the camping resorts.

    RULING

    The sale or charges for camping grounds are specifically taxable under the Virginia Retail Sales and Use Tax Act, which provides under Virginia Code Section 58.1-602.14 in part:
      • The terms "retail sale" and a "sale at retail" shall specifically include the following: (I) the sale or charges for any room or rooms, lodgings, or accommodations furnished to transients for less than ninety continuous days by any hotel, motel, inn, tourist camp, tourist cabin, camping grounds, club, or any other place in which rooms, lodging, space, or accommodations are regularly furnished to transients for a consideration... (Emphasis added.)

    Based upon the examination of the information that you provided with your ruling request, it is clear that Corporation is primarily engaged in the business of providing overnight accommodations. A strong indication of this is provided in your letter when you state that "...2O% or more of member usage of the Preserves owned by is day use only." Conversely 80% of the members usage is for overnight accommodations. Like many resort hotels, it provides a mix of services: social, recreational, etc. However, its primary purpose is furnishing accommodations, and as such, it is providing a taxable service.

    The fact that the payment for these overnight accommodations is made in the form of an initiation fee and annual dues, does not alter the substance of the transaction. While there is not a fee charged for each use of the camping resorts, there is a relationship between the membership fees and annual dues and the use of the resorts.

    It is normal business practice to spread the cost and expected profit of a project such as this equally among the members. As you state in your letter, "the maximum number of memberships that will be sold in a geographic region by is determined based on members' historical usage of the Preserves in that region." Therefore, at the time that the charges for membership fees and annual dues were set, expected usage was taken into consideration.

    The services provided by Corporation to its members differ from the services provided by country clubs and golf clubs in that the primary purposes of each differ. Whereas Corporation's primary purpose is providing overnight accommodations, any-overnight accommodations that are provided by country clubs and golf clubs are on a limited basis and are only an incidental part of their overall purpose.

    You restrict the definitions of "transients" to members of the general public and you contend that members of a private organization cannot be "transients." We find no basis for this contention. Absent a statutory definition of the term " transient" in the Code of Virginia, we must rely on the dictionary definition. Webster's New Collegiate Dictionary (1981) defines "transient" as:
    1
      • a: passing esp. quickly into and out of existence: TRANSITORY b: passing through or by a place with only a brief stay or sojourn.

    Therefore, we must hold that "transient," as used in this statute, only refers to the length of time someone is at a particular location.

    According to the statutes cited and the reasons given above, all sales made in Virginia of memberships are taxable on the "sales price" of the membership, i.e. the initiation fee, whether paid in cash or on credit, and the annual membership dues. No separate statement and exclusion is allowed under Section 58.1-602.17 of any services that are part of the initiation fee or the annual dues.

    This ruling applies to the stated facts of this particular situation and is not determinative of any other situation. Corporation should make application for a Virginia Retail Sales and Use Tax Dealer Certificate of Registration immediately.

    Since this ruling is consistent with a previous ruling issued on August 30, 1983 (copy attached), we are issuing this ruling without holding a conference. However, if you have other facts which have not been presented and would like to have a meeting, please contact this office within 30 days.

    Sincerely,


    W. H. Forst
    Tax Commissioner


Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46