Just because the sales tax code in your state does not have a listing “Swing Club Door Fees”, “Nightly Fee” or what ever else you choose to call your admittance charge does not mean you can take for granted that sales tax does not apply to these fees. In fact in some states even your Club Membership Fees can be taxable.
California says if a member attending a function at a club could receive food and or beverages (set-up) in addition to entertainment, the door charge (cover charge) is subject to sales tax even if the person paying the charge does not receive food or beverages. If however the door charge does not entitle the member or attendee to any food or beverage items the door charge is free from sales tax. Club membership fees may also be subject to California sales tax if they exceed a nominal amount. (For a copy of an email inquiry submitted to the California Board of Equalization check out the Sales Tax Forum on the Naked Accounting Network. www.nanetwork.com)
Georgia says that membership fees are not taxable but that admission fees (door charges) are subject to Georgia state sales taxes. (For a copy of an email inquiry submitted to the state of Georgia check out the Sales Tax Forum on the Naked Accounting Network. www.nanetwork.com)
Louisiana says sales tax is due on both membership and door fees.
These are just a few of the responses we received from the various state sales tax departments. In each case the states were presented with the following set of facts.
We have a client that is planning on opening an adult lifestyle club in (Your State).
This club will require members join and there will be a membership fee. The club will also hold parties for it’s adult only members on the weekends at it’s location. In order to attend the parties there will be a door charge of between $30 and $100. This door charge will cover: food, set-ups, entertainment (music), dancing and use of private play areas.
If the club is formed as a non profit does this affect what sales tax would be due.
In each case the states replied with answers and in some cases these email replies can be relied upon should a future tax action be brought by the state. In other cases it would be necessary to apply for a written private ruling from the state taxation department to assure that they stand up to future enforcement action. These written private rulings generally only cost a few hundred dollars and can save you tens of thousands of dollars should a sales tax auditor ever come knocking.
Remember that the state taxing authorities are the final authority on sales tax issues. The opinion of your attorney or your accountant are just that, their opinions, and are not protection from future action by the state sales tax authorities. This can be seen in a Florida case, U.F. INC., d/b/a ULTIMATE FANTASY LINGERIE, Petitioner, v. State of Florida, CASE NO.: 02-0686. In this case the Petitioner reliance on his attorney, his accountant and on a telephone call to the Florida Department of revenue did not prevent the state for assessing sales tax and collecting the tax, interest and penalties. (A copy of the case can be found in the Sales Tax Forum on the Naked Accounting Network. www.nanetwork.com)
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