Rev. Rul. 63-130

Advice has been requested whether the excise tax on club dues applies to amounts paid to a golf club by its members who own gasoline-powered or electric-powered golf carts (1) for the privilege of using the carts on the golf course, (2) for gasoline or for battery recharging service, and (3) for the storage of the carts.

Some of the members of a private golf club own gasoline-powered or electric-powered golf carts which they use for transportation around the golf course while playing golf. The club provides gasoline for the operation of the gasoline-powered carts, electricity and equipment for recharging the batteries of the electric-powered carts, and storage facilities for both types of carts. Some of the members store their carts in the storage facilities provided by the club, but others, who live in the vicinity of the golf club, store their carts at their homes. The members who use the storage facilities of the club also use the electric battery recharging facilities or use the gasoline furnished by the club for their carts. All of the carts which are stored by the members at their respective homes are gasoline powered. Some of these members furnish their own gasoline while others use the gasoline furnished by the club.

The club charges those members who own golf carts a fixed annual amount for the privilege of using them on the golf course. The club also charges those members using the gasoline or the battery recharging service a fixed annual amount for such service (regardless of the quantity of gasoline used or the number of times the batteries are recharged). In addition, a fixed annual charge is made to those members who use the cart storage facilities. The total amount each member pays each year depends upon the combination of the facilities he uses.

Section 4241(a)(1) of the Internal Revenue Code of 1954 imposes a tax on any amount paid as dues or membership fees to any social, athletic, or sporting club or organization, if the dues or fees of an active resident annual member are in excess of ten dollars per year.

Section 4242(a) of the Code defines the term `dues' to include any assessment, irrespective of the purpose for which made, and any charges for social privileges or facilities, or for golf, tennis, polo, swimming, or other athletic or sporting privileges or facilities, for any period of more than six days.

Section 49.4242-1(a) of the Facilities and Services Excise Tax Regulations provides, in part that the term `dues or membership fees' includes-

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(2) All charges made by a social, athletic, or sporting club or organization for (i) social privileges or facilities for any period of more than 6 days (whether or not consecutive), or (ii) golf, tennis, polo, swimming, or other athletic or sporting privileges or facilities for any period of more than 6 days (whether or not consecutive). In determining whether a charge by such a club or organization constitutes dues or membership fees within the meaning of subparagraph (2) of this paragraph the test is whether the payment of the charge confers the right to use a social, athletic, or sporting privilege or facility of the club or organization for the prescribed period. It is immaterial whether the privilege or facility is one for which a charge is mandatory, even though the member chooses not to avail himself of the privilege or facility, or whether the privilege or facility is one for which a charge is made only if the member, at his own election, chooses to have the privilege or facility made available to him. Any privilege or facility offered by a social, athletic, or sporting club or organization which is so directly related to a social, athletic or sporting activity in which the club is engaged, or for which it was created, as to partake of the nature of the activity itself is considered to be a social, athletic, or sporting privilege or facility. This is true even though such privilege or facility, if considered entirely apart from any social, athletic, or sporting activity, would not in and of itself constitute a social, athletic, or sporting privilege or facility.

The privilege of using the golf carts on the golf course and the use of the storage and service facilities, in the manner described above, are considered to be so directly related to the activity of playing golf as to partake of the nature of the activity itself. Accordingly, it is held that amounts paid by the members to the golf club for such privileges and facilities for a period of more than six days are `dues' within the meaning of section 4242(a) of the Code. Therefore, those payments are subject to the excise tax on club dues imposed by section 4241(a)(1) of the Code.