Rev. Rul. 55-318

Advice has been requested with respect to the application of the tax on dues imposed by section 1710 of the Internal Revenue Code of 1939 to charges made by a social, athletic, or sporting club or organization to its members for the use of any social, athletic, or sporting privilege or facility for a period of more than 6 days.

In the instant case a beach club operated for social purposes owns a strip of ocean beach and provides and maintains certain bathing facilities for the exclusive use of its members and guests. Among the facilities provided are lockers and bathhouses which a member may rent on a seasonal or an a daily basis as an accommodation for his guests. However, the rental of such facilities is optional. Members may come to the club in bathing suits and swim in the ocean or use the swimming pool without renting lockers or bathhouses.

Section 1710(a)(1) of the Code imposes a tax equivalent to 20 percent of 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 $10 per year. Section 1712(a) defines the term `dues' to include any charge 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 6 days.

Revenue Ruling 177, C.B. 1953-2, 341, which relates to the application of the tax on dues to payments by members of a beach club for the use of cabins or cabanas, holds that since members of the club obtain bathing and swimming privileges only by payment of charges for cabins or cabanas, such payments constitute charges for bathing and swimming privileges within the meaning of section 1712(a) of the Code and are subject to the tax on dues. That ruling is predicated upon facts in a particular case where members of the club, in order to obtain bathing and swimming privileges, are required to pay charges for the use of cabins or cabanas for the summer season. However, the ruling does not limit the application of the tax on dues to payments for the use of such privileges or facilities in situations where members are required to avail themselves of the privileges or facilities afforded. That a member may have the option to decide whether he will avail himself of any or all of the activities, facilities or privileges is not the controlling factor with respect to the application of the tax. The test is whether the charge confers the right to participate in or use the activities, facilities, or privileges involved for a period of more than 6 days.

It is held that any charge made by a social, athletic, or sporting club or organization to any of its members for the use of any social, athletic, or sporting privilege or facility, for a period of more than six days, irrespective of whether the members have the option to decide whether they will avail themselves of such privilege or facility, comes within the meaning of the term `dues' as defined by section 1712(a) of the Code. Accordingly, since the charges for lockers and bathhouses are charges for the use of athletic or sporting privileges or facilities, such charges are subject to the tax on dues imposed by section 1710(a)(1) of the Code.

Inasmuch as those clubs, whose operations come within the ambit of Revenue Ruling 177, supra , have relied upon it as a basis for not subjecting the optional payments here involved to the tax imposed by section 1710(a)(1) of the 1939 Code, it is further held that, under the authority of section 3791(b) of the Internal Revenue Code of 1939 and section 7805(b) of the Internal Revenue Code of 1954, the position stated in this Revenue Ruling will not be applied retroactively, except that any tax which has been paid will not be refunded