Membership Fees Not Taxable as Lump-Sum Admission Fees in Alabama

A public shooting range’s (taxpayer’s) charges for annual and family memberships constituted exempt membership dues and not taxable lump-sum admissions fees in Alabama. In addition to offering memberships for monthly or annual fees, the taxpayer also charges customers fees for various levels of access to its shooting ranges. The taxpayer’s membership fees and access fees are collectively referred to as “Range Fees.” The Tuscaloosa County Special Tax Board (Tax Board) had determined that the Range Fees were subject to the gross receipts sales tax. An Alabama tax statute levies a gross receipts sales tax on any taxpayer “engaged … within this state in the business of conducting or operating places of amusement or entertainment.” The statute includes a “catchall” provision that covers “any other place at which any exhibition, display, amusement, or entertainment is offered to the public or place or places where an admission fee is charged.” The taxpayer argued that its Range Fees are not subject to the gross receipts sales tax because the overall purpose of its business is to provide private firearms and safety lessons, rather than being a “place of amusement or entertainment.” The Tax Board argued that the Range Fees are admissions fees charged by the taxpayer for use of its shooting ranges. Additionally, the Tax Board argued that, because the monthly and annual memberships do not offer any benefits other than admission to the taxpayer’s facilities, they are, in effect, “lump-sum admissions fees” and therefore subject to the statute’s “catchall” provision. In reviewing the case, the Alabama Tax Tribunal stated that when a term is not defined in a statute, “the commonly accepted definition of the term should be applied.” The Tribunal agreed that the access fees are taxable “admission fees.”

However, the Tribunal disagreed with the contention that the annual and family membership fees are taxable “lump-sum admissions fees.” The evidence presented in the case suggests that the annual and family memberships entitle members to more than just access to the shooting ranges. During the hearing, screenshots of the taxpayer’s website were offered into evidence. The screenshots revealed that the annual and family memberships not only entitle a member to unlimited use of the shooting range but also to: a “Tee Time” option to reserve a table/lane prior to arrival; a 10% discount off ammunition, firearms, and custom work in the taxpayer’s shop; a 10% discount at two local restaurants; $10 firearms transfer fees; and one class. The taxpayer testified that the monthly membership offers no benefits over a daily fee. As such, the annual and family memberships are exempt as membership dues and not taxable “lump-sum admissions fees.” The monthly fee, however, is taxable.

This case demonstrates the importance of understanding how a state categorizes and defines lump-sum admissions fees as it can affect the taxability of these items. Additionally, businesses that charge annual and/or monthly membership fees should take note that the taxability of these fees may change depending on what is included in the fees (e.g. if additional items are included in the membership instead of just admission). (Warrior Ranch Training Center v. Tuscaloosa County Special Tax Board, Alabama Tax Tribunal, No. 19-102-LP, September 8, 2020)

Posted on October 29, 2020