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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 13116
Experience:  15years with H & R Block. Divisional leader, Instructor
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We are starting a volleyball club in PA. The parents are billed

Customer Question

We are starting a volleyball club in PA. The parents are billed a season fee. Most of the costs are pass through (they are billed for exactly what the cost is)such as court rental, tournament registrations, uniforms etc. We do charge a administration fee which pays our directors and hopefully some profit for us. In the state of PA do I need to set up the club as a business and are we required to pay sales tax on the club fees?
Submitted: 5 years ago.
Category: Tax
Expert:  Robin D. replied 5 years ago.

Robin D :

Hello and thank you for using Just Answer

Robin D :

The sales and use tax is imposed on the retail sale, consumption, rental or use of tangible personal property in Pennsylvania. The tax is also imposed on certain services relating to such property and on the charge for specific business services. Major items exempt from the tax include food (not ready-to-eat); candy and gum; most clothing; textbooks; computer services; pharmaceutical drugs; sales for resale; and residential heating fuels such as oil, electricity, gas, coal and firewood.
Club dues are not a taxable item for sales tax in PA.

Customer: So, I guess my question is :can I just set up a bank account for the club and not have to worry about reporting anything to the IRS?
Robin D :

Well you may wish to organize your club under the non-profit umbrella. Let me get you some more info on that. One minute

Robin D :

Organizations that may be exempt under Internal Revenue Code section 501(c)(7), if they meet the requirements for exemption, include--

  • College fraternities and sororities

  • Country clubs

  • Amateur hunting, fishing, tennis, swimming and other sport clubs

  • Dinner clubs that provide a meeting place library, and dining room for members

  • Variety clubs

  • Hobby clubs

  • Homeowners or community associations whose primary function is to own and maintain recreational areas and facilities

Robin D :

To be exempt, a social club must meet the following requirements—

  • The club must be organized for exempt purposes .

  • Substantially all of its activities must further exempt purpose

    • If the club exceeds safe harbor guidelines for nonmember and investment income, the facts and circumstances must show that it is organized substantially for exempt purposes.

    • The club has de minimis income from nontraditional sources (i.e., from investments or from activities that, if conducted with members, would further the club's tax-exempt purposes).

    • For a discussion of the effect of nonmember and "nontraditional" income on the tax-exempt status of social clubs under section 501(c)(7), see Nonmember Income.

  • The club must provide an opportunity for personal contact among members, and membership must be limited.

  • The club must be supported by membership fees, dues, and assessments.

  • The organization’s net earnings may not inure to the benefit of any person having a personal and private interest in its activities.

  • The club's governing instrument may not contain a provision that provides for discrimination against any person on the basis of race, color, or religion.

  • The club may not hold itself out as providing goods and services to the general public.

Robin D :

Although they are exempt from income taxation, social clubs are generally required to file annual returns of their income and expenses with the Internal Revenue Service. If a club has unrelated business income , it must file an unrelated business income tax return. In addition to filing an annual exempt organization return, social clubs may be required to file other returns and pay employment taxes. Some clubs may be required to file certain returns electronically. The club can have employees and they work a lot like a for profit business but have advantages. You will need to speak with an attorney in your area about organizing as a non profit club and then apply for your exempt status.

Robin D :

I know the above is alot to think about but you should be better prepared to speak with an attorney now since you know you have another option.



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