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Business Taxes Law Guide—Revision 2024
Sales And Use Tax Regulations
Title 18. Public Revenues
Division 2. California Department of Tax and Fee Administration — Business Taxes (State Board of Equalization — Business Taxes — See Chapters 6 and 9.9)
Chapter 4. Sales and Use Tax
Article 7. Specific Kinds of Property and Exemptions Generally
Regulation 1584
Regulation 1584. Membership Fees.
Reference: Sections 6011.1, 6012, and 6012.1, Revenue and Taxation Code.
(a) Application of Tax.
(1) In General. Membership fees related to the anticipated retail sale of tangible personal property are includible in taxable gross receipts when either
(A) the retailer sells its products only to members and the membership fee exceeds a nominal amount,
or
(B) regardless of the amount of the membership fee, the retailer sells its products for a lower price to a person who has paid the membership fee than to a person who has not paid the fee.
(2) The membership fees described in subdivision (a)(1)(A) or (a)(1)(B) are part of the gross receipts of the person selling tangible personal property to a member. It is immaterial that the person who sold the membership is not the person who sells the tangible personal property to a member. Any sale of a membership described in subdivision (a)(1)(A) or (a)(1)(B) is regarded as related to the retail sale by the retailer selling tangible personal property to a member, not by the person selling the membership, measured by the amounts received by the person selling the membership.
(3) Incidental Sales. Charges for membership fees not related to anticipated retail transactions are not subject to tax. For example, when a country club or similar organization charges fees (dues) to members and provides substantial service benefits, e.g., the use of golfing, tennis and swimming facilities, the membership fees are not related to sales even though the organization may establish minimum meal and drink purchase requirements for its members.
(4) Consumer Cooperatives. Initial or periodic membership fees received by consumer cooperatives, as defined in sections 6011.1 and 6012.1 of the Revenue and Taxation Code, are not subject to tax.
(b) Nominal Amount.
(1) For purposes of this regulation, beginning January 1, 2021, the term "nominal amount" means an amount totaling $70 or less per year subject to increase as provided in subdivision (b)(2). For periods from January 1, 2016, through December 31, 2020, the term "nominal amount" for purposes of this regulation means an amount totaling $60 or less per year. For periods from January 1, 2011 through December 31, 2015, the term "nominal amount" for purposes of this regulation means an amount totaling $55 or less per year. For periods from January 1, 2006 through December 31, 2010, the term "nominal amount" for purposes of this regulation means an amount totaling $50 or less per year. For periods from January 1, 2001 through December 31, 2005, the term "nominal amount" for purposes of this regulation means an amount totaling $45 or less per year. For periods prior to January 1, 2001, the term "nominal amount" for purposes of this regulation meant an amount totaling $40 or less per year. Amounts received for memberships which are in conjunction with a basic membership (add-ons) are not considered a part of the basic membership fee in determining the nominal amount of the basic membership. Additional cards issued under the same membership number are sales of separate memberships.
(2) During September in the year 2000, and every five years thereafter, the threshold for the nominal amount will be adjusted effective the following January 1, rounded to the nearest $5, to reflect changes in the California Consumer Price Index (CCPI) whenever that change is more than 5 percent higher than any previous adjustment. For purposes of computing the CCPI increase, the June 30 CCPI index of the computation year will be compared with the June 30 CCPI index of the computation year which resulted in an adjusted nominal amount. For example, for the January 1, 2026 adjustment computation, the CCPI index on June 30, 2025, will be compared with the CCPI index on June 30, 2020. If no adjustment is made at that time, the next comparison will be of the CCPI index on June 30, 2030 with the CCPI index on June 30, 2020.
History—Adopted February 22, 1996, effective August 2, 1996.
Amended October 31, 2000, effective January 1, 2001. Subdivision (b)(1)—phrase "beginning January 1, 2001" added; number $40 replaced with $45 in first sentence; Phrase "For periods … per year" added in second sentence. Subdivision (b)(2)—"2006" replaced "2001," "2000" replaced "1995," and "2010" replaced "2005."
Amended May 25, 2004, effective August 26, 2004. New subdivision (a)(2) added. Current subdivisions (a)(2) and (3) re-numbered (a)(3) and (4) accordingly.
Amended October 25, 2005, effective January 10, 2006. Adjusted the "nominal amount" in subdivision (b)(1) from $45 to $50 or less per year, operative January 1, 2006, to reflect an increase in the California Consumer Price Index as provided in the regulation. In subdivision (b)(2), updated the example years.
Amended March 25, 2010, effective May 13, 2010. Subdivision (c) deleted to remove unnecessary effective date.
Amended November 16, 2010, effective January 12, 2011. Adjusted the "nominal amount" in subdivision (b)(1) from $50 to $55 or less per year, operative January 1, 2011, to reflect an increase in the California Consumer Price Index as provided in the regulation. In subdivision (b)(2), updated the example years.
Amended September 16, 2015, effective December 8, 2015. Adjusted the "nominal amount" in subdivision (b)(1) from $55 to $60 or less per year, operative January 1, 2016, to reflect an increase in the California Consumer Price Index as provided in the regulation. In subdivision (b)(2), updated the example years.
Amendments filed with the Secretary of State May 25, 2021, and effective May 25, 2021. The amendments adjusted the "nominal amount" in subdivision (b)(1) from $60 to $70 or less per year, operative January 1, 2021, to reflect an increase in the California Consumer Price Index as provided in the regulation. In subdivision (b)(2), updated the example years.