The state’s Department of Revenue recently issued a ruling saying that membership fees to join a professional association are taxable if members receive tangible personal property in exchange for their dues payment. ASAE and other associations are concerned about the precedent this tax would set.
The Pennsylvania Department of Revenue (DOR) issued a sales and use tax ruling Jan. 31 clarifying that membership fees to join a professional association are taxable if the member receives tangible personal property in addition to non-taxable services in exchange for their dues payment.
While the ruling acknowledges that a membership fee in and of itself is not taxable, it states that “if the membership fee includes the transfer of taxable tangible personal property, in addition to nontaxable services, the entire charge for the membership is subject to tax.” Tangible personal property could include things like videos, books, or other publications, as well as apps, webinars, or other goods that are digitally delivered, streamed, or accessed.
The ruling has drawn the attention of membership associations in Pennsylvania and at least one organization – the Pennsylvania Institute of Certified Public Accountants – has reached out to the Pennsylvania Department of Revenue for a meeting.
“PICPA is very concerned about this ruling,” said Vice President of Government Relations Peter N. Calcara. “As you can imagine, it has generated a lot of discussion and angst among the professional membership organizations throughout the state to whom we’ve spoken, and they share in our strong concern.
Since issuing the ruling, the DOR has pulled the ruling off the department’s website, but it’s unclear if the department is rethinking the ruling. Letter rulings from the DOR are not subject to a public review process before publication and are intended as clarifying interpretations of existing tax law in the state.
This ruling is also concerning for national 501(c)(6) associations that may have members in Pennsylvania as it’s unclear if these groups would have to pay state sales tax on tangible property received by members in the state.
“A tax on membership fees in Pennsylvania is a troubling development for professional associations, including national organizations with members in the state,” said ASAE Interim President and CEO Susan Robertson, CAE. “We need more clarity from the Department of Revenue on this, as it would set a dangerous precedent for other states in search of tax revenue from the tax-exempt sector.”