On Monday, April 7, 2014 11:48:52 PM UTC-4, wrote:

To stay true to the FAR's so they don't act like a commercial pilot, from what I understand, they are allowed to split the cost of the flight. OK, that is fine. Can they only split the cost of the tow or can the demo passenger pay for the full tow because the pilot is contributing $60 already to be able to make that flight with his club dues?

The FARs allow sharing of "operating expenses", and the FAA has taken a very narrow view of this in the past. That is, unless you'd like to go to court and fight it out, their interpretation seems to be limited to direct costs associated with the specific flight: the tow, in this case, and rental (club charges). Of course it would be up to the club to structure its fees differently. The easiest and safest way forward would be might be to just convince a few people to get their commercial.