The Bloomberg BNA SALT Blog is a forum for practitioners and Bloomberg BNA editors to share ideas, raise issues, and network with colleagues about state and local tax topics. The ideas presented here are those of individuals and Bloomberg BNA bears no responsibility for the appropriateness or accuracy of the communications between group members.
Thursday, January 10, 2013
Ten days ago when many of us celebrated the new year with
resolutions to exercise more often or improve physical fitness,
it's likely that sales taxes were not a factor impacting the choice
of mechanism for implementing these life-improving changes.
However, and in addition to general excitement over the season of
freshly-minted gym membership cards and first-time reservations
with enthusiastic fitness trainers, health and fitness clubs must
be motivated to comply with differing state rules for sales taxes
imposed on these transactions.
Many states, such as Indiana, Maine, and Maryland, do not impose
sales tax on membership fees for fitness clubs. In those states
that do impose tax on membership fees, such as Arkansas, Florida,
New York, and Texas, applying sales tax to these transactions can
be especially tricky. The complication is that the
transaction may be taxable or exempt, depending on the ownership of
the facility, the types of activities available at the club, or the
scope of the membership.
For example, Florida imposes tax on dues paid to any
organization, such as athletic clubs, health spas, civic,
fraternal, or religious clubs, and organizations that provide
physical fitness facilities or recreational facilities, as well as
dues and fees paid to private clubs or membership clubs. However,
the state exempts dues, membership fees, and admission charges
imposed by nonprofit organizations, and admissions charged by
physical fitness facilities owned or operated by certain
Additionally, Florida specifically provides that fees paid to
private clubs or membership clubs that
do not entitle the payor to the use of the club's recreational or
physical fitness facilities are not
subject to tax. Examples of such fees include charges for
professional instructions in any sport conducted at the club, so
long as such charges are exclusively for the instructions and
include the use of the facility only during the period of time the
instructions are taking place.
In New York, dues paid to any social or athletic club are
subject to sales tax if the dues of an active annual member,
exclusive of the initiation fee, exceed $10 per year, and the
initiation fee exceeds $10. In the case of a life membership, the tax is on the amount paid
as life membership dues. However, a
life member pays annual sales tax based on the dues of an active
member, and must continue to make payment until the amount of the
tax paid is equal to the amount of tax that would have otherwise
been due had tax been imposed at the time the life membership was purchased and at the then applicable
In addition to these issues for a fitness club's tax team,
keeping resolutions may involve an encounter with a seasoned
gym-goer gracefully prancing along like a gazelle, while you're
thumping along on the treadmill just trying to stay upright.
Performing math computations, such as converting minutes and
seconds per mile into times per half mile/yard/foot/etc., can be a
helpful distraction. An advanced version of this strategy is to
consider the various approaches the states take for imposing sales
tax on gym memberships, and compute the tax amounts for a
membership purchase, total tax for the gym population, and the tax
amount for each day, hour, and minute exercised.
By the time you get done, you will have probably knocked off at
least a mile without thinking about how much farther until you can
stop. When the hard work is over you can fondly remember the turkey
dinners, cakes, and other goodies that were enjoyed during the
By Christine Boeckel
Follow us on Twitter at: @SALTax
Join Bloomberg BNA's State Tax Group on
to post a comment.