Why Does Missouri Tax Dance Classes?
- Jul 16, 2014 | Gail Cole
Missouri law imposes sales tax on “the amount paid for admissions and seating accommodations, or fees paid to, or in any place of amusement, entertainment or recreation, games and athletic events.” Although unpopular, the law was upheld by the Missouri Supreme Court in 2001, and again in 2008. The Missouri Department of Revenue also upholds the tax, ruling in 2012 that hourly charges for a “training classes led by an instructor and paid for by the hour” are subject to sales tax.
That determination has trickled down to Miss Dianna’s Dance Studio, which the Missouri Department of Revenue audited and handed a bill for “more than $73,000 worth of back taxes.”
Dianna Pfaff, owner of Miss Dianna’s Dance Studio, is contesting the bill. She argues that she has not charged her clients sales tax for the past 40 years because her classes are educational and therefore exempt. If there was a change of definition that sparked a sales tax obligation, she certainly didn’t know about it.
Ms. Pfaff has supporters. State Senator Ryan Silvey (R) insists, “You can’t raise somebody’s taxes by changing a definition.” And earlier this year, Missouri lawmakers approved legislation that would exempt fees people pay to participate in entertainment, recreation, games and athletic events. Dance classes would qualify for that exemption.
However, Governor Jay Nixon vetoed that provision in June.
Changing definitions = changing tax obligations
In fact, it is common for slight changes in definitions or rules or regulations to impact sales tax. It happens all the time. Beginning January 2015, for example, the District of Columbia may no longer exempt fitness classes from sales tax (the final decision depends on whether or not lawmakers supportive of the tax are numerous enough to override the mayor’s veto).
The real zinger? It’s the taxpayer’s obligation to keep up with changing definitions (and rules and regulations and boundaries and rates) and to make all changes needed to comply with them.
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