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Do New York Yoga Studies have to Collect Sales Tax Now?


 Taxable or exempt in New York State? How about New York City?

New York City imposes sales tax (4.5%) on receipts from the sale of many services, from beauty and barbering services to massage services. NYC sales tax is also imposed on “every sale of services by weight control salons, health salons, gymnasiums, Turkish and sauna bath and similar establishments and every charge for the use of such facilities....”

New York State imposes the 4% state sales tax (plus applicable local taxes) on dues paid to many social and athletic clubs (when dues are more than $10 per year). Social and athletic clubs are defined as “[a]ny club or organization of which a material purpose or activity is social or athletic.”

Confusion

Confusion arose back in 2011 when the New York Department of Taxation categorized yoga studios as health and fitness clubs, thereby subjecting them to the New York City sales tax. Confusion persisted, causing the department to update its bulletin on health and fitness clubs in July 2012. It clarified the following:

  • NY State sales tax is imposed on dues and membership fees to athletic clubs—any organization “whose material purpose or activity is the practice, participation in, or promotion of any sports or athletics.”
  • NY State sales tax is not imposed on any facility that “promotes exercising solely for health or weight reduction purposes, as contrasted to sports….”
  • NYC sales tax is imposed on every sale of services by weight control salons, health salons, gymnasiums, etc (see above).
  • NYC sales tax is not imposed “if a facility also provides access to participant sporting activities and facilities, such as a swimming pool or racquetball courts, to its members….” In that case, “the facility is not considered to be a weight control salon, health salon, gymnasium, or other establishment for New York City sales tax purposes.”

Evidence suggests that many businesses still find the tax requirements confusing. Three recent New York sales tax advisory opinions treat the subject: TSB-A-14(12)S; TSB-A-14(13)S; and TSB-A-14(18)S. Taxpayers wonder if their “mind body” classes are subject to the NYC sales tax. They don’t know if they are a “weight control salon, health salon, or gymnasium” subject to the city sales tax or “an athletic club” subject to the state (and local) sales tax. Or neither. Or both.

Learn how sales tax automation software makes handling sales tax less confusing.

photo credit: robglinka via photopin cc


Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.