Washington to exempt martial arts
- Oct 3, 2017 | Gail Cole
In the fall of 2015, lawmakers in the state of Washington decided sales tax should apply to martial arts and mixed martial arts classes. The new policy sparked outrage in the martial arts community as well as creation of the Washington State Martial Arts Association, “a unified front for martial arts school owners, students and parents” determined to repeal HB 1550.
While the group failed in its attempt to overturn the law in 2016, this year it got what it wanted with the enactment of Senate Bill 5977. Effective Oct. 19, 2017, martial arts facilities “not operated within and as part of an athletic or fitness facility (AFF)” will no longer need to collect tax on charges for:
- Martial arts classes
- Events such as tests, camps, competitions, and seminars
Under the law, the term “martial arts” includes but isn’t limited to aikido, boxing, hapkido, jujitsu, judo, karate, kendo, kickboxing, Krav Maga, kung fu, tae kwon do, and tai chi.
Location, location, location
Exempt facilities include the boxing gyms, karate dojos, and tae kwon do dojangs, as well as:
- Colleges or universities
- Community centers
- Hospitals or other medical facilities
- Private residences
- School gymnasiums
However, martial arts classes, training, and related events occurring in an AFF will remain subject to sales tax and Washington’s Business and Occupation (B&O) tax. An AFF is defined as “an indoor or outdoor facility … primarily used for exercise classes, strength and conditioning programs, personal training services, … or other activities requiring the use of exercise or strength training equipment.”
Nuts and bolts
According to a Washington Department of Revenue special notice, a one-time event held prior to Oct. 19 is exempt, while an event held on or after Oct. 19 is taxable.
Businesses that bill customers monthly (where payment is typically due in advance) don’t need to apply tax to bills for the months beginning after Oct. 19, 2017. However, tax applies to bills that went out already for October.
Changes like these complicate sales and use tax compliance for businesses. Learn how tax automation software helps facilitate it.