Funky Fitness Taxes – Wacky Tax Wednesday
- Sales and Use Tax
- March 30, 2016 | Gail Cole
I've been thinking about fitness lately, and how different forms of exercise appeal to different people. Friends participate in a wide array of activities: they climb, lift weights, play tennis or soccer, row, run, and more. Some are drawn to the camaraderie of classes, others want to be alone with their headphones.
Fitness doesn’t have to put a strain on finances, but money often factors in to the choices we make. And where there’s money, there’s sales tax. Or at least, there could be. While most fitness accoutrements are subject to tax in most states, charges for the activities themselves may be either taxable or exempt.
As an example, consider two activities enjoyed by one Washington State family (mine): Taekwondo (taxable) and yoga (exempt).
Both martial arts and yoga are taught by teachers to groups of varying sizes. Both usually make participants tired and sweaty, more flexible and physically fit. So why are they taxed differently in Washington State?
Location, location, location
As any realtor will tell you, location can make or break a sale. Location can impact sales tax, too, in some unexpected ways. My yoga classes are exempt from Washington sales tax because I take them at a yoga studio, a facility “that does not meet the definition of an athletic or fitness facility.” If I paid for yoga classes at a gym, sales tax would apply.
Yoga wasn’t always exempt in Washington State. Back in 2008, several yoga studios were audited and told they needed to charge sales tax because physical fitness services were taxable. Others, however, had been told their services were exempt. It turns out that, as the Washington State Department of Revenue interpreted the law, yoga classes were considered taxable only if “for exercise;” if the classes were “primarily instructional,” they were exempt. The location of the class helped the department determine its intention.
Yoga business owners, strong of core, challenged the policy that imposed tax on yoga and the Department of Revenue reversed it.* It published advisories (ETA 2023r1 and ETA 2034) clarifying “the distinction between physical fitness services (taxable) … and therapeutic activities and instructional lessons in physical fitness (exempt).” Deep stuff. At the time, department spokesman Mike Gowrylow said, “We decided the yoga people had made a very good case that yoga, and similar kinds of things, are not really what most people think of as physical fitness.”
This distresses me: am I not getting physically fit with all these yoga classes?
Last year, Washington enacted HB 1550, “An Act relating to simplifying the taxation of amusement, recreation, and physical fitness activities.” How it actually simplifies tax policy is somewhat of a mystery, but it did make it law that yoga classes offered at yoga studios and similar, non-athletic venues are exempt.
Curiously, prior to the enactment of HB 1550 on January 1, 2016, martial arts facilities were also classified as exempt service providers, like yoga studios. Under previous Washington law (WAC Section 458-20-183): “’Physical fitness services’ do not include instructional lessons such as those for self-defense, martial arts, yoga, and stress management.” This was the policy until the new legislation reclassified martial arts as taxable physical fitness. It’s good to know that, in the eyes of the state, my kids are now becoming more physically fit. At least some of us are.
Board breaking was not the only activity to find itself suddenly subject to sales tax on January 1. Other newly taxable activities include bowling, fishing, golf, horseback riding, skating and snow sports. It would seem suspiciously like state legislators decided to tax any activity that’s good for us, were it not for the fact that my yoga classes remain tax-free.
I’m happy to not pay tax on yoga, but I’m still troubled by the fact that my classes are exempt because they’re not considered to be exercise. I love practicing yoga for lots of reasons, including the fact that my back hurts less and it instills a sense of calm. But I have to be honest: I’m also in it for fitness—and when I’m holding the plank pose for what seems like eternity, I certainly feel like I’m working out.
But who am I to argue with the taxman?
* Strong cores aren’t always enough to impact tax policy. In spite of protests, yoga became subject to sales tax in Washington D.C. in October 2014.