If you’re in the business of helping folks get fit in Tennessee, there’s a good chance you’re required to charge sales tax for your services. Tennessee is one of several states that taxes many charges associated with physical fitness. However, other such charges are exempt.
Activities subject to Tennessee’s amusement tax (Tenn. Code Ann. § 67-6-212) include dues or fees to membership sports and recreation clubs (including any fees paid for the use of facilities or services rendered at a health spa or club or any similar facility or business), and charges for the privilege of entering or engaging in any kind of recreational activity (when no admission is charged spectators), such as tennis, racquetball, or handball courts.
The Tennessee Department of Revenue (DOR) explained back in 2015 that although personal training services are generally exempt from tax, they may be taxable if “offered as part of a gym or club membership.” Earlier this year, the DOR provided further clarification. I’m still confused.
Taxable vs. exempt fitness charges
Notice #18-09, Physical Fitness Facilities (June 2018) explains that sales tax applies (unless specifically exempt) to dues and fees paid to health clubs and similar facilities that offer exercise or other physical fitness conditioning. These include spas, sports clubs, and recreation clubs (e.g., country, golf, tennis, yacht clubs). See Tenn. Code Ann. § 67-6-212 and Sales Tax Rule 116 for more details.
Sales tax also applies to charges for services rendered at such facilities. Membership fees and per-class fees are taxable, for example, as are initiation fees and fitness equipment instruction fees, even if separately stated.
However, charges for “instruction only” in amusement or recreational activities are exempt from sales tax. For example, while the fee to play tennis is taxable, a charge for tennis lessons alone is not.
According to Notice #18-09, taxable and exempt fitness activities include the following and are broken down as follows:
