New York Explains Application of State and Local Sales Tax to Health and Fitness Facilities, Including Yoga and Pilates Studios

Wednesday, August 1st, 2012

 
 
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New York's rules for imposing sales tax on dues and fees charged by health clubs, gymnasiums, and athletic clubs can be confusing.

For instance, while New York State imposes its state sales tax on membership fees paid to athletic clubs, membership fees paid to health and fitness clubs are not subject to state sales tax. New York City makes a different set of distinctions: the city imposes its local sales tax on every sale of services by weight control salons, health salons, gymnasiums, Turkish and sauna baths, and similar facilities. But, the city does not tax fees for facilities that also provide access to participant sporting activities and facilities. To clarify these distinctions the New York Department of Taxation and Finance (DTF) recently released two documents discussing the taxability of fees charged by health and fitness clubs and facilities that provide yoga instruction.

The first document is a tax guidance that explains the application of state and local sales to facilities that provide yoga instruction. N.Y. Tax Guidance NYT-G-12(1)S (Dept. of Taxn. and Fin. July 24, 2012). The other is a sales tax bulletin that outlines which fees or charges by health and fitness clubs are subject to all state and local sales taxes, and which ones are subject only to the New York City local sales tax. N.Y. Tax Bull. TB-ST-329 (Dept. of Taxn. and Fin. Jul. 24, 2012).

In the tax guidance, NYT-G-12(1)S, the DTF addressed whether facilities that provide Pilates classes and yoga instruction needed to collect sales tax on their receipts.

New York imposes both state and local sales taxes on dues and membership fees paid to "athletic clubs," but "athletic clubs," are narrowly defined. An athletic club is any organization whose purpose or activity is the practice, participation in, or promotion of any sports or athletics (for example, a Judo club or curling club). However, a facility that provides steam baths, saunas, or exercise equipment, or that promotes exercising solely for health purposes, as contrasted to sports, is not considered to be an athletic club.

New York does not impose state sales tax on membership dues or fees paid to health and fitness clubs, but New York City does impose its local sales tax on sales of services by some types of facilities that are considered to be health and fitness clubs.

Generally, "health and fitness clubs" are facilities that provide customers or members with access to exercise equipment. Typical examples of health and fitness clubs include the following:

  • Pilates, aerobics, and fitness studios;
  • Gyms;
  • Weight reducing salons; and
  • Spas, saunas, Turkish baths, and tanning salons.

Thus, membership fees and dues for these types of clubs are not subject to state sales tax, but may be subject to New York City's local sales tax.

New York City imposes its local sales tax on every sale of services by weight control salons, health salons, gymnasiums, Turkish and sauna baths, and similar facilities, including any charge for the use of these facilities.

The inclusion of gymnasiums in this list is particularly tricky. In NYT-G-12(1)S, the DTF explained that "[a]gymnasium is commonly understood to be an indoor facility where sporting and/or exercise activities take place." On the other hand, in the bulletin, TB-ST-329, the DTF explained that a facility that also provides access to its members to participant sporting activities and facilities, such as a swimming pool or racquetball courts, is not considered to be a weight control salon, health salon, gymnasium, or other establishment for New York City sales tax purposes. See also MP Sports Club Upper Eastside LLC, N.Y. Advisory Op. of the Commr. of Taxn. and Fin. TSB-A-08(10)S (Feb. 14, 2008); The Paris Health Club, Inc., N.Y. Advisory Op. of the Commr. of Taxn. and Fin. TSB-A-08(12)S (Feb. 14, 2008).

In NYT-G-12(1)S, the DTF applied these rules to facilities that provide Pilates classes and yoga instruction. First, the DTF determined that charges for use of these facilities are not subject to state sales tax because the facilities were not "athletic clubs." Then, the DTF considered whether these facilities' charges are subject to New York City local sales tax.

The DTF explained that yoga instruction is not an exercise activity because yoga generally includes within its teachings but activities such as meditation, spiritual chanting, breathing techniques, and relaxation skills, not simply physical exercise. Thus, yoga facilities that only offer instruction in various yoga styles are not considered to be weight control salons, health salons, or gymnasiums.

On the other hand, The DTF stated that facilities that provide Pilates classes or a combination of yoga and Pilates qualify as gymnasiums because Pilates classes constitute exercise activities. Consequently, charges for all the services provided at, or for the use of, such facilities (including classes for instruction in yoga) are subject to the New York City local sales tax.


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