Gym Fees Soon to be Exempt from Sales Tax

The new law applies to gyms, fitness centers, fitness studios, high intensity interval training, cross training, ballet barre, pilates, yoga, spin classes, and aerobics classes.

In a previous post, we noted that in June 2018 the Tennessee Department of Revenue issued a Notice regarding gym fees. The Notice reminded taxpayers that dues or fees paid to health clubs and other facilities are subject to sales tax. Although the rule was not new, most people, including gym owners, were apparently unaware of it.

In response to the outcry over the Notice, the Tennessee Legislature took action by introducing House Bill 1138 in February. HB1138, as amended, replaces the existing, but limited, sales tax exemption for gym fees found at T.C.A. § 67-6-330(16). The actual language of the new exemption is as follows:

(16) Admission, dues, fees, or other charges paid to any person principally engaged in offering services or facilities for the development or preservation of physical fitness through exercise or other active physical fitness conditioning. This exemption shall apply to services and facilities such as gyms, fitness centers, fitness studios, high intensity interval training, cross training, ballet barre, pilates, yoga, spin classes, aerobics classes, and other substantially similar services and facilities that principally provide for exercise or other active physical fitness conditioning. This exemption shall not apply to persons principally engaged in offering recreational activities such as country clubs, tennis clubs, golf courses, and other substantially similar recreational facilities and activities.

Notably, HB1138 does not repeal T.C.A. § 67-6-212(a)(1). This is the portion of the amusement tax applies to “dues or fees to membership sports and recreation clubs.” Therefore, payments to organizations that do not satisfy the criteria above, such as country clubs, tennis clubs, and golf courses, will remain subject to sales tax.

HB1138 was signed into law by the Governor on, appropriately enough, April 15, 2019. It has been assigned Public Chapter 159. It does not take effect until July 1.

Posted by Joel D. Roettger, JD, LLM, EPLS

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