Current through all regulations passed and filed through September 16, 2024
(A)
As used in this
rule:
(1)
"Physical fitness facility service" means all transactions
by which a membership is granted, maintained, or renewed, including initiation
fees, membership dues, renewal fees, monthly minimum fees, and other similar
fees and dues, by a physical fitness facility such as an athletic club, health
spa, or gymnasium, which entitles the member to use the facility for physical
exercise. Physical fitness facility service includes facilities operated with a
principal purpose of fostering or promoting participation in physical exercise.
Physical fitness facility service does not include user fees.
(2)
"Membership"
means the privilege, right, or entitlement to open use or the right to purchase
the use of all or part of a facility over an extended period, at least one
month, with or without time-of-day or day-of-week restrictions. Open use of the
facility does not include the right to only attend instructor-led classes even
if the amount of classes are unlimited in the month.
(3)
"Dues" means the
fee or charge required for membership, affiliation, initiation, use, or
subscription.
(4)
"Fees" means a charge fixed by a physical fitness
facility for certain privileges or services.
(5)
"Initiation fee"
means a payment as a condition precedent to becoming a member of an
organization.
(6)
"User fee" is a one-time charge for a limited privilege
or service.
(B)
The following are instances, not inclusive, in which
sales and use tax applies to the sale or use of:
(1)
Membership dues
or fees whether billed monthly or annually;
A community center, organized and
operated to promote social interaction, fellowship and community involvement,
offers meeting rooms; a reading room; a cafeteria; a theater for musical and
theatrical productions; and a physical fitness center with a pool, weight
machines, exercise classes, and a gymnasium for the use by its members. General
membership entitles the member to the use of most rooms and discounted
admission to performances. For an additional fee, one can purchase a membership
to the physical fitness facility. The general membership is not a membership to
a physical fitness facility and is not subject to the tax. The additional
membership fee is the sale of physical fitness facility service and is subject
to the tax. The entire membership fee is subject to the tax if there is no
reasonable separation of charges for the general membership and the fitness
membership.
(2)
Unlimited membership, classes, lessons, or group
sessions for at least one month;
A physical fitness facility sells a
basic membership to all who want to frequent the facility. This fee will get
the individual in the door. In addition, if an individual wants to participate
in any one particular program, the individual will pay another monthly fee,
which grants the open use of the program. All of these fees are considered
membership fees to an organization that promotes and fosters physical exercise
and subject to the tax.
(3)
Initiation fees,
including a one-time equity contribution by a member toward a specific physical
improvement to a physical fitness facility;
An applicant for membership into a
physical fitness facility will pay an initiation deposit. Upon payment, the
applicant is given the right to use the facility. The physical fitness facility
treats this payment as an interest-free five-year loan that it accounts for as
a long-term liability. If a member cancels its membership, the member is
entitled to a refund of the initiation deposit over a period of time not to
exceed five-years from the date of the member's original acceptance as a member
of the facility. These payments classified as loans or equity transactions do
not change their nature as fees or dues that are similar to an initiation fee.
The amount is taxable.
(4)
Renewal dues;
and
(5)
Monthly minimum fees.
(C)
The following are
instances, not inclusive, in which sales and use tax do not apply to the sale
or use of:
(1)
One-time use of a physical fitness facility;
(a)
A physical
fitness facility charges separate fees for each court usage by the hour. This
fee is a user fee and not a membership fee; the fee is not
taxable.
(b)
A physical fitness facility charges a separate fee for
each trainer-assisted workout. This fee is a user fee and not a membership fee;
the fee is not taxable.
(c)
A self-defense school charges a one-time registration
fee of one hundred dollars for all applicants to the academy. Then, individuals
may purchase a variety of ten-week sessions with two classes per week.
Additionally, the individual may utilize the academy's floor space and weight
bags when classes are not in session. The registration fee grants patrons the
right to purchase the use of the facility for physical exercise and meets the
requirements of a membership fee. Tax should be charged on the registration
fee. The fee for the specified number of classes is a "user fee" and not a
membership, thus the charge for the classes is not subject to the
tax.
(2)
Specified number of classes, lessons, or group sessions
for a particular activity; and
(a)
A gymnastics school charges a fee for twenty-six
classes (two per week for thirteen weeks) that are payable in advance. This
gymnastics school is not selling a membership, but rather a specific number of
classes.
(b)
A physical fitness facility offers exercise classes
five days a week, four classes per day. For a monthly fee, an individual can
participate in any class they choose. This scenario does not qualify as a
membership fee. This fee does not grant the member the right to open usage of
the facility for a period of at least one month. Rather, the usage fee provides
restricted use of the facility only during an organized instructor-led
class.
(3)
A facility that is operated with a primary purpose of
making available to its patrons a facility or facilities for participation in
social or fraternal activities.
(a)
A fraternal organization, organized and operated to
foster social interaction and to provide community service, charges an
initiation fee and an annual membership fee. The social hall of the
organization has a weight room available for use by the members if they are so
inclined. There is no additional charge for the incidental use of the weight
room by a member. This organization is organized and operated for purposes
other than fostering and promoting physical exercise. The incidental
availability of fitness facilities for the occasional free use by members does
not constitute the sale of a physical fitness service.
(b)
A fraternal
organization, organized and operated to foster social interaction and to
provide community service, charges an initiation fee and an annual membership
fee. The social hall of the organization has a weight room available for use by
the members if they are so inclined. The fraternal club charges a fee for each
use of the weight room facility. A pay-for-play fee or user fee is not a
membership. It is a fee for the one-time use of the facility. User fees are not
to be the sale of physical fitness facility service and are not subject to the
tax.
(4)
Any program that is not fundamentally for the purpose
of fostering or promoting participation in physical exercise but may be offered
at the same facility as a physical fitness facility service is not considered a
physical fitness facility service, as long as, that program is billed
separately by the physical fitness facility. Some examples of include, but are
not limited to, lifeguard training, child care (including after school or early
learning), adult literacy programs, English language learning, G.E.D. classes,
substance abuse programs, Alzheimer's management, obesity intervention, first
aid, injury rehabilitation, or college preparation classes.
(D)
Unless an exemption based on who purchases the product
or who sells the product applies, a physical fitness facility is unable to
claim an exemption on purchases of equipment or supplies used or consumed at
the facility to provide the service.
