amusement tax

Are you Not Amused? Tennessee Legislature May have a Fiscal Fitness Question to Deal with in the 2019 Legislative Session Involving Physical Training

We have written previously about the Department of Revenue’s audit and assessment of physical fitness trainers such as CrossFit operators, and this issue does not appear to be going away. The debate about the sales tax and physical fitness facilities/physical training has been gaining steam since late 2017, and it now appears that the Legislature will be the next venue for this fight to continue.

As background, the amusement tax has always applied to recreation facilities, but the recent push to go after personal trainers is forcing policymakers to reconsider the wisdom of taxing exercise when Tennessee ranks 45th in the Country for surveys involving its citizens.

It is a somewhat complicated issue because health clubs and fitness facilities are clearly taxable, but where is the line between those that just provide personal training and those that provide access to workout facilities.

In the Department’s recent notice, Notice 18-09, the Department tried to clarify the issue. According to the Notice, dues or fees are taxable and per class fees for physical fitness classes at the facility are also taxable even if separately stated/itemized. The Notice carves out instruction training classes such as martial arts, dance lessons, gymnastics classes, fencing, skiing and yoga teacher training as examples of classes that are not taxable. But, Tennessee has declared most if not all personal training associated with a facility as taxable.

Pure Physical Training?

For charges for physical trainers that are not affiliated with a fitness facility, those charges do not appear to be included within the scope of the Notice and do not appear to be taxable, but there appears to be a fine line between pure physical fitness training and training as part of a club or facility. Physical trainers should be careful, and it may be worth a group of physical trainers requesting a ruling to clear up this question.

What’s Next?

We’ll see where this issue goes, but some legislators have already indicated a willingness to revisit the tax on recreation facilities, so the fight appears to be looming. With Wayfair dollars anticipated to start to flow in 2019, there is going to be some opportunities to cut other taxes, so it remains to be seen whether the tax on exercise will be one of the areas that the Legislature will target. Stay tuned…