Ohio generally taxes gym, athletic club, and health spa memberships that allow members to use the facility for physical exercise. R.C. 5739.01(B)(3)(n) & (r). However, with the growing popularity of group fitness classes, the issue arose whether fees for unlimited access to instructor-led classes are taxable. The Ohio Department of Taxation recently answered this question – these membership fees are not taxable.
The Department’s new regulation clarifies that memberships entitling one to use of a facility only during organized instructor-led classes are not taxable physical fitness facility services. Ohio Admin. Code 5703-9-62. This means your membership to places like a yoga studio, Orangetheory, Title Boxing, Crossfit, and numerous other places that provide fitness classes are not subject to sales tax. This is because the member is not entitled to open use of the facility, but rather may only attend fitness classes.
Ohio sales tax is imposed on membership dues paid for the right to use all or part of a physical fitness facility. Essentially, monthly or annual fees paid for the unlimited use of gyms and other fitness facilities are taxable. But fees paid for instructor-led classes, even if unlimited, are not taxable because the member does not have open access to the facility. Moreover, “user fees” such as charges for hourly court rentals, instructor-led classes, sessions with a personal trainer, or passes for one-time use or a limited number of classes are not taxable.
To illustrate the rule, consider a gym that charges a registration fee to secure the member’s spot, a monthly membership fee for unlimited use of the facilities, an optional monthly fee to attend 10 instructor-led classes a month, and a separate fee to attend a substance abuse lecture. The registration fee and monthly membership dues are taxable, while the optional fees for the instructor-led classes and substance abuse lecture are exempt.
The administrative rule also provides that fitness facilities cannot claim an exemption for purchases of equipment or supplies used or consumed to provide physical fitness services.
Gyms and other fitness facilities should analyze their offerings to determine their sales tax obligations relative to the services they provide. If you have any questions about whether your membership fees or other charges are taxable, please contact us.
Attorney Steven A. Dimengo is Managing Partner of Buckingham, Doolittle & Burroughs, LLC. He helps clients with complicated tax challenges including Ohio sales/use, income, commercial activity and federal taxes and has represented clients before the Ohio Supreme Court. Steve can be reached at sdimengo@bdblaw.com or 330.258.6460.
Richard B. Fry III is a partner and Buckingham’s Taxation Practice Group Chair. He focuses on state and local tax compliance and controversies, including Ohio and multistate sales/use tax, commercial activity tax, and personal income tax issues. Rich can be reached at rfry@bdblaw.com or 330.258.6423
Nathan M. Fulmer is an associate in Buckingham’s Taxation Practice Group. He represents clients on a broad range of tax planning and controversy matters. His joint degree in taxation allows him to provide unique solutions when assisting clients on business matters. Nate can be reached at nfulmer@bdblaw.com or 330.258.6464.
