LR 4912

Personal Training and Physical Fitness Fees

July 17, 2008

Dear Applicant:

This is a letter ruling issued by the Director of Revenue pursuant to Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020 in response to your letter dated May 23, 2008.

The facts as presented in your letter are summarized as follows.

Applicant operates a health club. Applicant charges its members fees for personal services. Applicant’s personal services include: personal training, massage, swimming lessons (group and individual), tennis lessons (group and individual), rock climbing instruction, karate instruction, dance instruction, group fitness classes, and hair salon services (nails and hair). Such fees are paid directly to Applicant. Applicant’s employees generally provide these personal services. Occasionally, Applicant will hire independent contract instructors for its karate and dance instruction, however, the fees for these instructions are paid to Applicant. Applicant in turn pays the independent contractor for such services.

ISSUE 1:

Are the fees Applicant charges its members for personal training and group fitness classes subject to sales tax?

RESPONSE 1:

Yes, fees Applicant charges its members for personal training and group fitness classes are subject to sales tax.

Section 144.020.1(2) imposes sales tax on “the amount paid for admission and seating accommodations, or fees paid to, or in any place of amusement, entertainment or recreation, games and athletic events.”

In Wilson’s Total Fitness Center, Inc. v. Director of Revenue, 38 S.W.3d 424 (Mo. banc 2001), the Supreme Court of Missouri held, “[a]thletic and exercise or fitness clubs are places of recreation for the purposes of section 144.020.1(2), and the fees paid to them are subject to sales tax.”

In Michael Jaudes Fitness Edge, Inc. v. Director of Revenue, 248 S.W.3d 606 (Mo. banc 2008), the Supreme Court of Missouri held that fees paid to a place of amusement for personal training services were subject to tax. The fitness center did not charge its members membership fees but charged its members fees for using the facility under the supervision of a personal trainer. The Court held that Section 144.020.1(2) “draws no distinction between whether a person exercises pursuant to a plan of her own devising or under the immediate and direct supervision of a fitness trainer. Rather, the statute states that the tax is due for ‘fees paid to, or in any place of amusement, entertainment or recreation . . .’ for taxable services offered at retail.” Id. at 610.

Applicant is a place of amusement and fees paid to it are subject to sales tax under Section 144.020.1(2). Therefore, the fees Applicant charges its members for personal training and group fitness classes are subject to sales tax.

ISSUE 2:

Are fees Applicant charges its members for swimming lessons, tennis lessons, rock climbing instruction, karate instruction, dance instruction, massage and hair salon services subject to sales tax?

RESPONSE 2:

No, fees Applicant charges its members for swimming lessons, tennis lessons, rock climbing instruction, karate instruction, dance instruction, massage and hair salon services are not subject to sales tax.

Although Applicant is a place of amusement, the fees Applicant charges its members for supervised lessons or massage and hair salon services are not subject to sales tax. See Michael Jaudes Fitness Edge, Inc. v. Director of Revenue, 248 S.W.3d 606 (Mo. banc 2008); Kanakum-Kanakomo Kamps, Inc. v. Director of Revenue, 8 S.W.3d 94 (Mo. banc 1999).Therefore, the fees Applicant charges its members for swimming lessons, tennis lessons, rock climbing instruction, karate instruction, dance instruction, massage and hair salon services are not subject to sales tax.

ISSUE 3:

Are fees Applicant charges its members for karate and dance instruction taught by an independent contract instructor subject to sales tax?

RESPONSE 3:

No, fees Applicant charges its members for karate and dance instruction taught by an independent contract instructor are not subject to sales tax because the fees are for lessons. See Response 2. If the independent contractor provided personal training or group fitness classes, the fees would be taxable. See Response 1.

This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals. If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change. For this reason, the interpretation set forth above should be reviewed on a regular basis. Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.

Should additional information be needed, please contact Associate Counsel Amy Bartolomucci, Office of General Counsel, Post Office Box 475, Jefferson City, Missouri 65105-0475 (phone 573-751-0961), or me.

Sincerely,

Omar D. Davis