LR 7166

Hourly Training Classes, Open Gym Memberships, and T-Shirt Sales Are Subject to Sales Tax

November 07, 2012

Dear Applicant:

     This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated September 13, 2012.

     The facts as presented in your letter ruling request are summarized as follows:

Applicant operates a gym that provides training classes led by an instructor and paid for by the hour; sells open gym memberships; and sells products such as t-shirts.

ISSUE 1:

     Is Applicant's hourly charge for a training class led by an instructor subject to sales tax?

RESPONSE 1:

     Yes. Applicant's hourly charge for a training class led by an instructor is subject to sales tax.

     Section 144.020.1(2), RSMo, 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 Michael Jaudes Fitness Edge, Inc. v. Director of Revenue, 248 S.W.3d 606 (Mo. banc 2008), the Missouri Supreme Court 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. The fitness center charged its members fees for using the facility under the supervision of a personal trainer. The Supreme Court held that Section 144.020.1(2), RSMo, "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, entertainment or recreation and fees paid to it are subject to sales tax under Section 144.020.1(2), RSMo. Therefore, an hourly charge by Applicant for a training class led by an instructor is subject to sales tax.

ISSUE 2:

     Are Applicant's charges for open gym memberships subject to sales tax?

RESPONSE 2:

     Yes. Applicant's charges for open gym memberships are subject to sales tax. See Response 1.

ISSUE 3:

     Are Applicant's sales of products, such as t-shirts, subject to sales tax?

RESPONSE 3:

     Yes. Applicant's sales of products, such as t-shirts, are subject to sales tax.

     Section 144.020, RSMo, imposes sales tax on all sellers for the privilege of engaging in the business of selling tangible personal property at retail. T-shirts and supplements are tangible personal property. Therefore, Applicant's sales of products are subject to sales tax.

     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 Legal Counsel Christopher R. Fehr, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475 (phone 573-751-0961), or me.

Sincerely,

Alana M. Barragán-Scott