At a weight-management clinic, which charges are taxable — instructional classes, fitness-center membership, or food products?

Plain-English summary

A weight-management clinic for children and adults offers several things for its fees: a structured weight-management program with classes on nutrition, exercise, and behavior; an optional fitness-center membership; food supplements for its adult program; "Mommy Classes" for new mothers; and an individualized private weight-management class. It asked the Department which of these are subject to Kansas sales tax. The answer splits along an instruction-versus-facility-and-goods line.

The classes are not taxable. The Department ruled that "fees paid by your clients for the purpose of attending or participating in any of the classes described in this letter, are not subject to Kansas retailers' sales tax." That covers the program's instructional classes, the "Mommy Classes" (answered "No"), and the private weight-management class (also answered "No"). Charges for instruction — teaching nutrition, exercise, and behavior — are not taxable recreation.

The fitness-center membership is taxable. Asked whether a weight-management client's fitness-center membership is taxed, the Department answered "Yes." The reason is K.A.R. 92-19-73, which requires clubs, organizations, and businesses to collect sales tax on dues charged to members "for the use of the facilities for recreation and entertainment." The regulation defines "recreation and entertainment" to specifically include "health, fitness, exercise and athletic activities" — so a membership sold for use of the clinic's fitness center is a taxable membership charge, even at a medical weight-management clinic.

The food products are taxable. Asked whether food products sold to weight management clients are taxed, the Department answered "Yes." The food supplements and other food products the clinic sells are tangible personal property and are taxable when sold at retail.

The dividing line. Pay to learn (a class) and it is not taxed; pay to use the fitness facility (a membership) or to buy a product (food supplements) and it is taxed. The label "weight-management clinic" does not exempt the membership or the product sales.

Bottom line: the clinic should not charge sales tax on its instructional class fees, but should collect Kansas sales tax on fitness-center memberships and on the food products and supplements it sells to clients.

What this means for you

Clinics, studios, and wellness businesses

Separate your revenue into instruction, facility access, and product sales. Fees for attending or participating in classes were not taxable here. But membership dues for use of a fitness facility are taxable under K.A.R. 92-19-73 — which expressly reaches "health, fitness, exercise and athletic activities" — and retail sales of food, supplements, and other goods are taxable tangible personal property.

A medical or weight-loss purpose does not exempt the gym membership

The clinic's health mission did not change the answer on membership dues. If you sell access to fitness facilities, the dues are taxable recreation-and-entertainment charges regardless of the therapeutic framing.

Watch how you bundle

Because classes are non-taxable while memberships and products are taxable, keep the charges separately stated. Rolling a taxable fitness membership or supplement sale into a single "program fee" with non-taxable instruction can pull the whole charge into tax or create documentation problems — invoice the taxable and non-taxable pieces distinctly.

Common questions

Q: Are the clinic's class fees subject to Kansas sales tax?
A: No. The Department ruled that fees to attend or participate in any of the described classes — including the "Mommy Classes" and the private weight-management class — are not subject to Kansas retailers' sales tax.

Q: Is a fitness-center membership taxable?
A: Yes. Under K.A.R. 92-19-73, dues for the use of facilities for recreation and entertainment — which the regulation defines to include health, fitness, exercise, and athletic activities — are taxable.

Q: Are food products and supplements sold to clients taxable?
A: Yes. They are tangible personal property sold at retail and are subject to Kansas sales tax.

Q: Does the clinic's medical/weight-loss purpose exempt the membership or the supplements?
A: No. The Department taxed the fitness membership and the food products despite the clinic's weight-management purpose; only the instructional class fees were non-taxable.

Citations and references

• K.A.R. 92-19-73 — membership fees and dues; requires businesses to collect sales tax on dues charged for the use of facilities for "recreation and entertainment," which the regulation defines to specifically include health, fitness, exercise, and athletic activities.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2001-130

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

December 3, 2001

XXXXXXXXXXXXX
XXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXX

Dear XXXXXXXXXXXXX:

The purpose of this letter is to respond to your letter dated November 13, 2001.

In your letter you stated:

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

The pediatric population and their parents enroll in an intensive 10-week program that teaches nutrition, exercise, and behavior changes with nine and one-half months devoted to follow up care by me and my staff. The clinic has a fitness center where clients workout as a part of their weight management program. An additional part of their program provides an option to purchase a membership to support their weight loss.

Our four-tiered medically managed adult program requires patients to purchase food supplements for their weight management.

We offer classes that I teach along with one of our trainers for new mothers regarding information on infants, diet and exercise.

Another specialized offer is an individualized 5-session class, nutrition and exercise are always used as baseline classes and the three remaining classes utilize this information to customize both the teaching and support given for an individual's personal lifestyle.

K.A.R 92-19-73 provides:

Membership fees and dues. (a) Each public or private club, organization or business charging dues to members for the use of the facilities for recreation and entertainment shall collect sales tax on the gross receipts received from the dues.
(b) “Dues” means any charge which is a debt owed to the club, organization or business by an existing member or prospective member in order for the member or prospective member to enjoy the use of the facilities of the club, organization or business for recreation or entertainment, and shall include periodic or one time special assessments, initiation or entry fees.
(c) “Recreation and entertainment'” means any activity which provides a diversion, amusement, sport or refreshment to the member and specifically includes health, fitness, exercise and athletic activities.

Your letter continues with a series of questions:

Are any of the aforementioned classes taxed, if so, which ones?

Answer: Fees paid by your clients for the purpose of attending or participating in any of the classes described in this letter, are not subject to Kansas retailers’ sales tax.

Is the fitness center membership of a weight management client taxed?

Answer: Yes.

Are food products sold to weight management clients taxed?

Answer: Yes.

Are the "Mommy Classes" taxed?

Answer: No.

Is the private weight management class taxed?

Answer: No.

This private letter ruling is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to make an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects this private letter ruling.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 12/13/2001 Date Modified: 12/13/2001

Table 1

Table 2