My fitness studio only offers instructor-led classes, not open gym access -- are my membership fees subject to Missouri sales tax?

Plain-English summary

The Missouri Department of Revenue ruled that membership fees charged by a company operating three Missouri health and fitness centers are not subject to Missouri sales tax, because every class the members attend is instructor-led.

Applicant's customers buy memberships (sold per class, month-to-month, or annually) that give them access to a variety of 45-minute and 60-minute health and fitness classes -- covering topics like balance, core strength, and mental health. Every one of these classes is led by an instructor; members cannot simply show up and use the space or equipment on their own.

Section 144.020.1(2), RSMo, generally taxes amounts "paid for admission and seating accommodations, or fees paid to, or in any place of amusement, entertainment or recreation, games and athletic events," but it expressly excepts "amounts paid for any instructional class." Section 144.010.1(5), RSMo, defines an "instructional class" as "any class, lesson, or instruction intended or used for teaching." Because all of Applicant's classes are led by an instructor and members cannot use the space or equipment individually, the Department concluded the membership fees are payments for instructional classes -- not fees for admission to a place of amusement or recreation -- and are therefore exempt from Missouri sales and use tax.

What this means for you

For fitness studios and gyms structuring their offerings

If every class or session you offer is led by an instructor -- and customers have no way to use your studio's space or equipment independently of that instruction -- your membership or class fees may qualify as payments for an "instructional class" under Section 144.010.1(5), RSMo, and fall outside the sales tax otherwise imposed under Section 144.020.1(2), RSMo. The key fact the Department relied on was that access was strictly tied to instructor-led sessions, not open, self-directed use of the facility.

For facilities that mix open-gym access with led classes

This ruling turns on the fact that Applicant's members could not use the space or equipment on their own at all -- every class had an instructor. If your facility instead sells memberships that include both instructor-led classes and open-gym or self-directed access to equipment, this ruling's reasoning would not automatically extend to the open-gym portion of your fees, since that access is not tied to instruction. Facilities with mixed offerings should evaluate whether their membership fees can be separated into taxable (open access) and exempt (instructional) components, or consult a tax professional about how the fee structure should be treated.

Common questions

Q: Would open gym access (no instructor) change the answer?
A: Very likely, yes. This ruling's exemption rests entirely on the fact that members could not use Applicant's space or equipment individually -- every class was instructor-led. If members could use equipment or facilities on their own without an instructor, that access would look more like a fee "paid to... any place of amusement, entertainment or recreation" under Section 144.020.1(2), RSMo, which is taxable.

Q: Does it matter whether the membership is sold per class, month-to-month, or annually?
A: No. The ruling treats all three billing structures the same way because the exemption depends on what the fee pays for (instructor-led classes) rather than how it is billed.

Q: Do the specific class topics (balance, core, mental health) matter to the outcome?
A: Not specifically. The ruling does not turn on the subject matter of the classes; it turns on the fact that each class is a taught, instructor-led session under Section 144.010.1(5), RSMo, rather than unsupervised recreational use of a facility.

Q: Can another Missouri gym or fitness studio rely on this ruling directly?
A: Not automatically. A Missouri letter ruling binds the Department only as to the requesting Applicant, only for three years from its date, and only so long as the facts and law remain unchanged. Another business should confirm its own classes are genuinely instructor-led with no independent access to space or equipment, and consult a tax professional before relying on this result.

Citations and references

Statutes and cases:

• Section 144.020.1(2), RSMo (sales tax on admission and fees paid to places of amusement, entertainment, or recreation, except amounts paid for an instructional class)
• Section 144.010.1(5), RSMo (defines "instructional class" as any class, lesson, or instruction intended or used for teaching)

Source

• Landing page: Missouri DOR Rulings Search
• Ruling: LR 8280

Original ruling text

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 November 9, 2023.

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

Applicant operates three health and fitness centers in Missouri. Applicant's customers purchase a membership that can either be used a) per class, b) month-to-month, or c) annual. These allow Applicant's customers to sign up for a variety of health and fitness classes. Customers are given access to a variety of 45-minute and 60-minute instructional classes. The instructional classes are always led by an instructor and cover a variety of health and fitness topics. Examples of a few of these classes are to improve balance, core, and mental health.

ISSUE :

Are Applicant's membership fees subject to Missouri state and local sales tax?

RESPONSE :

No. Applicant's membership fees are not subject to Missouri state and local sales tax.

Section 144.020.1(2), RSMo, subjects to sales tax as a service rendered at retail amounts "...paid for admission and seating accommodations, or fees paid to, or in any place of amusement, entertainment or recreation, games and athletic events, except amounts paid for any instructional class[.]"

"Instructional class" is defined by Section 144.010.1(5) RSMo., as including "[...]any class, lesson, or instruction intended or used for teaching[.]"

Applicant's membership fees are paid so that their members can take classes at Applicant's studios, and all of these classes are led by an instructor. Because all classes are led by an instructor and Applicant's members cannot use the space or equipment individually, these are considered as fees paid for an 'instructional class,' and therefore not subject to 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 J. Ross Shelton General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.

Sincerely,

Wayne Wallingford