Are a New York City fitness studio's class entry fees and weight-loss-challenge fees subject to sales tax?

Plain-English summary

A New York City HIIT (high-intensity interval training) studio runs heart-rate-based, coach-led group fitness classes using treadmills, rowing machines and resistance tools (equipment use is limited to the group classes). It also offers an optional weight-loss challenge for an extra fee, with a cash prize for the highest body-fat reduction. It asked whether State and local taxes apply to its class entry fees and weight-loss-challenge fees.

The Office of Counsel concluded these fees are subject to New York City local tax, but not New York State sales tax:

• Not a State admission charge. They are not charges for admission to a place of amusement under Tax Law section 1105(f)(1) (and that tax expressly excepts charges for facilities for participatory sporting activities).
• Not athletic-club dues. The studio is not an athletic club because there is no organizational structure under which members control activities, select members, manage the club, or hold a proprietary interest (20 NYCRR 527.11(b)). So Tax Law section 1105(f)(2) does not apply.
• Not an enumerated service. Personal-training services are not among the services taxed under Tax Law section 1105(c).
• But NYC taxes health/weight-control salons. New York City imposes a local tax on services of "weight control salons, health salons, gymnasiums, turkish and sauna baths and similar establishments" and charges for using such facilities (Tax Law section 1212-A(a)(2); Administrative Code section 11-2002(a)). A facility offering exercise equipment but no participatory-sports facilities (e.g., basketball/volleyball/racquetball courts or a pool) is a weight-control salon/gymnasium. Because this studio has no participatory-sports facilities, both its class entry fees and weight-loss-challenge fees are taxable under Administrative Code section 11-2002(a).

What this means for you

"No State tax" does not mean "no tax" in New York City

A gym or fitness studio's fees can be free of New York State sales tax yet still taxable by New York City as a health/weight-control salon or gymnasium. New York City operators must charge the local tax on memberships, class fees and use charges.

The participatory-sports line decides the category

A facility with exercise machines but no participatory-sports facilities (courts, pools) is treated as a weight-control salon/gymnasium subject to the NYC tax. Real participatory-sports facilities can change the classification.

Structure determines "athletic club"

You are not an "athletic club" (with taxable dues) unless members actually control and have a proprietary stake in the organization. A studio that simply sells classes is not an athletic club.

Common questions

Q: Are my class fees subject to New York State sales tax?
A: No — they are not amusement admissions, athletic-club dues, or an enumerated service. But they are subject to New York City's local health/weight-control salon tax.

Q: Why is my studio a "weight control salon"?
A: Because you provide exercise equipment but no participatory-sports facilities (like courts or a pool). That puts you within Administrative Code section 11-2002(a).

Q: Is the weight-loss-challenge fee taxed the same way?
A: Yes — it is also a charge by a weight-control/health salon or gymnasium, taxable under the NYC local tax.

Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner. Use it as guidance and confirm your own facts.

Citations and references

• Tax Law section 1105(f)(1) (admission charges to places of amusement; participatory-sports exception)
• Tax Law section 1105(f)(2) (social or athletic club dues)
• Tax Law section 1105(c) (enumerated taxable services)
• Tax Law section 1212-A(a)(2) (New York City local tax on health/weight-control salons)
• Administrative Code of the City of New York section 11-2002(a) (NYC tax on weight-control/health salons, gymnasiums)
• 20 NYCRR 527.11(b) (athletic club organizational structure)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2016.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a16_13s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-16(13)S
Sales Tax
April 26, 2016

Office of Counsel
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S150121B

The Department of Taxation and Finance received a Petition for an Advisory Opinion
from REDACTEDREDACTEDREDACTEDREDACTED (Petitioner).
Petitioner requests
guidance on whether state and local taxes apply to its receipts for entry fees to high intensity
interval training (HIIT) fitness classes offered at its facility within New York City. Petitioner
further requests guidance on whether state and local taxes apply to its receipts for entry fees to its
weight loss challenges.
We conclude that Petitioner’s receipts for class entry fees are subject to local sales tax
pursuant to Administrative Code of the City of New York (Administrative Code) § 11-2002(a).
Likewise, the receipts for entry fees into its weight loss challenges are subject to local sales tax
pursuant to Administrative Code § 11-2002(a). Neither entry fee is subject to New York State
sales tax.
Facts
Petitioner offers heart-rate based HIIT instructional fitness classes. Petitioner’s
customers wear heart rate monitors during classes. Heart rates are displayed on viewing
monitors within the exercise studio. The coach overseeing the fitness class attempts to ensure
that performance is maximized throughout the class, as measured by heart rate and caloric burn.
Customers purchase classes in six different ways, with the different annual fees covering
different numbers of classes in a given time period or an unlimited number of classes per month.
All plans provide access to group training classes only, which are always led by a
certified coach. Instructional classes include the use of treadmills, rowing machines, and other
resistance training tools (equipment). All use of equipment is strictly limited to group classes.
There is no option for the use of the equipment or the larger facility as a whole outside of
scheduled group class times.
Petitioner’s customer base includes athletes and non-athletes seeking to raise their fitness
levels, increase cardiovascular health, and build muscle. The overall goal of more than 90% of
the customers is not simple weight loss. However, Petitioner does offer an optional weight loss
challenge. Petitioner’s customers may participate in the challenge by paying an additional fee.
The winner of the challenge is determined by highest percentage of body fat reduction and wins

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TSB-A-16(13)S
Sales Tax
April 26, 2016

a cash prize. The participants in the weight loss challenge do not obtain any additional access to
Petitioner’s facilities or equipment.
Analysis
Tax Law § 1105(f) imposes sales tax, in part, on receipts from:
(1) Any admission charge… to or for the use of any place of
amusement in the state… except charges to a patron for admission to, or use
of, facilities for sporting activities in which such patron is to be a
participant, such as bowling alleys and swimming pools. . . .
(2)(i) The dues paid to any social or athletic club in this state if the
dues… are in excess of ten dollars per year, and on the initiation fee alone,
regardless of the amount of dues, if such initiation fee is in excess of ten
dollars….
Petitioner’s class entry fees and weight loss challenge fees do not constitute charges for
admission to a place of amusement. Therefore, the receipts for those fees are not subject to sales
tax on admission charges under Tax Law § 1105(f)(1). See NYT-G-12(1)S; NYT-G-08(2)S;
TSB-A-00(26)S; TSB-A-87(21)S.
Dues or membership fees paid to an athletic club would be subject to State and local sales
tax. However, the petitioner is not operating an athletic club because there is no organizational
structure under which members control social or athletic activities of the club, participate in club
member selection, participate in club management, or possess a proprietary interest in the club.
See 20 NYCRR § 527.11(b). Accordingly, Petitioner’s receipts for entry fees into classes or
weight loss challenges are not subject to tax as dues paid to an athletic club pursuant to Tax Law
§ 1105(f)(2).
Moreover, Tax Law § 1105(c) imposes tax on receipts from every sale, except for resale,
of certain enumerated services. Because personal training services are not included in the
services taxed under Tax Law § 1105(c), the receipts from such services are not subject to New
York State sales tax. See TSB-A-03(38)S.
However, the City of New York imposes a local sales tax at the same uniform rate on
"every sale of services by weight control salons, health salons, gymnasiums, turkish and sauna
baths and similar establishments and every charge for the use of such facilities . . . .” See Tax
Law § 1212-A(a)(2); Administrative Code § 11-2002(a). An establishment that provides steam
baths, saunas, rowing machines, shaking machines or other exercise equipment and does not
provide facilities for participatory sports activities is considered to be a weight control salon
subject to the tax imposed by Administrative Code § 11-2002(a). See TSB-A-10(46)S. Facilities
for participatory sports activities include, for example, basketball courts, volleyball courts,
swimming pools or racquetball courts. See TSB-A-14(12)S; TSB-A-10(46)S; TSB-A-08(12)S.
Because Petitioner does not provide any participatory sporting activities or facilities to its
members, Petitioner’s facility is a weight control salon, gymnasium or similar establishment as

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TSB-A-16(13)S
Sales Tax
April 26, 2016

described in Administrative Code § 11-2002(a). Petitioner’s receipts for class entry fees,
therefore, are subject to tax pursuant to Administrative Code § 11-2002(a). Likewise, the
receipts for entry fees into weight loss challenges are subject to tax pursuant to Administrative
Code § 11-2002(a) as a sale of a service by a weight control salon, health salon, gymnasium, or
similar establishment and/or a charge for the use of such facilities.

DATED: April 26, 2016

/S/
DEBORAH R. LIEBMAN
Deputy Counsel
NOTE:

An Advisory Opinion is issued at the request of a person or entity. It is
limited to the facts set forth therein and is binding on the Department only
with respect to the person or entity to whom it is issued and only if the person
or entity fully and accurately describes all relevant facts. An Advisory
Opinion is based on the law, regulations, and Department policies in effect as
of the date the Opinion is issued or for the specific time period at issue in the
Opinion. The information provided in this document does not cover every
situation and is not intended to replace the law or change its meaning.