Are supervised physical-therapy and fitness services taxable as New York City gymnasium/health-salon services, or exempt because a licensed physiotherapist is involved?

Plain-English summary

A New York City facility offered supervised physical training, rehabilitation, and therapy. Clients were admitted only on a physician's written authorization, given a lengthy evaluation, and then worked one-on-one with either a licensed physiotherapist or a degreed professional physical trainer under a physiotherapist's ongoing supervision. The facility asked whether its services are subject to the New York City tax on gymnasium and health-salon services.

New York City taxes (under Tax Law § 1212-A(a)(2) and NYC Administrative Code § 11-2002(h)) massage and "similar services," and services by weight-control salons, health salons, gymnasiums, and similar establishments. But the statute excludes services rendered by a physician, physiotherapist, and other professionals licensed under Title VIII of the Education Law. The key word is rendered: the exclusion depends on who actually performs the service, not who supervises it or owns the facility.

The Department held that this facility's services are similar to those of a gymnasium or health salon and are therefore taxable — except where the service is actually rendered by a licensed physiotherapist. When a service is instead delivered by an unlicensed professional physical trainer, the charge is subject to New York City sales tax, and that is true even if the trainer works under a licensed physiotherapist's supervision and even if the client came in on a physician's referral. Only the hands-on involvement of the licensed professional removes a given service from tax.

What this means for you

Gyms, health salons, and rehabilitation/training studios in NYC

If you sell gymnasium- or health-salon-type services in New York City, they are presumptively taxable under the City's § 1212-A tax. Having a licensed physiotherapist on staff or supervising does not blanket-exempt your business. The exemption applies service-by-service and only when the licensed professional actually performs the service. Track which sessions are delivered hands-on by a licensed physiotherapist versus by an unlicensed trainer.

Medically-oriented fitness and physician-referred programs

A physician's referral does not make the service exempt. Neither does close supervision of an unlicensed trainer by a licensed physiotherapist. If the person actually working with the client is not licensed under Title VIII, the City tax applies to that charge.

Accountants and tax professionals

This is a New York City tax (§ 1212-A(a)(2) / Admin. Code § 11-2002(h)), not the statewide § 1105 sales tax, so it turns on the City provisions and the Title VIII "rendered by" exclusion. The Department relied on Publication 846's massage-parlor Q&As applying the same actually-rendered-by-a-licensee test. Documentation of who performed each service is the crux.

Common questions

Q: Are the facility's services taxable?
A: Yes, as a New York City gymnasium/health-salon-type service under § 1212-A(a)(2), except for services actually rendered by a physiotherapist licensed under Title VIII of the Education Law.

Q: Does a licensed physiotherapist's supervision exempt a trainer's session?
A: No. The exclusion applies only when the service is actually rendered by the licensed professional. A session delivered by an unlicensed physical trainer is taxable even if a licensed physiotherapist supervises it.

Q: Does a physician's referral make the service exempt?
A: No. The Department was explicit that even when the client is referred by a physician, the service is taxable unless it is actually rendered by a licensed physiotherapist.

Q: Is this a statewide sales tax or a New York City tax?
A: It is a New York City tax imposed under Tax Law § 1212-A(a)(2) and NYC Administrative Code § 11-2002(h), which reaches health-salon and gymnasium-type services.

Q: Can another facility rely on this opinion?
A: No. An advisory opinion binds the Department only as to the petitioner and the facts described. It illustrates the Department's reasoning, but your facts may differ.

Citations and references

Statutes and authorities:

• Tax Law § 1212-A(a)(2) (New York City tax on massage, health salon, gymnasium, and similar services; exclusion for services rendered by licensed professionals)
• New York City Administrative Code § 11-2002(h) (parallel New York City provision)
• Education Law Title VIII (licensing of physiotherapists and similar professionals)
• NYS Tax Department Publication 846 (1/85), Sales Tax Information on Selected Services in New York City

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1993.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a93_21s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-93 (21)S
Sales Tax
March 30, 1993

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S921029B

On October 29, 1992 a Petition for Advisory Opinion was received from 49th Street Sports
Training Institute, Inc., 239 East 49th Street, New York, New York 10017.
The issue raised by Petitioner, 49th Street Sports Training Institute, Inc., is whether the
services provided by it are subject to the sales tax imposed by Section 1212-A(a)(2) of the Tax Law
and Section 11-2002(h) of the New York City Administrative Code as services rendered by a
gymnasium or health salon.
Petitioner operates a facility for supervised physical therapy and rehabilitation. Petitioner
directly employs professional physical trainers. The professional physical trainers are required to
have bachelors degrees in exercise physiology or related fields. At least 30 percent of the
professional physical trainers have masters degrees in their fields of study. Petitioner also employs
administrative and managerial personnel who oversee the operation of the facility.
In addition to its direct employees, Petitioner also retains, under an exclusive contract,
licensed physiotherapists employed by Sports Training Physical Therapy, P.C. ("STPT").
Historically, both Petitioner's current employees and the physiotherapists were employees of a single
corporation: NSM Center, Inc. NSM Center, Inc. operated the 49th street facility in the same manner
as it currently is operated and provided the identical services. In 1984, NSM Center, Inc. reorganized,
with its operations divided into Petitioner and STPT. All of NSM's former employees (other than
the physiotherapists) were employed by Petitioner. In other words, all receptionists, clerical,
administrative, billing, physical trainers, and other employees (other than the licensed
physiotherapists) remained on Petitioner's payroll. STPT employed only the physiotherapists; it had
(and still has) no other employees, not even someone to answer the telephone. STPT does not need
other employees because it obtains all of these services (reception, clerical, billing, etc.) from
Petitioner. The two corporations operate in a totally integrated manner, using the same facility and
all of the same administrative personnel.
The overall operation of Petitioner's facility is identical to the operations formerly conducted
by NSM Center, Inc. The physiotherapists act as the on-site physical therapy department and work
exclusively at Petitioner's facility. The two companies act as one enterprise, and in tandem, provide
the physical therapy and rehabilitation services at Petitioner's facility. All client billing,
administration, and management is performed by Petitioner, in exchange for which Sports Training
Physical Therapy, P.C. pays a management fee to Petitioner.

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Sales Tax
March 30, 1993
At Petitioner's facility, no client is admitted without written authorization from a physician
based on a recent physical examination. In many cases the physician's authorization extends to
prescription of a specific program of physical therapy and rehabilitation designed to address a
medical problem.
All clients, prior to using any of the equipment are thoroughly evaluated by the
physiotherapists. This 1 ½ hour evaluation involves a review of the client's medical history, complete
musculoskeletal screening, tests of body composition, aerobic capacity, strength, flexibility,
cardiovascular performance, and muscular endurance. Only after this evaluation has been performed
does the physiotherapist prescribe an individualized program designed to address the client's specific
medical and physiological needs. No client uses any equipment except according to the program
developed and supervised by the physiotherapist.
The programs developed by the physiotherapists are implemented through the client working
one-on-one with either a licensed physiotherapist or a professional physical trainer. No client may
use the facilities unaccompanied and unsupervised.
In those situations where the program is implemented by the professional physical trainer,
the physiotherapist remains integrally and continuously involved in each client's progress under the
program. The physiotherapist has on-going communication with both the professional physical
trainer and the client's physician. The physiotherapists' only offices are located in the exact same
space occupied by Petitioner's physical trainers. Thus, physiotherapists are on-site at all times and
immediately accessible to evaluate progress, prescribe changes, or deal with any problems.
Physiotherapists monitor the client's development and, if necessary, perform supplemental
evaluations which may be even more extensive than the initial evaluation discussed earlier.
Section 1212-A(a)(2) of the Tax Law and Section 11-2002(h) of the New York City
Administrative Code impose a tax on the receipts from every sale of" ... massage services and similar
services, and every sale of services by weight control salons, health salons, gymnasiums, turkish and
sauna bath and similar establishments and every charge for the use of such facilities, whether or not
any tangible personal property is transferred in conjunction therewith; but excluding services
rendered by a physician, osteopath, dentist, nurse, physiotherapist, chiropractor, podiatrist,
optometrist, ophthalmic dispenser or a person performing similar services licensed under Title VIII
of the education law as amended .... "
New York State Department of Taxation and Finance Publication 846 (1/85), Sales Tax
Information on Selected Services in New York City, in listing miscellaneous personal services
subject to the New York City sales tax states, starting at page 14:
"Q.

If a licensed physician operates a massage parlor for therapeutic purposes and
staffs it with licensed physiotherapists and nurses, are the services rendered
subject to the 4% sales tax imposed by New York City?

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TSB-A-93 (21)S
Sales Tax
March 30, 1993
A.

Not if the massage services are rendered by either the licensed physician or
the licensed physiotherapists or nurses. However, if the establishment also
employs attendants who are not licensed in the above-mentioned categories
and they render the services, the services would be subject to the tax,
regardless of who the owner or administrator of the facility might be.

Q.

What is the taxable status if the establishment in the previous question
renders its services to clients only upon referral by physicians, and an
attendant, although not licensed as a physician, physiotherapist or nurse,
administers the massage under instructions from one of these licensed
individuals?

A.

The service would be taxable, unless actually rendered by a licensed
physician, physiotherapist or nurse."

Although Petitioner is not operating a massage parlor, Petitioner's sales of services are similar
to the sales of services by gymnasiums, health salons and similar establishments. Accordingly, the
services rendered by Petitioner are subject to the tax imposed under Section l212-A(a)(2) of the Tax
Law and Section 11-2002(h) of the New York City Administrative Code unless the services are
actually rendered by a physiotherapist licensed under Title VIII of the education law as amended. It
is noted that when Petitioner renders its service to a client upon referral by a physician the service
will also be taxable unless actually rendered by a licensed physiotherapist. In all instances where
an unlicensed physiotherapist or professional physical trainer renders services on behalf of Petitioner
with or without supervision of a licensed physiotherapist, Petitioner's charges to the client for such
services will be subject to the New York City sales tax.

DATED: March 30, 1993

/s/
PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.