Is a corporate wellness program's health screening, fitness instruction, and re-evaluation/monitoring services subject to Texas sales tax?

Plain-English summary

A health/athletic club asked the Comptroller whether charges for its corporate wellness program were subject to Texas sales tax. The program included three components: (1) a health risk appraisal -- testing for cholesterol, body composition, blood pressure, lung function, cardiovascular fitness, flexibility, and abdominal strength; (2) wellness information and instruction -- educational literature, seminars, and counseling on nutrition, exercise, and health topics, plus instruction in cardiovascular conditioning and strength/circuit training; and (3) re-evaluation and monitoring -- retesting individuals, updating health histories, and tracking group participation and results.

The Comptroller ruled that a charge for these wellness program services is not subject to sales tax. The response noted it was based on the understanding that participation in the corporate wellness program was not limited to members of the club itself. The ruling did carve out one exception: if the club sells tangible personal property separately -- such as books and manuals -- tax must be collected on that property. If the club doesn't collect tax on such items when it sells them, it must instead pay tax on that property itself at the time of purchase.

The letter closed with the standard caveat that the opinion is based on the facts presented, and that additional or different facts could change the outcome.

What this means for you

Health clubs and wellness program operators

If you sell a bundle of health-screening, educational/instructional, and monitoring services similar to those described here, the charge for those services is not subject to Texas sales tax. But keep an eye on any physical materials -- books, manuals, or other tangible items -- distributed or sold as part of the program; those are taxable and need to be handled separately (either tax collected from the customer or tax paid by the club on its own purchase of the items).

Employers offering corporate wellness benefits

If your company contracts with a club for employee wellness programming (screening, instruction, monitoring), this ruling suggests the service charge itself should not carry Texas sales tax, though the facts of your specific arrangement should be confirmed against the club's invoicing practices.

Accountants and tax professionals

This is a narrow, facts-specific letter: it addresses only the three described service categories and turns on the premise that the wellness program isn't restricted to the club's own membership. Any variation in the facts -- for example, if the "wellness program" were instead just standard access to club facilities and equipment -- could produce a different result, since the letter expressly limits itself to the facts presented.

Common questions

Q: Is the fee for a corporate wellness program (health screening, instruction, monitoring) subject to Texas sales tax?
A: No. The Comptroller found that a charge for the wellness program services described -- health risk appraisal, wellness information/instruction, and re-evaluation/monitoring -- is not subject to sales tax.

Q: What if the club sells books or manuals as part of the program?
A: Tangible personal property sold separately, such as books and manuals, is taxable. If the club doesn't collect sales tax on those items from its customers, it must pay tax on them itself when it purchases them.

Q: Does it matter whether the wellness program is open to the general public or only club members?
A: Yes -- the ruling's response is expressly conditioned on the understanding that participation in the wellness program was not limited to members of the club.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9205L1169C11

Original ruling text

May 6, 1992

Dear *****:

Thank you for your recent letter asking about the taxability of the
*****.

You stated that the services provided under the wellness program are as
follows:

1. HEALTH RISK APPRAISAL includes testing for total serum cholesterol, HDL
   cholesterol, body composition and blood pressure; as well as, lung function
   screening, cardiovascular evaluation, body flexibility measurement and upper
   and lower abdominal strength measurement.

2. WELLNESS INFORMATION AND INSTRUCTION includes educational literature,
   seminars and counseling in nutrition, exercise and various health topics such
   as blood pressure and cholesterol risk ratios; as well as, instruction in
   cardiovascular conditioning, strength training and circuit training.

3. RE-EVALUATION and MONITORING includes retesting and up-dating individual
   health histories; as well as, tracking employee participation and monitoring
   the results of the group.

Response: This response is based on my understanding that participation in the
corporate wellness program is not limited to members of the ***** Club.

A charge for the services provided by the wellness program described above is
not subject to sales tax. Tax must be collected on tangible personal property
(such as books and manuals) sold separately. Otherwise, the club must pay tax
on such tangible personal property at the time of purchase.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

If you have any questions or need more information, you may call me toll free
at 1-800-252-5555, extension 3-4633. The regular number is 512/463-4633. You
may also write to the Tax Administration Division.

Sincerely,

Wanda Hutcheson
Tax Administration Division