DRS: SN 2003(7), Sales and Use Taxes on Health and Athletic Club Services

 

STATE OF CONNECTICUT
DEPARTMENT OF REVENUE SERVICES

25 Sigourney Street
Hartford CT 06106-5032
 
 
 
 
 
 

 
 

 

This Special Notice has been modified and superseded by SN 2003(7.1)

 

SN 2003(7)

 

Sales and Use Taxes on Health and Athletic Club Services

 

Purpose: This Special Notice describes recently enacted legislation that imposes sales and use taxes on health and athletic club services.  It also provides transitional rules for applying tax to sales of services occurring before and after the effective date of the legislation.


Effective Date: Effective April 1, 2003.

 


Statutory Authority: Conn. Gen. Stat. §12-407(a)(37)(FF), as enacted by 2003 Conn. Pub Acts 2, §27.


Sales and Use Taxes Imposed on Health and Athletic Club Services: Effective April 1, 2003, sales and use taxes are imposed on health and athletic club services.  Payments made to health and athletic clubs, such as service fees, membership fees, initiation fees, application fees, and similar fees, are subject to sales and use taxes.

Health and athletic club services provided at an additional charge are subject to sales and use taxes whether provided to members or guests.  Examples include additional charges by a health and athletic club for personal training sessions, aerobic exercise classes, tennis or swimming lessons, and any other activities not included in basic membership or service fees.

Health and athletic clubs may make nontaxable charges, such as for racquetball or tennis court rentals or massages by licensed massage therapists, in addition to their charges for taxable services.  The health and athletic club must separately state nontaxable charges from charges for taxable health and athletic club services.  If these charges are not separately stated, the entire charge is subject to tax.

Definition: As used in this Special Notice, health and athletic clubs mean businesses that feature exercise and other active physical fitness conditioning facilities directed at improving an individual’s muscle condition, body tone, or cardiovascular fitness, whether or not on a membership basis.  Businesses that are subject to sales and use taxes include, but are not limited to those that are engaged in operating aerobic dance and exercise classes, exercise salons, fitness salons, gymnasiums, physical fitness centers, and health fitness spas.

Health and athletic clubs do not include businesses limited to providing sports, amusement, and recreation services, whether they are private membership clubs or open to use by the public upon payment of a fee. 

Examples of these businesses include:

  • Beach clubs;
  • Boating clubs;
  • Bowling leagues and teams;
  • Golf clubs;
  • Hockey clubs;
  • Lawn bowling clubs;
  • Racquetball clubs;
  • Riding clubs;
  • Soccer clubs;
  • Tennis clubs;
  • Swimming clubs and yacht clubs;
  • Day camps;
  • Miniature golf, golf driving ranges, ice skating facilities; and
  • Businesses that provide instruction or competition in sports, dancing, or martial arts.  

Health and Athletic Services Excluded From Sales Tax: The legislation excludes from sales and use taxes health and athletic club services provided:

  • Without an additional charge and that are included in dues or initiation fees paid to the club that are subject to dues tax under Conn. Gen. Stat. §12-543 (for purposes of the dues tax, a club is any organization that is owned or operated by its members);
  • By a Connecticut municipality; and
  • By a non-profit organization described in Internal Revenue Code §501(c).


Dues Tax Implications: While some health and athletic clubs may be exempt from the dues tax, charges made by the clubs may nevertheless be subject to sales and use taxes as follows:

  • Clubs where the annual dues of a member enjoying full privileges and any initiation fee required of each member are each $100 or less are exempt from dues tax, but are subject to sales and use taxes on any separate charges for health and athletic club services.
  • Clubs that are sponsored and controlled by the federal government or the State of Connecticut are exempt from dues tax, but are subject to sales and use taxes on any separate charges for health and athletic club services.

 

Transitional Rules: Payments made for health and athletic club services are subject to sales and use taxes as follows:

  • Payments made on or before February 28, 2003, for services provided before and after April 1, 2003, are not subject to tax.
  • Payments made after February 28, 2003, for services provided on or after April 1, 2003, are fully subject to tax.
  • Payments made after February 28, 2003, for services provided before and after April 1, 2003, are subject to tax on that portion of the services provided on or after April 1, 2003.
  • Payments made at any time, including payments for past due charges, for services provided during periods before April 1, 2003, are not subject to sales and use taxes.


Information for New Retailers: Service providers that will be charging and remitting sales and use taxes for the first time should consult Informational Publication 2000(26), Getting Started In Business, for information on how to register as retailers and file sales and use tax returns.


Effect of This Document: A Special Notice is a document that announces a new policy or practice in response to changes in State or federal laws or regulations or to judicial decisions.  A Special Notice indicates an informal interpretation of Connecticut tax law by the Department of Revenue Services (DRS) and may be referred to for general guidance by taxpayers or tax practitioners.


 

Effect on Other Documents: None affected.

 


For Further Information: Please call DRS during business hours, Monday through Friday:

  • 800-382-9463 (in-state), or
  • 860-297-5962 (from anywhere)

TTY, TDD, and Text Telephone users only may transmit inquiries 24 hours a day by calling
860-297-4911.

 


Forms and Publications: Forms and publications are available all day, seven days a week:

  • Internet: Preview and download forms and publications from the DRS Web site: www.ct.gov/drs
  • Telephone: Call 860-297-4753 (from anywhere), or 1-800-382-9463 (in-state) and select Option 2 from a touch-tone phone.

Paperless Filing Methods  (fast, easy, free, and confidential): 

  • For business returns: Use Fast-File to electronically file sales and use taxes, business use tax, room occupancy tax, or withholding tax returns over the internet or telephone.  Visit the DRS Web site at: www.ct.gov/drs and click on Business Taxes Fast File Program
  • For resident income tax returns: Use WebFile to file personal income tax returns over the Internet. Visit the DRS Web site at: www.ct.gov/drs and click on Income Tax Web Filing.

SN 2003(7)
Sales and Use Taxes
Health and Athletic Club Services
Issued: 03/14/2003