Does a health club need to charge sales tax on membership fees, aerobics classes, punch cards, massage, physical therapy, personal training, and tanning?

Plain-English summary

A small health club owner, worried about disrupting existing yearly-contract members with automatic bank payments, asked the Commission a batch of practical questions about which of the club's charges required sales tax: single admittance to an aerobics class, single-visit exercise-equipment access, 10-punch aerobics passes, monthly passes, community-service exercise classes, tanning machine use, and massage therapy. The owner also asked whether existing contracted members could keep their current rates until their contracts renewed, rather than immediately adding tax to locked-in monthly payments.

General rule: facility/equipment access is taxable; standalone lessons and personal services are not. Utah taxes charges for admission or user fees for recreation or athletic activities, but lessons and personal services are not taxable. Applying that line:

• Membership fees and general facility/equipment access are taxable, calculated on each payment as it's made -- including monthly installment payments under a locked-in yearly contract. The Commission specifically addressed the owner's rate-change concern: because sales tax rates fluctuate with legislative action, the tax due on monthly payments can change mid-contract, and the Commission has NO authority to let a business keep collecting at an old rate once the rate changes -- the new rate applies to payments made after the change takes effect, regardless of contract terms. The Commission advised drafting contracts so patrons are obligated to pay the fixed membership fee "plus sales tax," to avoid ambiguity.
• Standalone aerobics/spin ("psychles") class charges are not taxable, whether paid per-visit, via punch card, or via a monthly pass -- as long as that charge is ONLY for the classes. But if a punch card or pass instead grants access to the ENTIRE facility, that's taxed as a membership sale. And if aerobics classes are bundled into the membership at no extra charge, the whole membership fee remains taxable (the bundling doesn't create a tax-free carve-out).
• Massage, physical therapy, and personal training charged separately are not taxable, again unless bundled into the membership price at no extra cost, in which case the whole membership fee stays taxable.
• Tanning machine use charged separately from membership is not taxable.

Physical therapy patients using club facilities: two different scenarios, two different results. (a) If a physical therapist directs a patient to join the fitness center independently for exercise equipment access, the club's charge to that patient for facility use is taxable like any ordinary membership -- the therapist's own separate healthcare charges remain untaxed. (b) If instead the therapist contracts directly with the club to rent facility space to treat their own patients, that's arguably a nontaxable real estate transaction between the club and the therapist (since the therapist isn't buying recreational/athletic admission), and if there's no separate sales transaction between the club and the patient (the patient instead buys healthcare services, including facility use, directly from the therapist), no sales tax is due on the therapist's charge to the patient either.

What this means for you

Gym, health club, and fitness center owners

Structure your billing to separately state charges for classes, massage, personal training, and tanning from your general membership/facility-access fee -- bundling a service into the membership price at no extra charge makes the entire membership fee taxable, while itemizing it separately can keep that specific service exempt.

Businesses with fixed-rate, multi-year membership or service contracts

You cannot lock in an old sales tax rate for the life of a contract. If the tax rate changes mid-contract, the new rate legally applies to payments made after the change -- draft your contracts to specify the fee "plus applicable sales tax" rather than a fixed total, so rate changes don't create a compliance gap or contract dispute.

Physical therapists and fitness facilities working together

How you structure the relationship matters: a patient independently joining a gym on a therapist's recommendation results in a taxable gym membership; a therapist directly renting facility space to treat their own patients (with the patient paying the therapist, not the gym) can avoid sales tax on both the rental and the patient charge.

Common questions

Q: Is a gym membership fee subject to Utah sales tax?
A: Yes. Charges for use of the facility and equipment are taxable, calculated on each payment as made, including monthly contract installments.

Q: Are separately charged aerobics or spin classes taxable?
A: No, as long as the charge is only for the class and doesn't include general facility access. If the pass or punch card grants full facility access, it's taxed as a membership.

Q: Are massage, physical therapy, personal training, and tanning taxable?
A: Not when charged separately from membership. If bundled into the membership fee at no extra charge, the entire membership fee remains taxable.

Q: Can a business keep charging an old sales tax rate for existing contracted customers after the rate changes?
A: No. The Tax Commission has no authority to permit collection at a rate other than the current effective rate; the new rate applies to payments made after its effective date, regardless of contract terms.

Q: Does this ruling apply to my health club or fitness business?
A: No. It binds the Commission only for the requesting taxpayer and the facts described, and can't be relied on by another taxpayer, though it illustrates how the Commission distinguishes taxable facility access from exempt standalone services.

Citations and references

This ruling did not cite a specific Utah Code section or administrative rule by number; it applied the Commission's general rule taxing admission/user fees for recreation or athletic activities while exempting separately charged lessons and personal services.

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original PDF: https://files.tax.utah.gov/tax/commission/ruling/97-022.pdf

Original ruling text

97-022

April 21, 1997 - RESPONSE FROM TAX COMMISSION

REQUEST LETTER

April 2, 1997

Dear Ms. Rees:

Thank you for talking with me over the phone last week about the questions I had regarding my health club. You had asked me to list my questions so that they may be addressed. I would like to be in compliance with your regulations and hope for a response as soon as is feasible so that I may integrate the necessary changes.

I have decided to take your suggestions to contact those who have signed yearly contracts to send them letters requesting that taxes be paid in addition to the rates they have already agreed to pay through the year.

Some of the items I have concern about are as follows:

How should we handle single admittance to an aerobics class?

If a client wishes to use the exercise equipment rather than be lead through instruction in a class, do we charge taxes on a single admittance?

Do we need to charge taxes on our 10-punch passes? (These are used primarily for aerobics classes.)

Do we need to charge taxes on a monthly pass?

Do we need to charge taxes on community-service oriented exercise classes (offered through XXXXX)?

Do we pay taxes on use of our tanning machine?

Do we charge taxes on massage therapy?

I believe we thoroughly covered taxing Physical therapy patients who after physicians treatment, engaged in exercise some-what independent of the Physical Therapy department (we are to charge taxes).

Can those who have committed to pay on a monthly basis (on yearly contracts) and have

signed contracts with the required monthly payments (especially those who have requested that their banks do automatic transfers) be allowed to continue their contracts as issued? Then, as they resign their contracts, they would have taxes added into the new contract. As you can well understand, it would be an extremely difficult and costly matter for me to change all of those contract amounts through the banks. And furthermore, it may make the contract null and void to change rates, allowing patrons to cancel contracts. This could potentially have a terrible impact on my business. Thus, I suggest as the contract expire (some expire each month), we add the tax onto them as they resign their new commitment. All patrons would then be integrated into the tax payment within one year's time.

We talked about numerous other questions relating to this complicated situation. My memory fails me at this time, so I send the list of questions above, knowing that I may have overlooked something.

As we discussed on the phone, I am anxious to make the changes needed to comply. I am somewhat worried about being able to integrate these changes without crippling my small business. I have been paying taxes on retail sales, thus I do have a tax number and do not need to apply for one (as NAME in Customer Service has sent me an application).

Please advise on any possible solutions to this problem. Thanks again for your attention to this matter.

Sincerely,

OWNER

RESPONSE LETTER

April 21, 1997

NAME

ADDRESS

CITY STATE ZIP

Advisory Opinion - Application of Sales Tax to Club Membership Fees and Other Charges.

Dear NAME,

We have received your request for sales tax guidance pertaining to charges to your customers for membership dues and other activities. We offer the following:

Utah law imposes sales tax on charges for admission or user fees for recreation or athletic activities. Lessons and personal services are not taxable. With regard to your particular business situation, sales tax applies as shown below:

1. Membership fees are taxable. Charges to your members for use of the facility and equipment are taxable. As we understand your arrangement, your patrons purchase use of the facilities for some spcified amount of time. The contract locks in the price that you charge for admission for the term of the contract. Payment for use of the facility is made in advance each month, and you never accept a lump sum payment for the entire term of the contract. Sales tax is calculated on each monthly payment.

Because sales tax rates fluctuate with actions of state or local legislative bodies, the sales tax due on monthly payments over the course of a contract may also fluctuate. If the sales tax rate changes during the course of the contract, the new rate applies to monthly fees charged after the effective date of the rate change. The tax commission has no authority to permit you to collect tax at a rate that is different from the effective tax rate. To avoid confusion about this tax obligation, we advise you to make sure that your contracts clearly specify that the patron is obligated to pay the fixed monthly membership fee plus sales tax.

2. Separate charges for aerobic lessons are not taxable. Charges to patrons who only purchase access to aerobic lessons (or �psychles� or �spinning� classes) are not taxable, whether the patron pays at the time of the lesson or pays in advance by purchasing a punch card or monthly pass. If these types of lessons are available to members at no extra charge, the entire cost of the membership is still taxable. However, if a punchcard or pass allows use of the entire facility, the sale of the punchcard or pass is taxable as sales of memberships.

3. Separate charges for massage, physical therapy, and personal training are not taxable - Separate charges to members or nonmembers for a massage, or instruction by a physical therapist or personal trainer are not taxable. If these services are included in the price of the membership at no extra cost, the entire membership fee is still taxable.

You mentioned that a patron may use your facility in conjunction with physical therapy and rehabilitation. We are not sure exactly how these transactions are structured, but the nature of the transaction will determine whether tax is due. For that reason, we present two possible scenarios:

a. If a therapist directs his or her patient to join a fitness center so that the patient has access to the exercise equipment, your charges to that patient for use of the facility are taxable like any other membership. Separate charges by the therapist for health care services are not taxable.

b. If the therapist enters a contract with you to rent the use of your facility to treat his or her patients, the result is different. Arguably, the transaction between your facility and the therapist is a nontaxable real estate tranaction. In any event, the therapist is not purchasing admission for recreation or athletic activity, so your charges to the therapist are not taxable. In this situation, we assume that there is no sales transaction between you and the patient. Instead, the patient purchases health care services directly from the therapist (including use of the facility). If that is the case, no sales tax is due on the charge by the therapist to the patient.

4. Separate charges for tanning are not taxable. Again, charges over and above the cost of the membership fee are not taxable.

Please let us know if you have other questions.

For the Commission,

Joe B. Pacheco,

Commissioner