Overview
The Administrative Review and Hearings Division (ARHD) determined that charges by the taxpayer, an operator of a gym, to a personal training business for the use of the gym to host fitness classes are properly subject to retail sales tax.
Key Points of the Decision
- Although the taxpayer contended that its relationship with the personal training business is a “partnership” and the fees it collected are not for use of the facility but a “partnership fee,” the ARHD noted that the contract between the parties specifically states that they did not intend to establish a partnership.
- Because fees charged to personal trainers by gym operators for using the operator’s facilities are subject to retail sales tax under Wash. Rev. Code §82.04.050(3)(g)(i), the ARHD concluded that the taxpayer is liable for retail sales tax on the fees charged.
Reference: Washington Tax Determination No. 20-0297, 11/04/2020, 41 WTD 222, released 05/16/2022.
Summary
- Gym operators in Washington must collect sales tax on fees charged to personal trainers when those trainers use gym facilities to conduct classes.
- Claiming a “partnership” relationship does not exempt such fees from taxation if the contract expressly states otherwise.
Frequently Asked Questions
Are gym usage fees charged to personal trainers subject to retail sales tax in Washington?
Yes. According to Washington state law and ARHD interpretation, fees charged by gym operators to personal trainers for use of the gym to host fitness classes are subject to retail sales tax.
Does calling a fee a “partnership fee” exempt it from sales tax?
No. Simply labeling a fee as a “partnership fee” does not exempt it from taxation. The ARHD emphasized that the contractual language and actual business arrangement determine taxability, not the label applied by the parties.
What if the gym and trainer have a partnership agreement?
Even if the parties claim to have a partnership, if the contract explicitly states that no partnership exists, then the relationship is not considered a partnership for tax purposes. In such cases, fees remain taxable.
Which legal reference supports this decision?
The ARHD’s conclusion is based on Washington Tax Determination No. 20-0297 and Wash. Rev. Code §82.04.050(3)(g)(i), which outlines that facility usage charges are taxable.
How should gym operators handle this tax obligation?
Gym operators should collect and remit retail sales tax on fees charged to personal trainers for use of their facilities, ensuring compliance with Washington state tax laws.