Florida gyms carry the weight of collecting and remitting Florida Sales Tax. Is your gym in good shape with Department of Revenue?
Health clubs make up an industry with an estimated $81 billion in annual revenue, over 186,000 clubs worldwide. This business is comprised of a wide range of business models, from licensing deals, to independently owned studios, to industry giants with revenue over a billion per year, such as Planet Fitness. The Sunshine State certainly has no shortage of fitness enthusiasts. South Florida is the birthplace of several fitness trends. By way of example, Zumba fitness, the dance class-turned fitness phenomenon, started in Miami and now has a global reach. Also, Orange Theory Fitness, a high intensity interval training class that has become a nationally recognized brand. While the fitness industry is fun, and exciting, it is still a business. And like any business, compliance is a necessary part of survival.
One such example of a compliance function that many gym owners fail to plan for is the tax on memberships. Florida is one of 23 states where gym memberships are subject to sales tax. Florida defines admissions to include dues and fees to private clubs providing recreational facilities. Similarly, the cost of admission to a gym is taxable. Rule 12A-1.005, Florida Administrative Code (“F.A.C.”) provides that sales tax is due on admission to:
- athletic clubs
- health spas
- civic, fraternal, and religious clubs,
- organizations that provide physical fitness facilities or recreational facilities, such as golf courses, tennis courts, swimming pools, yachting, boating, athletic, exercise, and fitness facilities, are subject to tax.
There are certain exceptions. Specifically, membership to organization where the initiation fee is for equity ownership, is not a taxable transaction. Additionally, private instruction is not subject to Florida Sales Tax. Florida Department of Revenue has opined that it is not a taxable transaction when the amount paid for instruction is at a facility where 1) members cannot come and go as they please 2) cannot use the studio at their leisure and 3) cannot follow their own program. The Department likened this to personal training, which is not taxable.
These examples are not the typical model of a gym or health club. The owner of a traditional gym facility is required to register with Department of Revenue, and collect tax on its memberships, and remit that tax to Florida Department of Revenue. Moreover, the business is required to keep records to prove the amount of tis taxable sales. Many gym owners are not aware of these requirements, and get caught owing Department of Revenue 6% of all membership fees, plus penalties and interest, for a three year lookback period, or more if the entity never registered.
One way for gym owners to get into compliance, and avoid being caught off guard by Florida Department of Revenue, is the Voluntary Disclosure program. Department of Revenue offers a chance to step forward and disclose the balance due. This will eliminate penalties, create a statutory presumption of no criminal intent, and - most importantly - limit the look back period to 3 years. If you are a gym owner who has not been paying sales tax on memberships, we can help you initially apply for the Voluntary Disclosure program, determine the amounts that are tentatively due, and help your company negotiate a final payment or even a payment plan with the state of Florida. In the alternative, if you have already been contacted by Department of Revenue, we can help navigate your company through the audit process.
At the Law Office of Moffa, Sutton, & Donnini, PA, our primary practice area is Florida taxes, with a very heavy emphasis in Florida sales and use tax. We have defended clients against Florida sales and use taxes for more than 25 years with over 100 years of cumulative experience working for our firm. Our partners are both CPAs/Accountants and Attorneys, so we understand both the accounting side of the situation as well as the legal side. We represent taxpayers and business owners from the entire state of Florida. Call our offices today for a FREE INITIAL CONSULTATION to confidentially discuss how we can help put this nightmare behind you.
About the author: Amanda Levine is an associate attorney with the Law Offices of Moffa, Sutton, & Donnini, P.A. Her primary practice area is Florida tax controversy, including criminal proceedings for state tax issues. Ms. Levine received a B.S. in Accounting from University of Central Florida. She spent several years working in public accounting before attending Nova Southeastern University Law School. She received her Juris Doctorate in 2014. During her time at Nova Law, Ms. Levine was the Executive Justice of Academics for the Moot Court Honor Society, as well as the Finance Chair. She was awarded by the National Order of the Barrister, a national honor society which encourages oral advocacy and brief writing skills. You may read more about her in her bio HERE.
Authority
Section 212.04, Florida Statutes - Admissions tax
Rule 12A-1.005 Florida Administrative Code – Admissions
Additional Resources:
FL TAX - VOLUNTARY DISCLOSURE CAN BE THE PERFECT SOLUTION - Posted on Oct 5, 2012 By Jerry Donnini, Esq.
FL SALES TAX CRIMINAL INVESTIGATION, published December 16, 2016, by Amanda Levine, Esq.