Martial arts lessons taxed

[GeneChing]

Now happening in Seattle. Imagine if taxing lessons spreads to the rest of the nation.

Martial arts lessons now a taxable sale
By Associated Press
Published: October 24, 2015, 5:06 PM

SEATTLE — People who run martial arts studios are just now finding out they probably should have paid more attention to the Legislature this year.

When lawmakers passed House Bill 1550 to streamline the state sales tax process, one of the changes they made was to reclassify some recreation and athletic activities as “retail” instead of “services.”

KING-TV reports that change directly impacts martial arts facilities, which are now classified as a fitness activity.

That means their students will now have to pay sales tax.

Government officials made an effort to educate the public and these businesses about the tax change, but it’s still coming as a surprise to some.

State tax law changes surprise martial arts businesses
KING 5’s John Langeler reports.
John Langeler, KING 5 News 11:36 p.m. PDT October 22, 2015


(Photo: KING)

SEATTLE -- The letter came a surprise to Andy Wilson last week. It was a notice from Washington's Department of Revenue telling him the Filipino martial arts studio he has operated for years was now something new.

"This just was a complete shock that our legislators and representatives thought all the sudden that we're physical fitness gyms," said Wilson. "It effectively raises our rates by 10%."

The notice comes from the passage earlier this year of House Bill 1550, which aims to streamline parts of the sales tax process. One of the major changes involves reclassifying certain recreation and athletic activities as "retail" instead of "services."

It's an alteration that directly impacts martial arts facilities, which had until now been classified as services, similar to yoga or tai chi.

"By this definition, it's recognized as a fitness activity," continued Wilson. "This fitness of martial arts has always been a byproduct of martial arts training."

Though Wilson said the change surprised him, state officials pointed out it came after a two-year vetting process by the Department of Revenue.

"We are a sales tax state," said Rep. Reuven Carlyle (D-Seattle), chair of the House Finance Committee. "The public embraces that. They accept we're a sales tax state. We try to be consistent in those areas."

Rep. Carlyle said efforts were made to reach out to all different kinds of businesses impacted by the change.

"I think we did a pretty respectable job (at simplifying tax code)," he continued. "We saved a lot of small businesses a lot of effort, a lot of headache and a lot of paperwork. And we saved taxpayers a good chunk of money at the same time."

In fact, the state will lose money because of the change, Rep. Carlyle said. And Wilson will pay the state less in taxes with the change; however, his customers will pay up to $15 more per month.

"How will our students take that extra on?" asked Wilson rhetorically. "It's just not a net positive for our students. We're here for our students, not for anybody else."

[SoCo KungFu]

Is not the rallying call of TCM that you are more likely to die of cardiac disease than armed robbery? That its the better choice for health into old age than say, MMA?

When the largest draw is the proposed health benefits, should it be that surprising to be reclassified as a fitness activity?

Edit: I predict in the not so distant future we will see a similar thread in the TCMA subsection, once the FDA submits to the cries for greater oversight by those claiming the pharmaceutical industries get by with shady work, only to realize that oversight will now include the currently non-regulated supplement industry (which really does need to be regulated).

[David Jamieson]

Maybe you can get it back as a rebate for healthy living and practice from the insurance end of things. I mean, if the government is going to be a bunch of greedy and poorly informed money grubbers (such as they are) then perhaps that can be corrected on the other end. If you're staying fit or offering fitness, then boom, insurance rebate.

Life and the good parts of it shouldn't be penalized. Some politicians and bureaucrats just need a good punch in the mouth.

[rett2]

If it's true that they simplified the code and reduced paperwork burden for businesses, then it's worth it.

And wtf, of course martial arts schools are fitness schools.

[SoCo KungFu]

Maybe you can get it back as a rebate for healthy living and practice from the insurance end of things. I mean, if the government is going to be a bunch of greedy and poorly informed money grubbers (such as they are) then perhaps that can be corrected on the other end. If you're staying fit or offering fitness, then boom, insurance rebate.

Life and the good parts of it shouldn't be penalized. Some politicians and bureaucrats just need a good punch in the mouth.

While I personally agree with this, I don't see it happening. If it were up to me, everyone would be doing quarterly fitness tests like we had in the military. High marks get you tax benefits. But that's never going to happen. There are already programs like your idea springing up in various workplaces in the US. People are fighting against it claiming that it constitutes workplace discrimination.

[GeneChing]

Any Washingtonians here that can comment on this?

FEBRUARY 16, 2016 5:02 AM
Martial arts academies fight back against sales tax on sport

Martial arts, karate schools subject to state sales tax for the first time this year

Owner say sales tax of up to 9.6 percent is causing them to lose clients

Bill in Legislature would again exempt karate, martial arts from sales taxes


Chaelee Cabrera demonstrates her technique in a mixed martial arts class at Lenderman's Academy of Martial Arts in Parkland Peter Haley phaley@thenewstribune.com


Instructors show technique in a mixed martial arts class at Lenderman's Academy of Martial Arts in Parkland. Peter Haley phaley@thenewstribune.com


Cliff Lenderman, owner of Lenderman's Academy of Martial Arts in Parkland Peter Haley phaley@thenewstribune.com

BY MELISSA SANTOS
msantos@thenewstribune.com

A dozen students kneel before Cliff Lenderman as he leads an evening martial arts class, pausing for a lesson that has little to do with kicks or punches.

“Goals we set are goals we get,” Lenderman tells the group of 8- to 14-year-olds. “Right?”

“Goals we set are goals we get,” the students shout back.

The scene unfolds during a Monday night class at Lenderman’s Academy of Martial Arts in Parkland. Lining the walls are Japanese kanji characters representing the seven virtues of the samurai code: veracity, bravery, benevolence, politeness, justice, honor and loyalty.

Teaching those values is what Lenderman says separates his business from typical gyms filled with weight sets and treadmills.

It’s also why Lenderman says his academy shouldn’t pay the same taxes as those gyms.

Right now, Lenderman and other martial arts teachers are pushing the Legislature to reverse a law that subjects them to retail sales taxes for the first time.

Prior to this year, Washington state regarded martial arts academies as providers of instructional services, and didn’t require their customers to pay state and local sales taxes on lesson fees.

But a law the Legislature passed in 2015 reclassified martial arts instructors as operators of athletic or fitness facilities — essentially, gyms — which means they too must collect retail sales tax, just like standard health clubs.

I’VE ACTUALLY HAD SOME PEOPLE WHO SAID THEY HAVE TO QUIT. ONE OF THEM WAS A SINGLE MOM. SHE SAID...WITH THAT EXTRA $15 A MONTH, ITS TOO MUCH FOR ME.”

Cliff Lenderman, owner of Lenderman’s Academy of Martial Arts in Parkland

For Lenderman, that meant he had to start charging a 9.4 percent tax on his services in January, adding about $11 to the average student’s tuition bill of $115 a month.

That may not sound like much, but for families who have multiple children in karate classes and often pay on an annual basis, it can be a big hit, Lenderman says.

“I’ve actually had some people who said they have to quit,” Lenderman says. “One of them was a single mom. She said, ‘I’ve been struggling already to make payments, so with that extra $15 a month, it’s too much for me.’”

Enter House Bill 2334, a proposal that aims to get karate and martial arts academies out from under the sales tax. House members unanimously approved the bill last week, sending it over to the state Senate for consideration.

The bill’s primary sponsor, Rep. Cindy Ryu, D-Shoreline, says she believes that reclassifying martial arts classes last year was an oversight that should be corrected.

Last year’s bill allowed sales tax exemptions for yoga studios and tai chi schools. Ryu says she’s not sure why it didn’t also exempt martial arts academies.

“Martial arts is a little bit different than fitness clubs. The target is different, the market is different, their finances are different,” Ryu says.

She says most martial arts teachers work after-hours and weekends to accommodate their students’ schedules, and tend to not make much money out of it.

“If they are covering their rent and a little bit to take home, I’d be surprised,” Ryu says.

MARTIAL ARTS IS A LITTLE BIT DIFFERENT THAN FITNESS CLUBS. THE TARGET IS DIFFERENT, THE MARKET IS DIFFERENT, THEIR FINANCES ARE DIFFERENT.

Rep. Cindy Ryu, D-Shoreline, on her bill that would exempt martial arts academies from sales taxes

Yet state Sen. Reuven Carlyle, D-Seattle, says charging sales tax on karate and martial arts academies in some ways makes sense. Carlyle, the former chairman of the House Finance Committee, sponsored last year’s bill that changed how the academies were taxed, based on a request from the state Department of Revenue.

Carlyle is one of several Democratic lawmakers who has fought to carefully examine Washington’s system of tax breaks. Last year, he and other House Democrats proposed ending seven tax preferences — including a sales tax break for bottled water — but none of those ideas were embraced by the Republican-led state Senate.

Carlyle says he isn’t opposed to Ryu’s proposal, but thinks state lawmakers need to look closely at which businesses receive tax exemptions to ensure Washington’s system is fair.

“The fact is we are not an income-tax state, we are a sales-tax state. And paying sales tax on those type of services is rational, and it’s consistent, and it’s not unreasonable,” says Carlyle, who recently was appointed to the state Senate.

The Senate’s top budget writer, however, says he is willing to consider giving martial arts schools a break.

“If it’s something where they think we didn’t get it right, we’ll take a look at it — if we can pay for it,” says state Sen. Andy Hill, R-Redmond, who chairs the Senate Ways and Means Committee.

A fiscal analysis by legislative staff found that exempting martial arts academies from sales taxes would cost the state about $150,000 per year.

THE FACT IS WE ARE NOT AN INCOME-TAX STATE, WE ARE A SALES-TAX STATE. AND PAYING SALES TAX ON THOSE TYPE OF SERVICES IS RATIONAL, AND IT’S CONSISTENT, AND IT’S NOT UNREASONABLE.

State Sen. Reuven Carlyle, D-Seattle, on subjecting martial arts academies to retail sales taxes

Meanwhile, families who take their children to karate and martial arts classes worry about how the sales tax is affecting their tuition bills.

Jessica Nielsen, who has three children enrolled in Lenderman’s Academy, says she expects she’ll pay about $400 more than usual next month to renew her children’s annual tuition at the school.

“With my husband being out of work, I don’t know how we’re going to do it,” says Nielsen, who lives in Parkland.

Others say they have absorbed the increase in their bill, but not without some difficulty.

Paul Whitfield of Tacoma says he decided to keep his two children enrolled in martial arts partly because of the benefits the classes provide his son, who has autism. Attending karate classes has helped his son learn to control his outbursts, Whitfield says.

He says the extra $260 he had to pay last month to renew his kids’ tuition was a noticeable increase, though.

“I’m a retiree, I’m a disabled veteran — my income isn’t huge,” Whitfield says. “If it wasn’t therapy for my son, I’d have to reconsider.”

Andy Wilson, president of the Washington State Martial Arts Association, says Whitfield’s story isn’t unique. Most parents who bring their children to martial arts classes do so with goals other than getting their children in shape, he says.

“They bring them here for confidence or focus issues,” says Wilson, who owns MKG Martial Arts in Seattle.

Wilson says once again separating martial arts academies from fitness clubs in the state tax code would recognize that martial arts are about the mind, not just the body.

“That just kind of restores the dignity of a martial arts school,” Wilson says.

[GeneChing]

Hopefully someone here can follow up on this tomorrow. If the sales tax stands, it'll set a poor precedent.

Time is running short for bill to chop martial arts sales tax


Andrew Hilton, 10, practices his technique Monday at Tiger Martial Arts in Freeland under the direction of owner and sensei Wendi Barker.— Image Credit: Justin Burnett / The Record

Mar 8, 2016 at 6:00PM updated Mar 9, 2016 at 8:24AM

Martial arts businesses on South Whidbey and across the state this week are sweating over the fate of a bill that will either live or die by Thursday.

The bill, SB 2334, seeks to reverse a decision last year that forced the industry to begin charging sales tax for services, while businesses teaching yoga or tai chi remained exempt. Though a house bill proposing the revision passed unanimously in February, its counterpart in the senate, as of Tuesday morning, remained in the Senate Ways & Means Committee.

The legislative session ends on Thursday.

Wendi Barker, owner of Tiger Martial Arts in Freeland, said her business doesn’t hinge on the success or failure of the bill, but that it will have impacts, particularly for financially struggling parents who have multiple children attending her school.

She also said the basis for the change last year, that martial arts studios are more akin to gyms than schools, is unfair and inaccurate.

“We’re teachers,” she said. “We teach about bullying, self defense — we’re a school.”

Robert Armstrong, owner of Armstrong’s Tae Kwon Do in Clinton, echoed those sentiments.

“I totally agree with Sensei Barker, the bigger families will feel the crunch,” he said.

“And I take insult that we’re not a school; we’re not a gym.”

Calls to Sen. Barbara Bailey, R-Oak Harbor, who serves on the Senate Ways and Means Committee, were not returned by press time on Tuesday.

This past year, martial arts facilities were reclassified and required to charge sales tax like gyms or fitness centers. A specific exclusion was provided for yoga, tai chi, and chi gong classes that are held in facilities which are not primarily used for physical fitness activities, such as a community center, school, or standalone yoga studio, according to the senate bill report. For business and operation tax purposes, these activities are classified as service and other rather than retailing, the report said.

While industry leaders protested the move, quickly criticizing it as being discriminatory to the martial arts and lobbying for the bill, some didn’t even know the state had changed the rules.

“I didn’t know about it until last week,” Barker said. “The state never notified me.”

She said she had no other choice but to send her 76 students back bills, requesting the difference over the past few months. It was “humbling,” she said.

Armstrong did know about the change as many tae kwon do businesses throughout the state were affected and he heard about it from colleagues; Barker teaches Uechi-ryu, and is the only one in the state to do so, she said.

Bayview resident Kevin Hilton, who’s 10-year-old son Andrew is enrolled at Tiger Martial Arts, said the sales tax is an added cost but that it’s well worth the expense and that the reasoning behind the tax — that it’s an exercise facility rather than a school or educational service — seemed silly.

“The service that Wendi provides is so much more than exercise,” Hilton said.

His son has learned discipline, focus, personal development and growth, and how to deal with issues such as bullying without the use of violence. The change in his son’s behavior when he’s participating in other sports that take him away from Tiger Martial Arts is noticeable, such as in the sass or “backtalk” department, he said.

Leaving the tax in place would be a “huge disservice” to South Whidbey youths, he said.