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.