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2016 Legislative Threats: Sales Tax on Health Clubs

Over the last decade, the club industry has been the target of an effort to impose sales tax on membership dues in ten states. For nine of those years, IHRSA has worked with clubs across Pennsylvania and its lobbyist in Harrisburg to fight against proposals that would expand the state’s sales tax base to include a host of currently untaxed services, including those offered by health clubs. 

The threat of a tax on healthy lifestyles reached new levels in 2015; the new governor built his election campaign on a promise to increase education funding and the legislature was intent on reforming the state’s property tax laws and pension system, all of which added up to the government needing to come up with new revenue. The first revenue source the legislature turned to was an expansion of the sales tax, which they have considered and rejected in each of the last nine sessions. 

Once IHRSA’s lobbyist provided intelligence that a sales tax on clubs would be included in the version of the state budget moving forward, IHRSA got to work educating lawmakers on why a tax on health clubs is bad policy.

In addition to direct meetings with every member of the legislature, IHRSA members and health club consumers throughout the state made a powerful statement against the tax, generating over 13,000 emails to state representatives and senators, and the governor’s office. The impressive volume of messages was made possible by industry leaders in the state (such as the Newtown Athletic Club in Newtown, PA) stepping up and working with IHRSA to engage as many within the industry as possible, urging them to join the cause. 

The messages were heard loud and clear in Harrisburg—IHRSA’s lobbyist was told by many legislators that their offices were hearing about the health club tax more than any other issue in the 2015 session. As a result, an expansion of the tax to clubs was rejected. However, Pennsylvania has still yet to enact a budget for the current fiscal year, meaning that the fight will continue on in 2016.

There are also a number of other states that may consider taxing health club memberships this year. Similar to what has happened in Pennsylvania, legislatures often propose taxing health club dues and services when the state is in need of more revenue to resolve a budget deficit or pay for a new legislative priority. However, in the long run, the revenue generated from a 5-7% tax on health club memberships is unlikely to compensate for the rising cost of caring for an increasingly inactive population.

What a tax on health club memberships does do is raise costs for members and creates a disincentive to engage in healthy behaviors. IHRSA strongly believes that policy makers should be doing everything they can to make healthy lifestyles more accessible.

Based on recent legislative trends, conversations with state lawmakers and regulators, and intelligence gathered from our lobbying teams and member clubs across the country, IHRSA predicts that we will once again face a number of bills that would restrict how a health club signs and retains its members in the upcoming sessions.

A number of indicators suggest legislators will consider the issue in multiple states in 2016*, most notably in California, Illinois, Maine, Michigan, Nevada, and Virginia.

IHRSA’s Public Policy team has worked to ensure that the industry is prepared to protect itself in each of these states. However, given how legislative issues spread quickly across state lines, it is very important to stay on top what is going on in your state, even if it is not listed among those above. Email us to make sure you are signed up to receive IHRSA’s Legislative Alerts and routinely visit IHRSA’s state pages to get the latest on issues that might impact your club.

*25 states (and the District of Columbia) already charge sales tax on health club dues and services.

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