Last week, Pennsylvania health clubs were alerted to the fact that a state sales tax imposition on health club memberships is still in play. On July 25, Governor Tom Wolf held an unplanned Facebook Q & A session, during which he vocalized his support for property tax relief. Wolf’s announcement aligns with the Senate’s continuous effort to replace property taxes with an expansion of the state sales tax to include health club memberships.
If Senate Bill 76 advances in the General Assembly, Pennsylvania clubs would be required to charge a 7% sales tax on all membership accounts beginning January 1, 2018. Because the state is currently in the midst of a budget stalemate, legislators have temporarily shifted their focus away from Senate Bill 76 until they can reach an agreement on a new revenue package to include in the new fiscal year budget.
However, just because this bill is currently on hold, does not mean that this issue has been resolved. In Pennsylvania, proposals to expand the state sales tax to health club memberships are common. IHRSA stopped the implementation of a number of bills—similar to Senate Bill 76—in 2015 and 2016, saving state health clubs approximately $35,000 per club. Because the sales tax proposal has not passed, clubs have also benefitted in other ways—businesses are running smoothly and are less concerned about declining numbers in areas like sales and member retention.
To make matters worse, once a sales tax proposal becomes law in one state, other states can—and often do—use it as an example to follow suit, regardless of whether passing such a proposal would be beneficial long term. “We are seeing legislation that would impact the industry in states we have never worked in before ... So, if you operate in a state where you thought, ‘I don’t have to worry about a law that will hurt my business’ think again,” said Helen Durkin, IHRSA’s EVP of public policy. Taxing physical activity creates a disincentive for individuals, families, and communities that wish to better their health by engaging in regular exercise and making healthy choices. Government officials should be encouraging participation in physical activity, not discouraging it by increasing costs associated with these services. If you are a club operator (in Pennsylvania or elsewhere) and are facing a sales tax threat, please contact your representative and let them know that you oppose a tax on healthy lifestyles. And, if you are looking for other ways to get involved or have additional questions about this issue, please contact Suzanne Trainor, IHRSA’s government relations coordinator.