WAC 183

Nonprofit Organizations

Pilates & Other Physical Fitness Services Guide

"Sale at retail," "retail sale"

Tax on Retailers

Tax on international investment management services or other business or service activities.

Exemptions--County, city, town, school district, or fire district activity.

Deductions -- Membership fees and certain service fees by nonprofit youth organization.

Deductions -- Fees, dues, charges

Tax imposed -- Retail sales -- Retail car rental.

Exemptions Sales of amusement and recreation services or personal services by nonprofit youth organization Local government physical fitness classes.

Use tax imposed.

Amusement, recreation, and physical fitness services.Effective 12/2/95

Health & Physical Fitness Clubs Receiving Initiation Fees & Dues Income Revised 2/2/09 See ETA 3098.2009

Physical Fitness Services - Specialized Exercise and Conditioning Activities - This advisory clarifies the distinction between physical fitness services, which are retail sales subject to retailing B&O and retail sales taxes, and therapeutic activities and instructional lessons in physical fitness, which are subject to the service and other B&O tax. This ETA has been revised to recognize that a new ETA 2034.08.183 addresses the taxability of Yoga, Tai Chi, and Qi Gong classes. Revised 2/2/09 See ETA 3104.2009

Physical Fitness Services - Specialized Exercise and Conditioning Activities Revised 12/1/08

Camping Clubs Receiving Initiation Fees and Dues Income (First Revision) ETA 2031 explains the tax-reporting responsibilities of camping clubs that charge initiation fees and dues for membership in the camping club. The ETA has been revised to explain how income received by camping clubs, whether from the sale of a membership, an annual periodic fee, or other charge, is sourced for retail sales tax purposes. Revised 2/2/09 See ETA 3015.2009

Camping Clubs Receiving Initiation Fees and Dues Income Revised 3/6/08

Taxability of Yoga, Tai Chi, and Qi Gong - This advisory is to explain the tax reporting responsibilities of persons providing Yoga, Tai Chi, and Qi Gong classes. Revised 2/2/09 See ETA 3003.2009

Taxability of Yoga, Tai Chi, and Qi Gong

Camping Clubs Receiving Initiation Fees and Dues Income

Use of market comparisons by golf businesses reporting on the "actual records of facilities usage" method

Health and physical fitness clubs receiving initiation fees and dues income

Physical fitness services – specialized exercise and conditioning activities

Taxability of Fees Charged for Amusement and Recreation Services The Department of Revenue has issued the following Excise Tax Advisory (ETA): ETA 3167.2011 Taxability of Fees Charged for Amusement and Recreation Services Charges for amusement and recreation services provided to a consumer are subject to retail sales tax under RCW 82.04.050.

Cover Charges for Opportunity to Dance Reclassified until July 1, 2017

Changes for Recreational Services and Athletic/Fitness Facilities coming Jan. 1, 2016

Martial arts facilities must begin collecting sales tax January 1, 2016

Changes for Recreational Services and Athletic/Fitness Facilities coming Jan. 1, 2016

Use Tax Obligations of Amusement and Recreation Businesses

Martial arts facilities must begin collecting sales tax January 1, 2016

Physical Fitness Services - Specialized Exercise and Conditioning Activities

Cover Charges for Opportunity to Dance Reclassified until July 1, 2017

Sunless Tanning is a Retail Sale

Changes for Recreational Services and Athletic/Fitness Facilities coming Jan. 1, 2016

Martial arts facilities must begin collecting sales tax January 1, 2016

B&O & RETAIL SALES TAX -- CARD ROOM FEES.An hourly fee that is charged to players for using a "public card room" is taxable under the Service and Other Business Activities Tax classification.

B&O TAX -- BOAT -- CHARTER OF --DIVERS -- TRANSPORTATION OF.The transportation of divers via a charterer-operated boat to a diving site at which the activities of the divers are controlled by a third-party diving school or group is not a retail sale.

RECREATION AND AMUSEMENT ACTIVITIES.Fishing guide services include the provision of a boat, fishing tackle, poles, and bait under circumstances where the customers do the fishing.Fishing guide services are amusement activities. Amusement activities that require active participation by the customer are retail sales.Therefore, the provision of fishing guide services as described is a retail sale.

RETAILING B&O TAX -- RETAIL SALES TAX -- COIN-OPERATED POOL TABLE.The gross receipts from a coin-operated pool table (and other pool tables) are subject to the Retailing B&O tax and retail sales tax.

HEALTH AND FITNESS CLUBS -- INITIATION FEES --INSTRUCTIONAL LESSONS -- SERVICE B&O TAX.The portions of initiation fees received by health and fitness clubs that pertain to instructional lessons are subject to service business and occupation tax.

HEALTH AND FITNESS CLUBS -- INITIATION FEES -- RETAIL SALES TAX -- RETAILING B&O TAX.Payments by new members to join health and fitness clubs were not deductible as bona fide initiation fees because the payments were in exchange for the use of exercise facilities and services.

RETAIL SALE -- BOAT CHARTERS -- DAY TRIPS FOR SIGHTSEEING PURPOSES.The chartering of boats with a skipper for weddings, funerals, office meetings or corporate social gatherings does not constitute "day trips for sightseeing purposes" which would make such trips subject to retailing B&O and require the charter operator to collect sales tax.

RETAIL SALE -- BOAT CHARTERS -- AMUSEMENT AND RECREATION SERVICES.The chartering of boats with a skipper for weddings, funerals, office meetings, or corporate social gatherings is not an amusement and recreation service.

USE TAX KARAOKE EQUIPMENT.Use of Karaoke equipment for karaoke, an amusement or recreation service defined as a retail sale in RCW 82.04.050(3)(a), is subject to use tax.

SALES TAX -- KARAOKE.A karaoke business receipts were taxable under the retailing classification for amusement and recreation services regardless of the taxpayers designation as room charges or equipment rentals.

B&O TAX SALES TAX USE TAX RESALE EXEMPTION -- GOLF COURSE DRIVING RANGE GOLF BALLS.A driving range at a golf course is part of the retail taxable amusement and recreation service of golf.Golf balls purchased by the course for use at the range are not exempt of sales/use tax because they are not actually resold to the driving range patron.

RETAIL SALES WILDLIFE TOURS - DAY TRIPS FOR SIGHTSEEING PURPOSES.A boat trip to view wildlife is still a day trip for sightseeing purposes, despite an optional lecture held off vessel during the week before the tour.

RETAIL SALES WILDLIFE TOURS - DAY TRIPS FOR SIGHTSEEING PURPOSES VERSUS EDUCATIONAL ACTIVITIES.To determine whether the paramount purpose of a trip is educational or sightseeing, a variety of factors must be examined: Whether instruction is a substantial part of the trip; whether the sightseeing is incidental to the primary purpose of the trip; whether the trip is in essence a continuation or enhancement of an existing curriculum; whether credit or certification is given; whether established places of interest are visited; and the manner in which the trip is advertised and sold to the publ

RETAIL SALES WILDLIFE TOURS - DAY TRIPS FOR SIGHTSEEING PURPOSES - MUNICIPAL ENTERPRISE ACTIVITIES: A municipal program that is subsidized by more than 50% of its costs is not enterprise activity.Non-enterprise activities are exempt from B&O tax, but not from retail sales tax.

B&O TAX RETAIL SALES TAX ATHLETIC CLUB PERSONAL TRAINER.A personal trainer at an athletic club evaluates a members physical fitness needs and designs a workout program intended to meet those needs.His/her services are physical fitness services, taxable since July 1, 1993 as retail sales.

B&O AND RETAIL SALES TAX -- TENNIS/FITNESS CLUBS -- INITIATION FEES MEMBERSHIP DUES -- RETAIL SALES TAX.An exclusive private dining club, in which membership has value beyond the opportunity to purchase food and drink, may deduct membership fees and dues that are not in exchange for the goods and services it renders.

B&O TAX -- EXCLUSIVE DINING CLUBS -- INITIATION FEES MEMBERSHIP DUES.The deduction under RCW 82.04.4282 for bona fide initiation fees and dues is available to an entity to the extent it can show the fees and dues are not in exchange for goods and services it renders.There is no requirement under the statute or Rule 183 that membership entitle a member to a proprietary interest or a voice in the operational control of the taxpayer, or that the taxpayer fit a particular profile.

BARE BOAT CHARTER -- LEASE WITH OPERATOR -- USE TAX -- INTERVENING USE.If a taxpayer purchases and uses a boat solely for the purpose of chartering it to consumers under bare boar charters, no retail or use tax is due.Retail or use tax is due when the boat is chartered with the owner as the operator, because the owner has not relinquished dominion and control over the vessel.Under such circumstances the owner uses the boat in operating the business and use tax is due measured by the full purchase price.

SALES TAX -- AMUSEMENT AND RECREATION -- DANCING -- COVER CHARGES -- ALLOCATION OF INCOME. Where service activities consisting of both retail sales taxable amusement services (dancing) and non-sales taxable services are provided at the same place of business, admission to which is charged by a fee, the physical segregation of the facility serves to automatically allocate and apportion the admissions income between sales and services.Technically precise allocation by measuring the respective areas is neither required nor generally practicable.

RCW 82.08.0281, RCW 82.04.4289: SALES TAX -- PRESCRIPTION PHYSICAL FITNESS SERVICES.Charges for exercise prescribed by physicians were subject to retail sales tax.The prescription drug exemption applies to drugs and substances, not services.

RCW 82.04.050(3)(g): SALES TAX PHYSICAL FITNESS SERVICES -- WEIGHT TRAINING INSTRUCTIONAL.Members who participated in a health clubs personal strength program primarily to enhance fitness, strength, or improve their health, paid for physical fitness services.Instructional benefits were secondary.

BONA FIDE DUES AND FEES - AIRPORT LOUNGE --TAXPAYER RECORDS - REQUIREMENT TO DOCUMENT CLAIM FOR DEDUCTION.Exemptions and deductions are narrowly construed.Consequently, taxpayers claiming a deduction from gross receipts for amounts received as bona fide dues or fees must keep business records that substantiate the portion attributable to the privilege of membership in order to claim this deduction.

RETAILING B&O TAX -- RETAIL SALES TAX -- DEDUCTION -- GOLF AND COUNTRY CLUB -- BONA FIDE INITIATION FEES AND DUES.From total amounts paid by its members, a country club may deduct the portions allocated for proprietary interests the members have in the club and the amount of membership fees they paid for the privilege of belonging to the club.The balance was payment in exchange for a service, the privilege to play golf, and was subject to retail sales tax and retailing B&O tax.

B&O TAX -- HEALTH CLUB INITIATION FEES AND DUES -- DEDUCTIBILITY.No deduction is allowed for initiation fees or dues unless a taxpayer shows that the revenue is only received for the privilege of membership.

B&O TAX -- VALUE OF GOODS AND SERVICES PROVIDED.When a golf course is owned by property owners of a development and the property owners pay a monthly fee which is used for maintaining the golf course and other uses unrelated to the golf course and the golf course is equally available to the public for a fee, the a reasonable allocation may be determined by reference to the amounts charged the public and number of rounds played by the public.

B&O TAX -- VALUE OF GOODS AND SERVICES PROVIDED.For the purposes of determining the portion of dues that are subject to the B&O and retail sales taxes, the taxpayer may use either an allocation of a reasonable charge for the specific goods or services or a market comparison.ETA 548 states how a market comparison will be performed for golf courses.

RETAIL SALE PHYSICAL FITNESS SERVICES PILATES.The term sale at retail includes the sale of physical fitness services.Pilates is a physical fitness service.

RCW 82.04.050: RETAIL SALES TAX DATING SERVICE.Taxpayer that charges a fee for bringing together strangers seeking romantic partners is operating a dating service, and its charges are subject to retail sales tax.

RULE 183; RCW 82.04.050; ETA 2023 -- RETAIL SALES TAX -- RETAIL SALE -- PHYSICAL FITNESS SERVICES - MOVEMENT THERAPY.Because the primary purpose ofmovement therapy is to improve the motion of clients neuromuscular skeletal systems in order to enhance their general fitness, strength, flexibility, conditioning, and/or health,its individual instruction is classified as physical fitness under RCW 82.04.050(3)(g) and taxable as a retail sale.

RULE 183; RCW 82.04.050(3): RETAIL SALES – AMUSEMENT AND RECREATION SERVICES – CHARGES MADE FOR PROVIDING THE OPPORTUNITY TO DANCE. When a nightclub provides a dance floor along with music, it is clearly providing patrons with “the opportunity to dance.” Therefore, the cover charge for admission is subject to retail sales tax and retailing B&O tax.

Rule 183(2)(b), (m); RCW 82.04.050(3)(a): RETAIL TAXABLE AMUSE-MENT AND RECREATION ACTIVITIES -- INFLATABLES. Sales of activities, such as inflatable bouncy houses, mechanical bull rides, trampolines, speed pitch, pool, and air hockey, and similar activities that are participatory in nature are retail-taxable, unless access to those activities is purchased at a central ticket location in a manner similar to a carnival.

RCW 82.04.4271: BUSINESS AND OCCUPATION TAX – EXEMPTION FOR NONPROFIT YOUTH ORGANIZATIONS. A nonprofit corporation is not entitled to the B&O tax exemption in RCW 82.04.4271 when the third parties it sells to, not the nonprofit corporation, provide the camping and recreational services on property exempt from property tax under RCW 84.36.030(2), and the league participates do not become members of the nonprofit corporation.

RCW 82.08.190; 82.08.195: STREAMLINED SALES AND USE TAX AGREEMENT – BUNDLED TRANSACTIONS – RETAIL SALES TAX. For periods after July 1, 2008, a seller of sports program materials along with support services provides them in a “bundled transaction” under RCW 82.08.190(1)(a) when the products are “distinct and Identifiable” and “sold for one nonitemized price.” As a bundled transaction, selling tangible personal property along with related services is subject to retail sales tax under RCW 82.08.195(1).

RCW 82.04.050(1)(a); 82.12.010(6)(a): RETAIL SALES TAX – SALES FOR RESALE – INTERVENING USE. Retail sales made to event organizers are not sales for resale when the event organizers use or consume the materials in putting on youth sports leagues, even though some of the items are resold to the league participants.

RULE 183; RCW 82.04.050; RCW 82.08.020: RETAIL SALES TAX – AMUSEMENT AND RECREATION SERVICES - PURCHASE OF BAIT - NOT A PURCHASE FOR RESALE. The purchase of bait by a charter fishing boat business is subject to retail sales tax even though the business charges its customers retail sales tax on a flat fee for the fishing excursion, the use of fishing gear, and the provision of bait. The purchase of the bait by the business is not a purchase for resale in the regular course of business without intervening use.

RULE 183; RCW 82.04.4282: B&O TAX – SINGLES ACTIVITIES CLUB MEMBERSHIP FEES AND DUES – DEDUCTIBILITY. No deduction is allowed for membership fees and dues paid in exchange for significant services.

RCW 82.04.4286: RETAIL SALES TAX – B&O TAX – FEDERAL PREEMPTION – ANTI-HEAD TAX ACT (AHTA) – SKYDIVING. The AHTA does not preempt Washington’s ability to tax skydiving receipts.

RULE 183; RCW 82.04.050: RETAIL SALES TAX – AMUSEMENT – SKYDIVING — UPJUMPER CHARGE. A skydiving service’s “upjumper charges” to United States Parachute Association (USPA) A class license holders, were retail sales subject to retail sales tax because non instructional skydiving is an amusement and recreation activity under RCW 82.04.050(3).

Rule 183; RCW 82.04.050: RETAIL SALES TAX – AMUSEMENT AND RECREATION SERVICES – OPPORTUNITY TO DANCE. A facility that charges a cover or admission charge and provides an opportunity to dance is charging for an amusement and recreation activity. The fact that a patron may elect not to dance after paying the cover charge does not change the outcome. Charges for use of a facility are the equivalent of charging to participate in the amusement activity the facility offers.

RCW 82.04.050: RETAIL SALES TAX – DATING SERVICE. Taxpayer who operates an online dating website that allows individuals to post and view personal profiles is providing a dating service that is subject to retail sales tax.

RULE 183; RCW 82.04.050: RETAIL SALES TAX – PHYSICAL FITNESS SERVICES – DANCE FITNESS CLASSES. Since the primary focus of the taxpayer’s dance fitness class is fitness and health, the class is a physical fitness service, subject to retail sales tax.

RCW 82.04.050(3)(a), RCW 82.12.020: RETAIL SALES TAX/USE TAX – VIDEO GAMES/EQUIPMENT. Retail sales tax/Use tax is due on the equipment used to provide an amusement service. When providing the playing of video games, retail sales tax/use tax is due on the video game software and equipment.

RULE 183; RCW 82.04.250, RCW 82.08.020: RETAILING B&O AND RETAIL SALES TAX – MOBILE VIDEO ARCADE. The playing of video games is an “amusement and recreation service” and therefore properly characterized as a retail activity when provided to Taxpayer’s customer, the consumer.

DET. NO. 94-016, 14 WTD 184 (1995); DET. NO. 04-0098, 23 WTD 331 (2004): TAXPAYER’S FINANCIAL HARDSHIP. Taxpayer’s alleged financial hardship in having to pay the assessment under appeal is not a grounds for relief from the assessment. However, it is a circumstance that the Department’s Compliance Division can consider in deciding whether to accept installment payments of a tax debt.

RULE 183(2); RCW 82.04.050(3): RETAILING B&O TAX AND RETAIL SALES TAX – HUNTING GUIDE SERVICES. Taxpayer’s hunting guide services do not involve a specific curriculum, lead to a certification, or result in knowledge in a specialized field of study. Rather, the primary purpose of the guide services and associated activities is for amusement and recreation, and is therefore a retail activity.

RCW 82.04.050(3); WAC 458-20-183: RETAILING B&O TAX AND RETAIL SALES TAX – PHYSICAL FITNESS SERVICES. Taxpayer’s “crossfit” classes focus primarily on exercise and are therefore are retail fitness services.

RULE 183: RCW 82.04.050(3)(g) – RETAIL SALE TAX – PHYSICAL FITNESS SERVICES. Strength and conditioning training services that are designed to improve an athlete’s performance in a specific sport is a physical fitness service subject to retail sales tax.

RCW 82.08.190: RETAIL SALES TAX– BUNDLED TRANSACTIONS. The provision of party planning and preparation services was not essential to the provision of indoor playground services, and therefore, the exception from the bundled transactions contained in RCW 82.08.190(4) does not apply.

RULE 183; RCW 82.04.050(3)(a): RETAIL SALES TAX – AMUSEMENT & RECREATION SERVICES. Provision of indoor playground with inflatable structures is an amusement and recreation service, and are not analogous to charges made for entry into carnival rides or amusement parks.

RETAIL SALES TAX - AMUSEMENT & RECREATION SERVICES – TRUE OBJECT TEST. The true object of hosted private parties at an indoor playground facility, which also included exclusive use of party room and party planning services, was access to the indoor playground facility, not the ancillary party planning services.

RULE 183; RCW 82.04.050(3)(a)(i); ETA 3167.2011: RETAILING B&O TAX – RETAIL SALES TAX – AMUSEMENT AND RECREATION SERVICES – BASKETBALL TOURNAMENTS AND LEAGUES – LEAGUE FEES AND ENTRY FEES. Income that a business derived from charges to players and teams to participate in its underlying activity, playing basketball, is subject to the retailing B&O tax classification, and does not constitute “league fees” or “entry fees” as those terms are defined under Rule 183, which are separate from and do not include income derived from charges to participate in the underlying activity.

RULE 183; RCW 82.04.050(3): RETAIL SALES TAX – B&O TAX – AMUSEMENT AND RECREATION SERVICES – TANDEM SKYDIVING – FLIGHTS TO HIGHER ELEVATION. A skydiving service’s charges for tandem skydiving packages and flights to higher elevation are subject to retail sales tax and retailing B&O tax because the primary purpose is amusement and recreational activity.

ESTOPPEL – PRIOR AUDIT. The Department is not estopped from asserting tax liability based on an auditor’s failure to discover the taxpayer’s incorrect reporting in an earlier audit.

RCW 82.04.4286: RETAIL SALES TAX – B&O TAX – FEDERAL PREEMPTION – ANTI-HEAD TAX ACT (AHTA) – SKYDIVING. The AHTA does not preempt Washington’s ability to tax skydiving receipts.

RULE 183; RCW 82.04.4282; ETA 3080.2009: B&O TAX – MEMBER DUES – WEIGHTED AVERAGES – MARKET COMPARISON – DEDUCTION. ETA 3080 does not require a taxpayer only compare itself to golf courses with eighteen holes, when seeking a deduction under RCW 82.04.4282. It only requires that a taxpayer use the weighted averages of eighteen holes of golf at the ten closest public courses and the ten closest private courses. Courses that are physically only nine holes, but offer an eighteen hole rate, should be included in the weighted average pool.

RULE 183; RCW 82.04.4282; RCW 82.32.100; ETA 3080.2009: B&O TAX – MEMBER DUES – ACTUAL RECORDS OF FACILITIES USAGE METHOD – DEDUCTION. A taxpayer seeking to use the “actual records of facilities usage method” to calculate its deduction under RCW 82.04.4282 must maintain actual records of the facilities usage. In the event a Taxpayer does not maintain adequate records, the Department is authorized to estimate the Taxpayer’s income.

RCW 82.04.050(3): RETAIL SALES TAX – RETAILING B&O TAX – SUNLESS TANNING. Under RCW 82.04.050(3) and as explained in a Special Notice, dated March 3, 2011, charges for sunless tanning, like traditional bed tanning, are retail sales subject to the retailing B&O tax and retail sales tax. These charges are retail sales regardless of whether the business provides both sunless and traditional bed tanning, or provides only sunless tanning.

RCW 82.04.050(3)(a)(i); RCW 82.04.4282; WAC 458-20-183; ETA 3080.2009: RETAIL SALES TAX – USING THE ACTUAL RECORDS OF FACILITIES USAGE METHOD FOR ALLOCATING GOLF FEES BETWEEN DEDUCTIBLE AND TAXABLE AMOUNTS. In using a market comparison of the value of eighteen holes of golf, a private golf course could use a comparable nine hole golf course that is capable of being played twice, but could not use non-USGA certified courses or par-3 courses that don’t over the same eighteen-hole layout as the private course.

RCW 82.04.4282; WAC 458-20-183: RETAIL SALES TAX – B&O TAX – INITIATION FEES – DUES – MANDATORY CAPITAL ASSESSMENT – TENNIS CLUB. A tennis club may treat a portion of a mandatory capital assessment as dues if the taxpayer can show the dues are received solely for the privilege of membership and not in exchange for goods and services per Det. No. 07-0254, 28 WTD 1 (2009).

RCW 82.04.4282; WAC 458-20-183: RETAIL SALES TAX – B&O TAX – DONATION – CONTRIBUTION – MANDATORY CAPITAL ASSESSMENT – TENNIS CLUB. A tennis club that requires its members to pay a capital assessment in order to maintain their memberships could not deduct the payment as a contribution or donation.

B&O AND RETAIL SALES TAX -- AMUSEMENT AND RECREATION BUSINESS -- TENNIS -- ETB 503 -- HEALTH AND FITNESS. Tennis is the type of participatory recreational activity intended to be taxed under the retail sales tax classification.The fact that a recreational activity may be pursued for health and fitness reasons does not remove the activity from the retail sales classification.

RETAIL SALES TAX -- MEASURE OF TAX"SELLING PRICE " -- COSTS INCLUDED.The taxpayer's purchases which it uses in providing recreational activities are not purchases for re-sale, but are non-deductible costs of providing the business activity.

B&O TAX -- RETAIL SALES TAX -- GOLFING -- GOLF CART PATH USAGE FEES.Fees collected for the privilege of using golf cart paths are taxable under the retailing classification of the business and occupation tax and the retail sales tax, since, under Rule 183, they are "charges for . . . the use of facilities by persons engaged in the . . . recreation activit[y]. . ." of golf.

SALES TAX -- B&O TAX -- AMUSEMENT AND RECREATION ACTIVITIES -- SWIMMING.Lap swimming and open swimming are retail activities whereas swim team activities are of an instructional nature and, thus, non-retail subject to Service B&O tax.