Yoga Alliance sent out an email yesterday with this memo from the Washington Department of Revenue with details on the upcoming meeting to discuss taxation on yoga. It’s a public meeting, so anyone interested can RSVP (details at the bottom of the memo). 

MEMO FROM THE WASHINGTON STATE DEPARTMENT OF REVENUE

TO: Interested Parties

FROM: Jay Jetter, Tax Policy Specialist
  Interpretations & Technical Advice Division

SUBJECT: Stakeholder Meeting regarding the Taxability of Yoga

The Department of Revenue acknowledges recent concerns and confusion in regard to the taxability of yoga under the provisions of RCW 82.04.050 (3) (g), WAC 458-20-183 (Rule 183), and Excise Tax Advisory (ETA) 2023, and it is beginning a stakeholder process to consider possible changes to Rule 183 and/or ETA 2023.

Background

In 1993, the Legislature added “physical fitness services” to the definition of “retail sale” provided by RCW 82.04.050, thereby subjecting these services to Business & Occupation (B&O) tax under the Retailing classification (RCW 82.04.250) and retail sales tax (RCW 82.08.020). The term “physical fitness services” was not defined by the statue.

In the 1995 amendment to Rule 183, the rule discussing the tax treatment of physical fitness services, the Department adopted a “primary purpose” test to distinguish between “excercise classes,” which are considered physical fitness services and therefore subject to retailing B&O tax and retail sales tax, and “instructional lessons,” which are not considered to be physical fitness services or retail sales and therefore subject to Service & Other activities B&O tax. Under the primary purpose test, exercise is the primary focus of “exercise classes,” while instruction in the activity is the primary focus of “instructional lessons.”

In April 2005, the Department published ETA 2023, which provided in part additional guidance on what constitutes “instructional lessons” for purposes of Rule 183. The ETA described one situation in which yoga would be taxable as a retail sale and another situation in which it would not.

As you may be aware, the Department considers most yoga classes to be “physical fitness services.” This tax treatment forms the basis of the concerns and confusion referenced above.

Stakeholder Meeting Scheduled

The Department will hold a public meeting to discuss the current tax treatment of yoga and to solicit comments from yoga businesses and other interested parties on Wednesday, November 19, 2008 at 1:30 p.m. in the Cascade Building/Auditorium of the Washington State Criminal Justice Training Commission, 19010 1st Avenue S., Burien, Washington, 98148. The Department’s goals are to provide an opportunity for input and suggestions for possible changes to the Rule and/or ETA and to gather information to determine whether yoga classes constitute “physical fitness services” and/or whether there is an identifiable “bright line” between yoga classes that are “physical fitness services” and yoga classes that are not.

We invite you and any others you may know who would be interested in attending this meeting. We would appreciate it if you would confirm your attendance by responding to the email address below. Based on the issues raised and interest shown at this meeting, additional meetings may be planned as appropriate. Regardless of whether or not additional meetings will be scheduled, please note that comments will be accepted before, during, and after the November 19th meeting date.

Additional questions

If you have any additional questions or would like more information, please contact Jay Jetter in the Department’s Interpretations & Technical Advice Division by telephone at (360) 570-6057 or by email at JayJ@dor.wa.gov. Thank you.