Foundry Law Group Blog

Clarifying the Tax Issue for Yoga Studios in Washington

Yoga in Washington State has been in the focus for the past several years, but not just for its spiritual and health benefits. Since 2008, the state has been pursuing yoga studios in an attempt to properly collect an excise tax. As a result, it is has become crucial for yoga studios and teachers to know whether or not they must charge their students a sales tax.

There is quite a bit of confusion when it comes to determining whether a particular yoga studio or teacher must collect the tax from their students. This is due primarily to the categorization of Yoga by the Washington State Department of Revenue. Under section 458-20-183 of the Washington Administrative Code (WAC), physical fitness services are taxed. Yoga is exempt from this requirement and in relevant part the statute states: “‘Physical fitness services’ do not include instructional lessons such as those for self-defense, martial arts, yoga, and stress-management.”

Essentially, the above-mentioned section categorizes yoga as instructional and distinguishes instructional lessons from exercise classes. Thus, generally the distinction between instructional lessons and physical fitness services depends on whether exercise is the primary focus.

Changes in Tax Policy Towards Yoga

So when the Department of Revenue began to audit yoga studios in November 2008, it came as a surprise to many studios and instructors. The Department had re-categorized yoga by dividing it into two categories: instructional lessons or exercise classes. The reason yoga studios and instructors were caught off guard, is a result of the Excise Tax Advisory 2023.08.183 issued in 2005 by the Department where it qualified yoga as a physical fitness service subject to sales tax.  But at the same time the Code referred to yoga as an instructional lesson.

Several yoga studios were told they were possibly liable for three years of back taxes. These studios would have little choice but to shutdown in the face of having to pay such a large amount. Other studios responded by charging their students sales tax, which ultimately led to an increase in monthly fees.

In appears that these taxes were not seriously enforced until the random sudden audits began in 2008. After much protest by yoga studios, the Department decided to reconsider its policy on yoga and re-classified its application of the tax rule on yoga. Moreover, the Department decided to no longer assess taxes prior to December 1, 2008.

Current Categorization of Yoga

In February 2009, the Department of Revenue issued Excise Tax Advisory 3003.2009 seeking to clear up the divisions it made within the previous classification of yoga. It delineates physical fitness services as activities of physical exertion where the purpose is the improvement or maintenance of an individual’s fitness and/or health.

On the other hand, it describes yoga as a philosophy and discipline where the primary purpose is breath regulation and meditation and the physical benefits are secondary. The Department labels the practice of the aforementioned description of yoga as a traditional yoga class. While yoga classes that fall under this description are exempt, other types of yoga classes are not.

If the Department determines that primary purpose of a yoga class is physical fitness, then the excise tax applies. To help explain what sort of classes fall under physical fitness services, the Department states that when yoga classes are “conducted at a health or athletic club, fitness center, health spa, or similar facility (‘fitness facility ’),” then it presumes that physical fitness is the primary focus. See page 2 of 3003.2009.

Maintaining Yoga Classes as Instructional

Auditing of yoga studios continues namely due to the confusing nature of the distinction between yoga as instructional lessons or exercise classes. It appears that the Department of Revenue has a limited scope of how people may practice yoga. Yoga’s popularity and growth is tied just as much with its adaptability and flexibility as it is with its rich history and traditions. While the Department focuses its distinction between practicing yoga for meditative purposes versus for physical wellbeing, yoga is a lifestyle that is meant to benefit both one’s mind and body.

With that in mind, yoga classes that could fall on either side of the Department’s categorization should underscore or incorporate the teaching of yoga’s history, philosophy, breathing regulation, and wellbeing through meditation. There is no clear line here, so the more a yoga class provides instruction in aspects of yoga in addition to physical postures and movement, the more likely the presumption that the primary purpose of the class is not physical fitness and thus becoming exempt from the excise tax.

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