State Tax Law Changes Suprises Martial Arts Businesses

The letter came a surprise to Andy Wilson last week. It was a notice from Washington’s Department of Revenue telling him the Filipino martial arts studio he has operated for years was now something new.

“This just was a complete shock that our legislators and representatives thought all the sudden that we’re physical fitness gyms,” said Wilson. “It effectively raises our rates by 10%.”

The notice comes from the passage earlier this year of House Bill 1550, which aims to streamline parts of the sales tax process. One of the major changes involves reclassifying certain recreation and athletic activities as “retail” instead of “services.”

It’s an alteration that directly impacts martial arts facilities, which had until now been classified as services, similar to yoga or tai chi.

“By this definition, it’s recognized as a fitness activity,” continued Wilson. “This fitness of martial arts has always been a byproduct of martial arts training.”

Though Wilson said the change surprised him, state officials pointed out it came after a two-year vetting process by the Department of Revenue.

“We are a sales tax state,” said Rep. Reuven Carlyle (D-Seattle), chair of the House Finance Committee. “The public embraces that. They accept we’re a sales tax state. We try to be consistent in those areas.”

Rep. Carlyle said efforts were made to reach out to all different kinds of businesses impacted by the change.

“I think we did a pretty respectable job (at simplifying tax code),” he continued. “We saved a lot of small businesses a lot of effort, a lot of headache and a lot of paperwork. And we saved taxpayers a good chunk of money at the same time.”

In fact, the state will lose money because of the change, Rep. Carlyle said. And Wilson will pay the state less in taxes with the change; however, his customers will pay up to $15 more per month.

“How will our students take that extra on?” asked Wilson rhetorically. “It’s just not a net positive for our students. We’re here for our students, not for anybody else.”

Read more here: http://www.king5.com/story/news/2015/10/23/martial-arts-tax-law-changes/74443818/