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Tax Changes for Recreational Services and Athletic/Fitness Facilities


December 29, 2015 by Toni Nelson
Category: Revenues

Tax Changes for Recreational Services and Athletic/Fitness Facilities

HB 1550 amended the definition of a “retail sale” in RCW 82.04.050, affecting businesses and local governments that provide recreational services or operate athletic or fitness facilities. The Department of Revenue (DOR) recently released a special notice on this change which becomes effective January 1, 2016.

So what does this mean for local governments? For some of you it will be business as usual, while there will be others that the change in the definition for recreational services will generate an additional tax liability to be reported and remitted to the DOR on your 2016 tax reports. While HB 1550 does not affect the retail sales tax exemption under RCW 82.08.0291 for physical fitness classes provided by local governments, this exemption is not available for local governments that provide “retail recreational services.”

In general, all charges by local governments to customers for the use of an athletic or fitness facility are “retail sales” subject to retail sales tax. However, physical fitness classes provided by local governments are exempt from retails sales tax. Some examples of this type of activity are: aerobics; CrossFit; Pilates, yoga; spin (stationary bike cycling); water aerobics and Zumba. The DOR has developed a webpage specific to local government physical fitness classes to provide some clarity. Additionally, this page provides a few examples of other types of activities that are not exempt from retail sales tax, such as general use of pool, use of exercise and strength training equipment, and general use of gymnasium, to name just a few. As you evaluate the types of recreational services being provided, the DOR has also prepared a recreational services at a glance web guide that may assist with this process.

In reviewing the webpages provided by the DOR, several activities come to mind that could be subject to retail sales tax that may not have been in the past. Does your parks department have batting cages?  Basketball courts for rent? How about a water park? All of these activities should be evaluated in the context of “retail” recreational services.

As with many new tax law changes there is often more confusion than clarity in the beginning. This is certainly one of those topics where each jurisdiction may be providing a recreational service that is just a bit different from the definitions provided on the DOR website or in the statute. We have talked with the folks at the DOR and they strongly encouraged local governments to present their specific recreational service activity questions to them. You can go directly to the website, select contact us, and then select “I need a binding tax ruling.” The ruling provided by the DOR is binding on the audit. If you have a unique scenario and feel like you are unable to answer the question of whether your recreational activity is considered a “retail” recreational sale, the ruling will provide you with the support documentation needed to avoid interest and/or penalties during the next DOR audit.

If you have questions or comments about this issue, please feel free to post them in the comments below or send me an email directly at tnelson@mrsc.org.


MRSC is a private nonprofit organization serving local governments in Washington State. Eligible government agencies in Washington State may use our free, one-on-one Ask MRSC service to get answers to legal, policy, or financial questions.

About Toni Nelson

Toni Nelson joined MRSC in 2014 as the finance consultant. She has worked in local government finance since 1990 and was previously the “Small Cities Specialist” with the State Auditor’s Office (SAO), Clerk Treasurer for the Town of Twisp, as well as an independent financial consultant working with small local government across the state. Toni's area of expertise is "Cash Basis" accounting and reporting, budgeting, and the financial responsibilities and challenges of smaller local government.

Toni is a board member of the Washington Finance Officers Association (WFOA) and longtime member of the WFOA Education committee. While with SAO, Toni wrote the Small Cities handbook and she annually prepares the MRSC - Budget Suggestions publication. Most recently Toni co-authored the comprehensive update of the Revenue Guides for WA Cities, Towns and Counties, in 2019.

Toni conducts workshops on local government financial reporting, budgeting, and the essential duties of finance staff in smaller jurisdictions, with an emphasis on cash basis accounting and the challenges of small local government.

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