On June 24, 2014, the Washington, D.C. City Council officially approved a 5.75 percent “yoga” tax that will be applied to health clubs and yoga studio memberships in the D.C. area. The tax is part of a larger budget proposal that’s purpose is to reduce income taxes for D.C. residents.
The yoga tax was controversial and garnered a lot of press. One opponent of the tax was David von Storch, the founder and owner of VIDA Fitness, which has seven locations in D.C. and includes yoga as one of its many Group X offerings.
“It’s a bad tax and public policy,” said von Storch. “Having gone through a large list of industries to go after, the Council bypassed hair salons, accountants, lawyers and a host of other professional services, arguing that gym memberships are price inelastic and there will be little short-term and no long-term impact to club operators large and small. We couldn’t disagree more. Taxing an industry that helps to lower city-wide health and medical costs, while bypassing numerous others, smacks of political opportunism.”
Von Storch believes the tax could lead to a multitude of negative outcomes, such as higher numbers of membership cancelations. “Our members will not make a distinction between the sales tax going up or an increase in dues,” he explained. “To them, it is one and the same. We have never increased our dues 5.75 percent in any one year in the history of our company — we are certain that this is going to have a material adverse effect on our operations.”
According to von Storch, he’s not alone in his opinion — the health and fitness community was strongly united in opposition of the tax. “We do not have an institutionalized lobbying entity in D.C. that advocates for health and wellness at the local level, and we suspect that this was one of the reasons the gym tax was proposed,” he said. “We have been really encouraged by how quickly our community has coalesced, but it has been tough. The Chairman of the Council doesn’t belong to any fitness center and his lack of awareness and sensitivity to this issue is glaring.”
As a result of the tax’s approval, von Storch said he might have to charge sales tax on VIDA’s group fitness, per-class or per-program activities. “It is likely that we will add this tax to our members’ monthly dues, as is customary with a sales tax,” he said.
Von Storch added: “We all know that people who quit the gym generally exercise less, and no one disputes that public policy should be focused on getting a sedentary population engaged in health and wellness activities. For those people on the margin, this tax is going to hit particularly hard.”
Rachel Zabonick is the assistant editor for Club Solutions Magazine. She can be reached at rachel@clubsolutionsmagazine.com. Reach out to her about exciting events or programs your club has implemented, or to share the amazing accomplishments of a member.
Here in Baton Rouge, LA, we pay 9% tax on health club memberships – 4% state tax and 5% city/parish!