JEFFERSON CITY, Mo. – The Senate Ways and Means committee heard the latest in a string of bills filed to protect small businesses from overreach by the Department of Revenue (DOR) Thursday.
Senate Bill 1025, sponsored by Sen. Will Kraus (R-Lee’s Summit), would exempt instructional classes offered by fitness centers and dance studios from sales tax. Several recent changes in the interpretation of sales tax law by the DOR have been implemented unfairly against taxpayers, Kraus said.
“This bill is an effort to push back against the government invading taxpayers’ pockets,” Kraus said. “We’ve heard from many gym and studio owners who didn’t even know they were supposed to be collecting sales tax.”
Sales tax is not collected on educational classes, and, historically, instructional classes given by dance and gymnastic studios and other fitness facilities have fallen under this designation. However, the DOR began auditing small gyms and studios and claiming business owners owed years of back taxes, even though the owners were never notified they were supposed to start collecting the tax.
Last year, the Legislature passed Senate Bill 18, sponsored by Kraus, requiring the DOR to notify business owners when there is a change in the sales tax. Senate Bill 18 was an effort to ensure the DOR cannot pull the same revenue-grabbing maneuver on other industries in the future, Kraus said.
“The DOR’s process of notification by audit devastated many of these locally-owned gyms and studios,” Kraus said. “Government should be helping build the economy, not burdening small businesses by trying to gain as much revenue as possible.”
Several business owners testified in favor of the bill, claiming the tax is not enforced consistently by the DOR. Gym owners said they have lost business because they are required to collect the tax, while the gym across the street is not.
Senate Bill 1025 would restore educational status to instructional classes offered by dance studios and fitness centers, which would qualify the classes for a sales tax exemption. These instructional classes teach participants life-long skills and help them maintain a healthy lifestyle, Kraus said.
“The intent of sales tax was never to tax services, only goods,” Kraus said. “These business owners are providing a valuable service to our communities.”