Probe on unpaid sales taxes has fitness clubs in a sweat

Three of New York City’s trendiest fitness clubs are feeling the burn after receiving subpoenas for unpaid sales taxes from state Attorney General Eric Schneiderman last week, sources told Crain’s.

SoulCycle, Bar Method and Flywheel Sports were all issued investigative subpoenas but have not been accused of any wrongdoing by Mr. Schneiderman’s office. The clubs are being directed to provide relevant tax documents stretching back about a year, sources said. A spokeswoman for Mr. Schneiderman declined to comment.

SoulCycle and Flywheel are both popular spinning studios with a reputation for attracting A-list celebrities. Bar Method, which uses a mix of ballet-inspired stretches and Pilates moves, has also grown in popularity in the city.

Multiple locations

Jay Galluzzo, CEO and co-founder of Flywheel Sports, acknowledged receiving the subpoena and, in a statement, said he intends to “cooperate fully with the attorney general’s office.” Spokespeople for SoulCycle and Bar Method declined to comment.ABC Billing Company, AMERI SHAPE, amerishape, anytime fitness, ASF Billing Company, asf international, butterfly life, contours express, curves for women, enroll members, fitness ,fitness center, fitness life marketing, fitness marketing, fitness promotions, golds gym, world gym, gym, Gym Marketing, Gym promotions, health, health club, health club for sale, Health Club Marketing,  Health Club Promotion,  fitness Consultants, health club promotions, Health Clubs, join health club, Ladies Fitness, Ladies Workout Express, lady of america, NAC Billing Company, Peak Performance, planet fitness, Powerful Promotions, powerhouse gym, Professional Fitness Marketing, Raise EFT $6, Slim and tone, snap fitness, spa studio owners, Targeted fitness, Flywheel, which is headquartered in New York, has three locations in Manhattan, two in the Hamptons and dozens more across the country (plus an outpost in Dubai).

SoulCycle, owned by fitness-club chain Equinox, has 14 studios nationwide, with 11 in New York. SoulCycle, a subsidiary of the Related Cos., has said it plans to open up to 60 locations by 2015. Bar Method has just one location in New York but dozens of others across the country, as well as a popular DVD series.

City exception

City health and fitness clubs are the only businesses of that type subject to sales taxes in the state. Similar businesses outside the five boroughs are exempt.

The details of the subpoenas could not be ascertained. But the issue of sales taxes as they apply to fitness studios has been known to cause confusion.

Last year, state tax auditors became aware that some yoga studios were not collecting sales taxes. The state—which collects the city’s 4.5% sales tax from health and fitness businesses—began auditing several studios, in some cases presenting them with bills for unpaid taxes going back several years.marketing that generates new fitness,  Thousands of health clubs,   world health club, workout express, join,health club closed, health club opening,club solutions magazine, s,24 Hour Fitness,Anytime fitness,  Bally Total Fitness,Health Club Management ,Crunch Fitness,Club One,Curves,Equinox,Health Fitness Corp.,Lifestyle Family Fitness,Planet Fitness,Plus One Management,Powerhouse Gyms,Snap Fitness,Spectrum Athletic Clubs,Sport & Health,Town Sports International,Sports Club Co.,Urban Active,WellbridgeHealth Club,Western Athletic,World Gym, virgin active,workout anytime, la boxing, 9 rounds fitness,weight lifting gym, health spa, attorney general, health club contract, club enhancement fee, health club billing, health club fraud, health club franchise, gym franchise ,breaking industry news,health club news,

In July, the state determined that facilities that only provide yoga and meditation classes would not be subject to city sales taxes, citing longstanding exemptions for religious-oriented goods and services, but those that offered any fitness services, Pilates included, must pay the city’s levy. If a business offered yoga and Pilates, for example, both services would be subject to city sales taxes.

Neither SoulCycle nor Flywheel offer yoga, but many customers have attested to the almost spiritual nature of the workouts provided by the businesses. Bar Method describes its services as a form of Pilates.

Richard Caro, president of Management Vision, a consulting firm specializing in the health and fitness industry, said that many businesses admit to a lack of certainty about which of their services are subject to city sales taxes.

“There’s been a real confusion for years as to what the criteria are for payment,” Mr. Caro said. “This is not something that’s a new topic.”

It is unclear whether Mr. Schneiderman is working in consultation with the state Taxation Department on his investigation. A spokesman for the agency said, “We don’t discuss the specifics of our investigations or auditing activity, but we are continuously monitoring the business environment for widespread, as well as localized, tax evasion.”