YMCA seeks exemption from Ohio sales tax

YMCA

YMCA seeks exemption from Ohio sales tax.

Two Ohio lawmakers want to eliminate sales taxes from YMCA memberships.

Rep. Jim Buchy of Greenville and Sen. Bill Beagleof Tipp City, both Republicans, have introduced bills to exempt from sales and use taxes memberships to gyms and other recreational facilities operated by nonprofits.

Under current law, sales tax is charged on a host of services, including on physical fitness facility services and recreational and sports clubs. Anyone who pays a membership, initiation or monthly minimum charge at a health spa, athletic club or gym — or at a golf, country or boating club — pays the state’s 5.75 percent sales tax, along with the local county sales tax.

In some counties, that could be as much as 8.75 percent.

House Bill 334 and Senate Bill 211 contain the same language. The House bill has 28 co-sponsors; the Senate bill has 10. so far.

“With more than one-quarter of the state representatives signed onto this bill as co-sponsors it appears that there is broad bi-partisan support to have the bill given consideration in the legislative process,” Buchy said in an email. “This is good public policy because providing healthy options to Ohioans should be a focus for state government.”

Buchy said lawmakers have discussed the change for about a year.

“Removing that sales tax would return us back to the way it was prior to 1992, when sweeping tax changes began taxing nonprofit gym memberships which were previously not taxed.”

Before 1992, no memberships at fitness centers were taxed.

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This isn’t the first time lawmakers tried to exempt nonprofits like the YMCA from the sales tax. A bill was introduced in 2007, but it died in committee. At that time, John Bickley, who was the CEO of the YMCA of Central Ohio, said it was “bad public policy to tax any healthy behavior — for-profits or nonprofits.”

But Beagle has a different reason for sponsoring his bill.

“It seems there is inconsistency in terms of how we treat nonprofits for how we tax memberships,” he said. “The YMCA is taxed, but Rotary and Boys & Girls Clubs are not taxed. This is an effort to identify those physical fitness types and treat them like we do other nonprofits, like the Boys & Girls Clubs, that offer similar services.”

Beagle noted the YMCA uses an ability-to-pay measure that for-profits don’t. The subsidized membership shows an effort to help healthy activities in the community, he added.

Ohio’s tax code does make a distinction in many areas regarding for-profit and nonprofit groups, Beagle explained.

“Credit unions don’t have to pay the financial institution tax in Ohio, but banks do,” he said, adding that banks “don’t like it any more than the for-profit gyms will.”

Unlike the financial institution tax imposed on banks, the sales tax isn’t imposed on the organization but rather on the consumer, who isn’t tax-exempt. It’s a pass-through for the business.

The YMCA agrees it acts as a pass-through for the tax but insists membership in a Y is very different from membership at a for-profit gym because of the charitable work the YMCA does.

“Like a donation to any other charity that supports the work the charity does while also giving that donor access to the organization, a Y member supports the Y’s charitable work while also getting the benefits of belonging,” said Beth Tsvetkoff, executive direction of the Ohio Alliance of YMCAs.

But if the point, as it was in 2007, is to promote healthy activities, why not roll back the sales tax on all facilities, regardless of profit status?

“If other nonprofit groups have memberships that are not taxed, we should make sure that all are not taxed,” Beagle said. “We’re being consistent with Ohio law that nonprofit entities that sell memberships don’t have to collect Ohio sales tax.”

The International Health, Racquet and Sportsclub Association, IHRSA, opposed the similar measure in 2007, preferring to work with nonprofits to completely repeal the tax on the physical fitness category of services.

IHRSA did not respond to a request for comment prior to publication.

“There are two sides to everything,” Beagle said. “Before this goes forward, I’ve got 131 other people to convince.”