Blog Post

The Taxman Cometh to NY Yoga Studios

Yoga studio owners throughout New York City are panicking as the state begins to impose sales tax on their businesses, with the existence of some studios threatened after being audited for years worth of back taxes.

The Wall Street Journal (WSJ) is reporting that the New York Department of Taxation and Finance decided that yoga studios fall into the category of weight control or health studios and must begin to pay the city's  4.5 percent sales tax. Although the decision was announced last year, it is only now sinking in as studios across the city prepare to meet the April 15 tax deadline.

The state, which collects the city's sales tax, has also begun to audit studios for sales taxes dating back several years.

"We do see this as a fairness issue," said Edward Walsh, a spokesman for the Department of Taxation and Finance, noting that Pilates studios have to pay sales tax. "Businesses that provide similar services should be subject to the same taxes in the city."

But Yoga for New York (YFNY), a lobbying group that formed several years ago when the state was trying to protect consumers by regulating the training of yoga instructors, said the state is not properly categorizing them. 

“We’re not like fitness studios,” said YFNY Director Allison West. “We have larger and deeper missions.”

She claims part of that mission is to provide stress relief for citizens at affordable rates, something that would be jeopardized if studios have to pass along a price increase in order to cover the sales tax.

"Yoga studios have been severely taxed—no pun intended—by the economic crisis," she said. "If students drop out because of the cost increases, then studios will suffer."

Ms. West added: "It is important to the city that we have stress-relieving activities that are affordable to all levels of income. Something like this is a threat to that."

Perhaps the biggest threat of all is the ambiguity surrounding yoga and whether it is a spiritual regimen or "just exercise." The answer to this question seems to be dependent upon whose asking it - a Christian who doesn't want to get involved in Hinduism or the state who says exercise studios must be taxed. In the first case, yoga is almost never linked to religion; in the second case, it always is.

Take the uproar that occurred in Missouri in 2009 when the state decided to start taxing yoga studios.  Yoga instructors desperately tried to convince lawmakers that what they teach isn't just exercise but a form of physical preparation for meditation, based on ancient Hindu texts, with the ultimate goal of spiritual enlightenment.

"We feel that yoga taught in a studio is actually instruction on an ancient spiritual practice, not an amusement, entertainment or recreation,” Mike Shabsin, an attorney and yoga instructor told the St. Louis Dispatch at the time.

It didn't work.

However, yoga instructors in the state of Washington were much more successful in convincing lawmakers to categorize yoga as a religious practice that deserves the same tax exempt status as churches.

“They told us that yoga is more than just staying physically fit; it’s more of a spiritual and mental type of exercise,”  Mike Gowrylow of the Washington Department of Revenue, told the Dispatch. “After they educated us, we agreed they had a point.”

Some experts who weighed in on the Missouri law warned that claiming the need for a religious exemption could backfire.

" . . . (T)hose who are seeking tax exemptions for yoga classes should be careful what they wish for," said Jay Wexler, Professor of Law, Boston University. "If yoga classes count as religion, then public schools, which might like the idea of offering a popular and stress-relieving form of physical recreation to students or faculty, may not offer them. If we decide that yoga centers are providing religious training, then the government may not support them financially, unless it supports all other similarly situated businesses in exactly the same way."

Others say the only way to handle the problem of taxation is to determine what kind of yoga is being taught and apply the law accordingly. 

"It would appear that the sensible approach in this situation would be one in which the context of practice is taken into consideration, in accordance with the types of standards that are applied to determining tax-exempt status for religious organizations," said Stuart R. Sarbacker, Assistant Professor of Philosophy at Oregon State University.

"I do not doubt that some yoga organizations would fall solidly within the 'religious organization' parameters, and others outside of it (yoga is big business too, after all). The tricky part would be in evaluating the spectrum in between, and determining where the 'dividing lines' between secular and spiritual organizations are to be found, legally and philosophically."

Tricky indeed! Millions of exercise enthusiasts have already discovered that the dividing line between exercise and religion is no easy boundary to discern.

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