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November 22, 2016

Instructional Classes Now Exempt from Missouri Sales Tax

A long unpopular policy in Missouri applies sales tax to admissions to instructional classes, such as dance, fitness, and yoga classes. For several years, lawmakers have been working to change this, arguing, in part, that it discourages physical fitness, which the state should instead encourage. As of September 15th, 2016 the policy has officially changed to make instructional classes exempt from Missouri sales tax.

Under the previous law, charges and fees at places of recreation are subject to sales tax if they offered a “diversion” to the customer. It was hard for taxpayers to discern whether a business was offering educational services or entertainment (“diversion”) services. Senate Bill 1025 clarifies that taxable activities do not include amounts paid for “instructional classes” provided at recreational centers.

Senate Bill 1025 therefore exempts such instructional classes — “any class, lesson, or instruction intended or used for teaching — from sales tax. The bill was approved by lawmakers earlier this year but then vetoed by Governor Jay Nixon. His reason: it “would require cutting up to $8 million each year from other essential services.”

However, the Missouri General Assembly disagreed, voting on September 14 to override that veto. Sen. Will Kraus, the bill’s sponsor, noted that the policy has caused much confusion to business owners over the years. He added, “I do not believe it was ever the intention of the General Assembly to tax these types of classes, just as we do not tax other educational classes.”

The change went into effect September 15th, 2016.

If you have any questions about how this may affect you or your business, please contact an Anders advisor.

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