TRENTON, NJ — The New Jersey health club tax that went into effect on Oct. 1 is facing opposition from a nonprofit group and revisions by state legislators.
The law requires for-profit health clubs and tax-exempt organizations to collect and remit a 7 percent sales tax on initiation and membership fees. The sales tax, which is part of a multi-faceted approach to solving New Jersey's budget problems, does not apply to guest fees or to clubs with the majority of their members under the age of 18. In New Jersey, the YMCAs have 475,000 members, and 253,000 are under the age of 18. As of press time, William Lovett, CEO of the Metuchen-Edison-Woodbridge YMCA, was still waiting to get definitive regulations from the New Jersey Treasury Department as to how the 18-and-under count would be conducted and applied to a YMCA.
“YMCAs should be excluded because health and wellness is a critical part of our exempt service to so many New Jersey communities,” Lovett says. “YMCAs serve thousands of non-member children through a wide variety of programs and services.”
In early November, the New Jersey YMCA Alliance, which represents 44 YMCA branches, filed a lawsuit seeking an immediate injunction prohibiting the New Jersey State Division of Taxation from assessing the sales tax on YMCA membership fees. The organization had not yet received a ruling on the lawsuit, but Lovett says the situation will be “corrected” either through judicial intervention or legislative action.
State legislators have proposed legislation excluding tax-exempt organizations from being subject to the tax, but some for-profit club owners say the legislation and lawsuit aren't needed because non-profits should be subject to the same provisions as for-profit clubs.
“Proposing new legislation excluding tax-exempt organizations such as JCCs and YMCAs from being subject to the tax creates an unfair advantage as we compete for the same dollar,” says Bob Bonham, owner of Strong and Shapely Gym in East Rutherford, NJ. “It's bad enough that they don't pay other taxes also.”