DES MOINES, IA—A number of Curves franchises in Iowa are fighting a state tax assessment that could cost them more than $500,000.
The Iowa Department of Revenue notified dozens of Iowa Curves franchise owners that they owed state sales taxes from years past that were never charged to their customers. In Iowa, sales tax is charged for all commercial recreation, including health clubs and country clubs, said Dave Casey, policy manager for the Iowa Department of Revenue.
One point of confusion for some franchise owners though deals with instruction. Iowa sales tax is not charged if customers are paying additional fees for instruction. According to court documents, one test case brought by an Ames, IA, Curves argues that the women’s-only facility’s activities should not be considered commercial recreation because members “receive instruction under the guidance and direction of instructors on how to perform the Curves workout. Ordinary persons cannot perform the activity without instruction, and the instructors have received special training.”
Health Palmer, a Des Moines attorney, is representing a group of Curves owners who are challenging the tax, but could not comment due to pending litigation.
Becky Frusher, communications manager for Curves International, said it is up to franchisees to follow state and local laws.
”Curves International is in the business of providing independent business owners with the opportunity to offer a valuable service to the women in their communities through a proven business method, and not in the business of providing legal or tax advice,” she said. “We do however, advise franchisees to comply with all applicable state and local laws, as well as to secure their own attorney and tax advisor.”