28 Mar Martial Artists Praying For Last Minute Amendment To Restore Equal Treatment To the Arts and Save Small Businesses
Martial Artists Praying For Last Minute Amendment To Restore Equal Treatment To the Arts and Save Small Businesses
Only a few days left for the Washington State Senate to fix a law that many feel denigrates the martial arts, is damaging martial arts schools and will limit access to vital services for many participants and families for generations to come. Most lawmakers considered the law to be a mistake but the bill to fix the oversight and this particular small business community appear to have become a casualty in the fight over the state budget.
Olympia, WA – Washington State, former home and current resting place of world renowned martial arts legend Bruce Lee, blindsided martial art school owners across the state last October with ‘Special Notice’ of a new law. It’s effect:
… Taxation on their services, up to 9.9%, required everywhere in the state.
… Martial arts at a government community center is tax-free but the exact same facility across the street is taxable.
… Some cultural arts like yoga, tai chi and chi gong were exempted but karate, kung-fu, tae-kwon-do and countless others didn’t make the preferred list.
… According to current state law these centuries old art forms primary purpose is exercise.
… Lawn bowling, land sailing and remote control racing now a service but karate is a ‘retail sale’.
… Only martial arts schools changed status while ballet, dance, gymnastics and other studios were exempted or remained unaffected.
… Every facet of the educational process must be taxed including special workshops, private lessons, test fees and tuition.
Unbeknownst to them, HB1550 passed in early 2015 and reclassified their schools as ‘health clubs’, the arts they teach as ‘physical fitness activities’ for the purpose of exercise and as such required them to begin collecting retail sales tax on their services, up to 9.9% in the state, effective January 1, 2016. Similar specialty studios such as dance, yoga, tai chi, chi gong and gymnastics continue to be sales tax-free.
The martial arts community has been fighting an uphill battle to get the offending law changed since receiving notice on October 13, 2015. Despite less than 90 days to react a statewide association was formed and school owners and participants banded together to fight the law. An online petition on change.org currently has over 7,400 signatures and hundreds of comments in support.
Language in HB1550, which lawmakers intended to simplify “…the taxation of amusement, recreation and physical fitness services…”, ensnared martial art studios by lumping them into the legal definition of an ‘Athletic or Fitness Facility’ which is described as a facility offering ‘physical fitness activities’ for the primary purpose of exercise. Physical fitness services have been taxed at a retail rate for decades in the state. All business conducted inside an Athletic or Fitness Facility is subject to retail sales tax with few exceptions.
Instruction is considered a service in the state and services are not typically subject to sales tax. Current Washington Administrative Code (WAC) specifically states “…self-defense, martial arts, yoga and stress-management…” are instructional and NOT physical fitness services.
That their classrooms were just exercise classes was news to instructors who thought they were teaching self-defense, passing on cultural art forms and attempting to instill confidence, discipline, respect and focus in children and adults.
According to the Washington State Martial Arts Association (WSMAA) HB1550 was passed without a single school owner in the state being notified of impending legislation affecting their businesses or given an opportunity to testify on their own behalf.
WSMAA representatives have asserted that the law is unfairly and unevenly applied, irrevocably damages their educational small businesses, denigrates the practice of martial arts in general and by selectively providing preferential treatment for some art forms, and not others, is inherently culturally discriminatory.
A review of a chart of 83 activities affected by the new law shows that ‘martial arts’ and ‘amusement park admission fees’ were the only two activities to switch from a service to retail status while hockey, baseball, mud runs, rodeo riding, remote control racing, land sailing and dozens of others are now tax-exempt.
The WSMAA claim their review of public records also reveal dozens of irregularities including inconsistent and inaccurate use of nationally accepted industry codes, preferential treatment of Chinese and Indian methods and improper application of current law. The bill summaries legislators were provided with in 2014 and 2015 for their deliberation contained an incomplete definition of an ‘Athletic or Fitness Facility’ and did not mention the change in treatment of martial arts at all.
According to Representative Cindy Ryu, who introduced a bill to fix the issue earlier this year, most legislators consider the change to be a mistake or oversight and were just as surprised as school owners.
Her bill, HB2334, passed with unanimous bipartisan support, 96-0, in the House of Representatives but did not get a full vote on the Senate side where majority leaders viewed the law to fix the mistake to be a ‘tax exemption’.
When asked about all the emails in support being made to Senate offices, Senate Majority Leader Mark Schoesler (R) had this to say on 03/08/2016. “It’s interesting…it has minor fiscal implications. It’s also very interesting that the same people who scream about all the tax exemptions voted for this one.”
According to the WSMAA, in less than 3 months as law the near 10% overnight tax increase has already had a chilling effect on schools and participants across the state. Especially hard hit are families with 2-3 siblings enrolled. Some member schools are reporting a dramatic increase in student cancellations with an equally troubling slowdown in new students compared to the last 5-10 years data.
WSMAA representatives fear this sudden plunge in overall membership, and the resulting cash flow problems, will force many of these mom and pop shops to lay-off staff and potentially close altogether as the year progresses.
According to WSMAA Acting-President Andy Wilson, “The average martial arts school is not of a scale to absorb this type of trauma. A typical martial art school might have only 100 students paying $120 a month while a health club like Planet Fitness might have 6,500 paying $10-20. Our schools are set up just like any other educational institution. We have tuition, private lessons, examinations and guest lecturers. Taxation on each of these areas really stifles our ability to educate much less survive financially with so little time to adapt.”
Despite the grassroots efforts and support from individual Senators preliminary news is that the Senate did not pass the bill as part of their budget negotiations. The only hope that remains is for the Senate to pass a budget amendment in the next couple days. Rep. Ryu has promised to re-introduce the bill next year but by that time the damage to the business community will be done and it is hard to see the government giving back money they got used to receiving.
It’s ironic that at the same time martial arts teachers were receiving notice the state now considered their schools to be health clubs that Newsweek published a Special Edition on Bruce Lee celebrating what would have been his 75th birthday. The introduction described him as ‘The Timeless Legend’ and his legacy as “…an icon-an example of how, through discipline and focus, anyone can achieve greatness.”