Martial arts singled out for taxation, relief bill stuck in committee

Martial artists across the state hope to see relief from what they view as an unfair tax passed last fall targeting their profession.

Update note: As of Wednesday afternoon, HB 2334 had passed the Senate Ways and Means Committee. It will now go before the Rules Committee, and if passed scheduled for a full Senate vote and approval from the Governor by the end of tomorrow barring an extended session.

Due to the quickly developing nature of this story, this report will be updated as information becomes available.

Martial artists across the state hope to see relief from what they view as an unfair tax passed last fall targeting their profession.

Last October, state lawmakers voted to reclassify martial arts schools to be taxed as fitness clubs, levying a sales tax instead of being taxed like a service, raising taxes and prices by up to 9.6 percent, effective the first of this year.

In response, representatives from disciplines and schools all across the state formed the Washington State Martial Arts Association in an effort to fight against what they view as a mistake.

Andy Wilson, owner of MKG Martial Arts in Seattle, is the acting president of the organization.

“It seems like a really sloppy, disrespectful treatment towards a particular group,” Wilson said. “We can’t help but feel slighted and disrespected as a profession and a practice.”

The legislation, House Bill 1550, was first requested by the state Department of Revenue.

But Wilson said many other activities like basketball, auto racing, dancing, soccer, yoga and a couple forms of martial arts are still classified as services instead of sales, and doesn’t understand why they were reclassified.

Additionally, he said martial arts provide much more instruction and personal development beyond simply physical fitness.

House Bill 2334 was introduced this session to revert martial arts to its previous status, passing the House unanimously but getting stuck in the Senate Ways and Means Committee. If it is not moved out of committee for a vote before March 10, it will not pass.

And if it doesn’t, Wilson said, the consequences for state martial arts schools could be dire.

“We really do think that there is a possibility that we’re going to lose a number of schools by year’s end,” he said.

In his own school, Wilson said he’s had his worst January in five years.

Industry standard prices range from $110 to $130 a month and many families send multiple children to martial arts classes, Wilson said.

Consequently, a 10 percent price increase puts a significant dent into families’ budgets, forcing many to withdraw their children from martial arts schools, and causing schools to lay off employees.

And even if their cause is taken up during the 2017 legislative session, Wilson worries instructors across the state won’t have the time or energy to lobby again.

Korbett Miller is a board member with the Washington State Martial Arts Association and owner of Miller’s Martial Arts Academy in Kirkland, which has been operating for 19 years.

Miller said his school had its worst January since 2010, a story mirrored in schools all across the state.

“No martial arts school can absorb that,” he said.

To compound his frustration, Miller said the Department of Revenue and legislature never notified martial arts schools about the proposed change until it had already passed, informing them by letter they had two-and-a-half months to comply with the new tax.

According to a press release from the Association, in the bill that summaries state legislators rely on for information, the provision to reclassify martial arts was never mentioned, leading to not only schools being blindsided, but lawmakers as well.

However, Department of Revenue spokesperson Kim Schmanke said when they crafted the bill, they were following direction from the state legislature to create a ‘bright line,’ clearly defining what activities would fall under sales tax.

In their view, martial arts were primarily a physical fitness activity.

Opponents of the reclassification argue that activities like yoga, Tai Chi and Qi Gong were exempt from the tax. Schmanke said this exemption stems from an agreement reached in 2009, where practitioners of these three activities argued their traditions were primarily spiritual in nature. The Department of Revenue agreed, and carried this exemption forward.

If HB 2334 passes, the department will head back to the drawing board to once again exempt martial arts from the sales tax.

“We were asked to create the bill, and we did so,” Schmanke said.

At recent hearings in Olympia, more than 400 people showed up at the legislature to voice their support of HB 2334, and more than 6,500 supporters have signed a petition on to repeal HB 1550.

But as of Tuesday afternoon, Wilson said HB 2334 was still stuck in committee.

If the bill dies this session the Association may pursue legal action but it could be up to 16 months before their case went before a judge, which Wilson said is a long time for a self-funded grassroots organization comprised of a wide range of martial arts traditions.

“We’re thinking about it, but the problem is there was no association to represent us until we banded together four months ago,” he said. “That’s traditionally extremely hard for martial arts.”

In the meantime, Miller said he’ll try to make-do.

“We’re hoping that the people in Kirkland will stick by us,” he said.

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