Tennessee Amusement Tax Punishes Small Business, NFIB Says

If you own a small gym in Tennessee then state officials force you to pay what is called an amusement tax, and that’s especially bad for the state’s overall physical health, according to a business expert.

Large gym owners don’t have to pay this tax.

Small business owners must pass the higher costs of doing business down to their customers.

The tax amounts to about 10 percent, said Jim Brown, Tennessee director of the National Federation of Independent Business.

Tennessee officials used the amusement tax to take about $16 million out of the economy and put it in state coffers last year, Brown told The Tennessee Star.

The Volunteer State, Brown went on to say, is not among the healthiest of the 50 states. Tennessee, for instance, ranks as the nation’s sixth most unhealthy state, according to a 2017 Tennessean article.

And this tax discourages people from getting in shape.

That’s why Brown said he and other grassroots groups plan to push hard to do away with the tax this new legislative session.

“We can talk a lot about health care reform, but we don’t talk enough about health reform. This is excellent tax reform that is health reform,” Brown told The Star.

“For someone who is middle class this (tax) is painful. For someone who is poor it will keep them from working out.”

Tennessee legislators passed the tax into law sometime in the 1980s, Brown said.

Revenue from the tax goes to the state’s general fund, he said.

Brown said business owners around Tennessee tell him they’re uncertain whether they must pay the tax. But government officials began to audit some of those businesses in 2016 and 2017. That was when they began a push to eliminate the tax, Brown said.

“It’s unfair for small fitness centers to pay this tax and for big fitness centers not to,” Brown told The Star.

“There are a number of exemptions (for big gyms),” Brown said.

Square footage is one of the things state officials put into the code back in 1986 in order for large gyms to have an exemption, he said.

“There’s the number of hours you operate, stuff like that. The one that caused the inequity is the 15,000-square footage exemption. You have places like Lifetime Fitness and LA fitness (getting the exemptions),” Brown said.

Brown said he believes there are about 30 to 35 of these large, big-box fitness centers not paying the tax in Tennessee.

“We believe it is important to remove the exemption and get rid of the tax and have everyone on the same playing field,” Brown said.

State Sen. Steve Dickerson, R-Nashville, and State Rep. Mark White, R-Memphis, are currently filing a bill to repeal the tax, Brown said.

State Sen. Richard Briggs, R-Knoxville, and State Rep. Martin Daniel, R-Knoxville, filed a similar bill a couple of months ago, Brown said.

Business owners who want to get involved with the fight should visit www.tossthetax.com, Brown said.

The NFIB represents about 6,000 independent business owners around the state, Brown said.

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Chris Butler is an investigative journalist at The Tennessee Star. Follow Chris on Facebook. Email tips to [email protected].