An Iowa news source reported this week that the Iowa Department of Revenue and a group of Curves franchisees are locked in a legal battle over whether the franchisees are required to pay more than $500,000 in sales in sales taxes that were never charged to their customers. At the crux of the dispute is the issue of whether the services provided by Curves constitute "instructional services," which are exempt from Iowa sales tax, or fall under the same category as membership fees at health clubs, which are taxed. A spokeswoman for the franchisor, Curves International, stated that while the company is "not in the business of providing legal or tax advice" to its franchisees, it requires its franchisees to comply with all applicable federal and state laws. This standard franchise agreement requirement may subject any franchisee who does not pay the outstanding taxes to possible termination if it is determined that Curves' products are subject to Iowa sales tax. With over 9,000 locations worldwide, Curves is the largest fitness franchise in the world and is dedicated to providing fitness, exercise and nutritional information and programs for women.
Posted by franchiselawblog at September 23, 2005 03:03 PM