A new bill introduced in the Minnesota legislature, HF 884 proposes to change the way that the massage therapy profession is taxed in the state.
Currently, massage therapists in Minnesota are required, with some exceptions, to collect sales tax from their clients and then pay that collected tax to the state (click here for information on sales tax). HF 884 would remove that sales tax and replace it with a new tax consisting of 2% of the massage therapist's gross revenue, which is the same tax levied on other "health care providers." The bill's current language indicates that only those massage therapists who register with the state would be subject to the 2% tax.
The proposed system would likely simplify the payment of state taxes for massage therapists, and would result in a lower state tax bill for many therapists. However, it has potential downsides as well. For example, sales tax would no longer be added on to the listed price of a massage, but, rather, a therapist might need to pass the tax cost on to the client through an increase in the listed price itself. We also have concerns about the term "massage therapy" being given a statutory definition for the first time in the tax code. This could create problems if a state licensing or certification law for massage therapists were ever passed.
We are monitoring the bill and will keep you apprised of its status as it moves through the legislative process.