Polly Sweitzer, E-RYT 200, owner of Yoga Sol, RYS 200, in Columbia, Missouri, experienced firsthand the challenge of running a yoga business and working with her state’s Department of Revenue. She opened her studio 10 years ago when she moved to Columbia from Los Angeles. In 2009, the state imposed a sales tax on yoga classes and services. The move put yoga studios in the same tax category as places of amusement, entertainment and recreation.
Polly said she initially planned to fight the sales tax imposition with the help of a lobbyist and crowd-funding campaign when the state sued her; tax officials claimed her teachers were considered Yoga Sol employees and not independent contractors. Consequently, state officials charged that she owed more than $50,000 in back taxes. Believing she was following the letter of the law, Polly hired an attorney to contest the case, which has cost her thousands of dollars.
According to an April 30, 2014 Columbia Daily Tribune report on Polly’s case, state and federal employment laws are enforced by the Division of Employment Security under the Missouri Department of Labor and Industrial Relations. “Called ‘worker misclassification,’ violations carry heavy financial penalties — $50 to $1,000 a day plus 25 percent of unpaid taxes,” the paper reports.
The Tribune reported the “key to the appeal will be how Yoga Sol performs on the IRS 20 Factor Test, designed to measure a business relationship to determine whether a person is an employee or an independent contractor. The test measures the controls an employer places on job performance. The more control, the more likely the person is to be legally considered an employee, making the employer liable for the taxes and other costs that go along with that status.”
Polly said a May 2014 hearing on the matter should have been a short, uncontested court proceeding. “But after making the front page of the Tribune, I think they brought in their big guns,” she told Yoga Alliance®. “They had opposing council and had allowed visitors in the room. It was a circus. They really made me feel like a criminal and I've done nothing wrong.”
After seven hours of questioning – Polly says one of the questions they asked was, “Do you tell your teachers to put toilet paper on the toilet paper holder?” – she waited for more than a month for them to rule that two of her 12 teachers were considered employees and would be subject to back taxes, even though Yoga Sol met the state’s IRS 20 Factor Test criteria for independent contractors.
She is now appealing this ruling as well. Of the two instructors who are considered employees, Polly said one was paid to write a quarterly newsletter; the state is collecting taxes on this as well as all of the instructor’s yoga teaching fees.
“I've thrown money at this in hopes to get that number down that they say I owe. With the two teachers they say that are employees, the fee was over $10,000,” she adds. “My lawyer filed the certifications for the one in contest and I am waiting to hear. I will also try to only pay the newsletter fees for the other teacher.”
Overall, Polly described the case as unfair and exhausting. “(It’s) time consuming, costly and emotionally draining,” she said. “It's so disappointing to see government act in such a brutal way to an honest, woman-owned small business that is doing so much good for the health and wellness of their tax paying constituents.”
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