Sales tax changes result in dance studio owner being hit with thousands in back taxes

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LEE'S SUMMIT, Mo. -- When parents send children to dance class, time spent there should be taxing, not taxed. But the Missouri Department of Revenue is stepping up enforcement of sales tax on places of: amusement, entertainment or recreation. Dance practice might now fall under that category.

For years, a sales tax was never collected at Miss Dianna’s Dance Studio because it was considered a place of education. The state charges a sales tax on places of recreation and entertainment and now that might include her studio.

"We've had to help a few of our families out. The struggle of paying for dance lessons is a little harder now," said Dianna Pfaff, the owner.

Parents might have to shell out more money. For 40 years, Pfaff never required parents to pay a sales tax because it’s a place of education. But that changed a year ago.  The Missouri Department of Revenue audited her small business and slapped her with  more than $73,000 worth of back taxes.

But Pfaff didn’t know she was supposed to be collecting taxes. Only places of recreation and entertainment are taxed. Within the last year, the state considered Pffaff’s studio one of those places.

"You can't raise somebody's taxes by changing a definition," said Missouri State Senator Ryan Silvey (R-17).

Silvey helped propose a bill that would better define places of education that would include dance. But Missouri Governor Jay Nixon vetoed it in June.

"I think that he's finding all ways to find revenue and by forcing people to pay taxes by reinterpreting tax code. I think that's a way he could get extra money," he said.

There are hopes to override the veto in September.

"I don't believe in what's going on here and I have to fight for my families, and all the families who have children that take dance in the state of Missouri," said Pfaff.

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7 comments

  • Ben

    Since when did a dance school become educational. It may be in the narrowist sense of the word and is for those who go on to become professionals; but for most kids, it is recreational. When the law changed, the woman should have been aware of it considering the impact it has on her business. I wouldn’t be surprised if much of her business goes unreported since some of it are cash transactions.

    • Keith

      I disagree Ben. I think it is education in the literal sense. It doesn’t really matter if they don’t go on to be professionals. And what if they do? Does they state owe THEM now? It is a “School of Dance” . IDK maybe if they offer some sort of official certification or something the state might have to recognize it as education but I don’t think that is likely.

    • Chet G

      Get a clue. If you are LEARNING to do something, it is educational. Educational as defined by Merriam-Webster as pertaining to the action or process of teaching someone. There is no question that these studios are teaching someone to dance. Education is not limited to reading, writing and arithmetic. Attempts to retroactively apply a new interpretation of the law would be rejected by the appellate courts; however, these studios should not be forced to spend money to prove the rightness of their positions when MO DOR won’t reimburse their attorney fees when it eventually loses.