What Taxes Does a New Fitness Studio Pay? A Complete Guide
Learn the federal, state, and local taxes new fitness studios must pay, including income, payroll, sales, and property taxes, with practical steps.
Starting a fitness studio means taking on a new set of obligations, and taxes are among the most important. You will owe federal income tax, self-employment tax (if you are a sole proprietor or partner), payroll taxes if you have employees, and potentially state and local taxes like sales tax and property tax. This guide breaks down each tax, what it costs, and how to handle it, so you can budget accurately and avoid surprises.
Federal Income Tax
Your studio’s net profit, which is revenue minus deductible expenses, is subject to federal income tax. The rate depends on your business structure:
- Sole Proprietor or Single-Member LLC: Profits pass through to your personal tax return. You pay ordinary income tax rates, which range from 10% to 37% for 2026.
- Partnership or Multi-Member LLC: Similar pass-through treatment, with each partner paying taxes on their share.
- S Corporation: Profits pass through, but you must pay yourself a reasonable salary, which is subject to payroll taxes.
- C Corporation: The corporation pays a flat 21% tax on profits, and shareholders pay tax on dividends.
What to do this week: Estimate your annual net profit and set aside 25% to 30% of that amount for federal income tax. Use IRS Form 1040-ES to make quarterly estimated payments if you expect to owe $1,000 or more.
Self-Employment Tax
If you are a sole proprietor, partner, or LLC owner, you pay self-employment tax, which covers Social Security and Medicare. The rate is 15.3% of your net earnings, up to the Social Security wage base ($168,600 in 2026). The Medicare portion is 2.9% with no cap, plus an additional 0.9% on income over $200,000 (single).
What to do this week: Calculate your self-employment tax using Schedule SE. Include this in your quarterly estimated payments. For a net profit of $50,000, you would owe about $7,650 in self-employment tax alone.
Payroll Taxes
If you hire employees, you must withhold and pay payroll taxes. These include:
- Federal Income Tax Withholding: Based on each employee’s W-4.
- Social Security and Medicare (FICA): You and the employee each pay 7.65% (6.2% Social Security plus 1.45% Medicare).
- Federal Unemployment Tax (FUTA): You pay 6% on the first $7,000 of each employee’s wages, but you can get a credit of up to 5.4% if you pay state unemployment taxes, reducing the effective rate to 0.6%.
- State Unemployment Tax (SUTA): Rates vary by state and your experience rating, typically 1% to 6% of wages.
What to do this week: Register for an Employer Identification Number (EIN) with the IRS if you have not already. Set up payroll processing with a service like Gusto or ADP, which will handle calculations and filings. Expect to pay roughly 10% to 15% of gross payroll in employer-side taxes and withholdings.
Sales Tax
Most states require you to collect sales tax on fitness memberships and classes. The rate varies from 0% (in states like Oregon and Montana) to over 10% in some cities. For example, California’s base rate is 7.25%, but local additions can push it to 10.25% in Los Angeles. New York City’s combined rate is 8.875%.
What to do this week: Check your state’s Department of Revenue website to see if fitness services are taxable. If they are, register for a sales tax permit, collect the tax at the point of sale, and file returns monthly or quarterly. Many states require you to file even if you collected $0 in sales tax.
Property Tax
If you own the building where your studio operates, you will pay property tax based on the assessed value of the real estate. Rates vary widely, but a typical commercial property tax rate is 1% to 3% of assessed value per year. For a building valued at $500,000, that means $5,000 to $15,000 annually.
If you lease your space, you may still pay property tax indirectly through your rent, as landlords often pass on these costs. Additionally, some states impose a personal property tax on business equipment like treadmills and weights. Check your local assessor’s office for rules.
What to do this week: Review your lease to see if you are responsible for property tax increases. If you own, contact your local assessor to confirm your assessment and look for exemptions, such as a small business exemption.
State and Local Income Taxes
Most states impose their own income tax on business profits. Rates range from a flat 4.4% in Colorado to 13.3% in California’s top bracket. Some states, like Texas and Nevada, have no state income tax but may have a gross receipts tax. For example, Texas has a franchise tax of 0.375% to 0.75% of revenue.
What to do this week: Determine your state’s tax rate and whether you need to register with the state revenue agency. Factor this into your quarterly estimated payments.
Comparison Table of Tax Types
The table below summarizes the main taxes a new fitness studio can expect:
| Tax Type | Who Pays | Typical Rate | When Due |
|---|---|---|---|
| Federal Income Tax | Business owner | 10% to 37% | Quarterly |
| Self-Employment Tax | Owner (sole prop/LLC) | 15.3% | Quarterly |
| Payroll Taxes | Employer | 7.65% employer share + FUTA | Quarterly or monthly |
| Sales Tax | Customers (collected by studio) | 0% to 10%+ | Monthly or quarterly |
| Property Tax | Owner or lessee (via rent) | 1% to 3% of value | Annual or semi-annual |
| State Income Tax | Business owner | 0% to 13.3% | Quarterly |
FAQ
Q: Do I need to pay taxes if my studio is not profitable yet? A: Yes. You may still owe self-employment tax on any net earnings, and you must file a return even if you have a loss. Losses can offset other income, so it is important to file.
Q: Can I deduct the cost of equipment like treadmills? A: Yes. Under Section 179, you can deduct the full purchase price of qualifying equipment in the year you place it in service, up to $1,160,000 for 2026. Alternatively, you can depreciate it over several years.
Q: What records should I keep for tax purposes? A: Keep all receipts for expenses, bank statements, payroll records, and sales tax filings. Use accounting software like QuickBooks to track income and expenses. Retain records for at least 3 years, but 7 years is safer.
Q: When are quarterly estimated taxes due? A: For 2026, the due dates are April 15, June 15, September 15, and January 15, 2027. If a due date falls on a weekend or holiday, the deadline moves to the next business day.
The Bottom Line
New fitness studios face a complex tax landscape, but you can manage it with planning. Start by estimating your federal and state income tax, self-employment tax, and payroll taxes. Register for an EIN and sales tax permit, and set up a system for quarterly payments. Use accounting software to track everything. If you are unsure, consult a CPA who works with small businesses. The cost of professional help, typically $300 to $800 for a basic return, is worth the peace of mind. Take action this week: call your state revenue department, open a separate bank account for tax savings, and mark the quarterly due dates on your calendar.