A few weeks ago, the New York state tax department seized iconic Brooklyn pizzeria Di Fara in connection with some $150,000 in unpaid sales tax. Although Mayor Bill de Blasio vowed to come to the aid of the beloved institution, Gov. Andrew Cuomo was quick to remind the mayor that it is the state—and not the City—that controls the administration of sales tax. This New York state versus City dispute comes mere months after a more prosaic controversy in SoulCycle, DTA Nos. 827698 and 827699 (N.Y. Div. Tax App., May 23, 2019). SoulCycle concerned a particularly knotty interaction of the state and City sales tax rules, leading to an unfavorable result for the taxpayer.

SoulCycle is a provider of “instructor-led indoor cycling classes” (commonly referred to as “spin” classes). A typical class included “35 to 40 minutes of stationary bicycle riding led by an instructor with music, 5 to 8 minutes of upper body strength exercises using hand weights, and a 3 minute cool-down stretch.” The classes were not inherently competitive, as, among other things, there was no mechanism by which to “score” participants. The ALJ noted that “[t]he stationary bikes [did] not measure power, speed, cadence or distance.” Participants paid either on a class-by-class basis, or by purchasing a “package” for multiple classes.

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