How should I record annual memberships and class packs?

As unearned revenue when paid, then as revenue over the membership period or as classes are used. Recording the full payment on day one overstates the month it was sold.

Are my trainers and instructors employees or contractors?

It depends on control: who sets schedules and prices, who supplies tools and products, and whether they serve their own clients. Misclassification is expensive, so each arrangement is worth reviewing.

Do I charge sales tax on services?

In Colorado, services are generally not taxed, but retail products usually are, and home-rule cities like Denver collect their own tax. Rules vary by state and city, and change, so it’s worth confirming for your setup.

Who I work with

Accounting for gyms and fitness businesses

Gyms, boutique fitness and yoga studios, martial arts schools, climbing gyms and personal trainers sell memberships, class packs and sessions paid in advance, and rely on coaches and instructors who may be employees or contractors. The books need to separate what was collected from what was earned.

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What the books need to handle

Memberships and prepaid packages

Class packs, annual memberships and prepaid services held as unearned revenue and recognized as they are used or earned.

Instructors, coaches and trainers

Employee and contractor arrangements reviewed for correct classification, with commissions and tips run through payroll where they belong.

Booking and payment platforms

Mindbody, Vagaro, Square and similar platforms reconciled to deposits, fees, refunds and failed payments.

Retail and equipment

Product sales, inventory and sales tax tracked separately from services, and equipment and buildout depreciated.

Numbers worth tracking monthly

Member retention

Members kept month to month, and the churn behind it.

Revenue per member or client

Average monthly revenue per active member or client.

Instructor and coach cost

Pay, commissions and payroll taxes as a share of service revenue.

Unearned revenue balance

Prepaid memberships and packages still owed as service, the obligation behind the cash.

Balance sheet accounts I keep workpapers on

Each of these is supported every month by a workpaper that ties the balance to a source document, so the number can be trusted and followed by anyone who reviews it.

Unearned revenue

Memberships, class packs, gift cards and prepaid services not yet delivered.

Merchant and platform clearing

Payments in transit from booking platforms, cleared to deposits.

Retail inventory

Products for resale counted and costed, separate from supplies used in services.

Accrued payroll, tips and commissions

Wages, tips and commissions earned but not yet paid.

Month-end close for gyms and studios

Booking platform payouts reconciled to deposits and fees
Memberships and packages released from unearned revenue
Tips and commissions reconciled to payroll
Retail, supplement and merchandise sales tracked separately
Retail inventory counted and sales tax reconciled
Failed payments and refunds reviewed

Tax

Tax considerations

Worker classification

Employees and contractors each carry different payroll, 1099 and liability obligations.

Tips and commissions

Reported tips and commissions run through payroll with correct withholding.

Equipment and buildout

Fitness equipment and interior improvements may qualify for faster write-offs than the building.

Owner pay and entity

Owners who also teach or coach need a compensation plan that fits the entity and the margins.

General information, not advice for your specific situation. Call 239-896-6799 to talk through yours.

How I help

Common questions

How should I record annual memberships and class packs?: As unearned revenue when paid, then as revenue over the membership period or as classes are used. Recording the full payment on day one overstates the month it was sold.
Are my trainers and instructors employees or contractors?: It depends on control: who sets schedules and prices, who supplies tools and products, and whether they serve their own clients. Misclassification is expensive, so each arrangement is worth reviewing.
Do I charge sales tax on services?: In Colorado, services are generally not taxed, but retail products usually are, and home-rule cities like Denver collect their own tax. Rules vary by state and city, and change, so it’s worth confirming for your setup.

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