Virginia Lawmakers' Push for Gym Membership Tax Fails After Sparking Business Backlash

RICHMOND, Va. – A series of controversial proposals introduced by Democratic lawmakers in the Virginia General Assembly, which would have extended the state’s sales tax to a wide range of services including gym memberships, failed to pass before the legislative session concluded on March 14, 2026. The bills, introduced shortly after Governor Abigail Spanberger took office in January, ignited a fierce debate about the state's business climate and the new administration's campaign promises of affordability. Among the most discussed proposals was House Bill 978, introduced by Delegate Vivian Watts. The bill sought to impose a retail sales tax on dozens of everyday services, targeting businesses in the fitness, pet care, home repair, and digital services sectors. Had it passed, Virginians would have paid new taxes on their monthly gym fees, as well as on services like dog grooming, vehicle repairs, counseling, and concert tickets. Other proposals floated during the session included new taxes on firearms, large employers, and delivery services. These legislative efforts created immediate uncertainty for small and mid-sized service businesses across the Commonwealth. Even when tax proposals fail, the introduction alone forces business owners to begin contingency planning. They must consider how to adjust pricing, update accounting systems, and communicate potential cost increases to customers, diverting critical resources from growth and operations. This is a recurring challenge we see for clients whenever state or federal tax codes are debated. The proposals drew sharp criticism from taxpayer advocacy groups and political opponents, who argued they directly contradicted Gov. Spanberger’s campaign focus on making Virginia more affordable. Americans For Tax Reform, a conservative advocacy group, noted that neighboring states were actively looking to lower taxes, creating a competitive disadvantage for Virginia. Grover Norquist, the group's president, stated it would be “particularly foolish” for Virginia to raise taxes amid “heightened state tax competition.” Joe Bishop-Henchman of the National Taxpayers Union echoed these concerns, telling local news outlet WWBT that while each individual tax might seem small, their cumulative effect could become costly for families and small businesses. The proposals included more than 50 different measures, ranging from new income tax brackets and taxes on investment income to local property taxes on electric landscaping equipment. Delegate Watts defended her bill, arguing that those who can afford discretionary services should contribute to the state’s tax base. “The fact that I can afford to have someone take care of the dog indicates that I should be part of making sure that someone who can’t even afford to travel isn’t the only one paying taxes,” Watts said in a February interview. For service-based businesses, the prospect of applying sales tax represents a significant operational shift. It’s not just about collecting more money; it involves reprogramming point-of-sale systems, understanding complex remittance schedules, and managing new compliance burdens. In our experience, many entrepreneurs in fields like fitness or skilled trades are unprepared for this level of tax administration. We strongly advise business owners to proactively model the financial impact of such potential legislative changes. Understanding how a new service tax would affect cash flow and profitability is a crucial component of the strategic tax preparation and compliance services C&S Finance Group LLC provides at csfinancegroup.com. Ultimately, the predictions of political analysts like Larry Sabato of the University of Virginia’s Center for Politics proved correct. Sabato noted early in the session that history suggested most of the bills were unlikely to pass, anticipating that either legislative leadership or the governor’s office would eliminate them. According to a statement from Governor Spanberger’s office after the session, the bills in question failed during the legislative process and never reached her desk to be signed into law. Despite the proposals' failure and a lack of endorsement from the governor, Republicans have continued to criticize Spanberger for the tax increase attempts made by members of her party. The Washington Post noted in an April 2026 fact-check that these claims were misleading, as the governor never signed or publicly supported the service tax bills. However, Spanberger has endorsed other measures with financial implications for businesses and residents, including Virginia rejoining the Regional Greenhouse Gas Initiative (RGGI), which adds a fee to electricity bills, and a state-managed paid family and medical leave program funded by a new payroll tax. While Virginia’s service-based businesses have avoided this new layer of taxation for now, the legislative session has highlighted a growing willingness among some lawmakers to expand the state’s tax base. Business owners should anticipate that the debate over taxing services is likely to resurface in future legislative sessions as the state continues to address its revenue needs and policy goals.