Guidance From the IRS on the New Tanning Tax

Anyone familiar with Snooki, Mike “The Situation” Sorrentino, or any of the other roomies from MTV’s hit reality series, “Jersey Shore,” knows that tanning is as popular as ever for some. Unfortunately for spas, salons, and other businesses offering ultraviolet tanning services, a new tanning tax went into effect on July 1 stipulating that they must collect a 10 percent excise tax as part of the Affordable Care Act, enacted in March. If you’re still a bit confused about what this may mean for your business, the Internal Revenue Service (IRS) offers some guidance on the topic:

  • Businesses must collect the tax at the time the customer pays for the tanning services. If the customer doesn’t pay the excise tax, the tanning service provider must pay it.
  • The tax does not apply to spray-on services or tanning offered as an incidental service, without a separately identifiable fee, to members of certain qualified fitness facilities.
  • If a customer buys other goods and services when paying for tanning, a business does not need to collect the excise tax on those other items provided that they are separately stated and the charges do not exceed the fair market value for those items. However, if the charges are not separately stated, a business should collect the tax on the amount that is reasonably attributable to the tanning services.
  • A gift certificate for unspecified services is not subject to tax when it is purchased. If the recipient uses the gift certificate for tanning services, the provider will collect the tanning excise tax at that time.
  • Tanning service providers must report and pay the excise tax in full on a quarterly basis. The first quarterly return and payment, due Nov. 1, 2010, covers taxes collected during July, August, and September. To report and pay the tax, a business must have an Employer Identification Number assigned by the IRS and must file IRS Form 720, Quarterly Federal Excise Tax Return. Businesses that do not already have an EIN can apply for one at IRS.gov. Business that do not file and pay the tax by the quarterly due date may be subject to a penalty.
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