July 2010
With summer in full swing, so is tanning season. But beginning July 1, enhancing your tan at an indoor salon will cost you more. The recent health care reform legislation includes a new 10% federal excise tax on indoor tanning services. Service providers must report the tax on their quarterly federal excise tax return (Form 720). The first return to report the excise tax is due on October 31, 2010 for the third quarter of 2010. The IRS is currently revising the form to add a line for the new tax. The tax is paid with the form, as deposits are not required.
Service providers who “bundle” tanning with other services must calculate the amount of tax due using a ratio based on the non-bundled price of each service. For physical fitness facilities offering tanning services as part of their business, membership fees are not subject to the indoor tanning services tax as long as tanning is not a substantial part of the business and certain other factors are met. The excise tax is not collected at the time of the sale of a gift certificate if it is unknown what the certificate will be redeemed for. Instead, the tax is collected when the gift certificate is redeemed for tanning services.
The tax does not apply to spray tans or topical creams and lotions, to other goods and services purchased from a tanning salon, or to licensed medical professional phototherapy services (which are designed to treat dermatological conditions, jaundice, or seasonal affective or other disorders) performed on the medical professional’s premises.
Tax-exempt entities that provide indoor tanning services are not exempt from collecting the tax.
Contact us for more information or for assistance with understanding how the tax will impact your business. The Frequently Asked Questions on the IRS website also provide additional information regarding the excise tax.
Terri Lillesand provides tax planning and compliance for corporations, partnerships, individuals, and fiduciaries. Terri also represents clients in IRS and state audits.
|
