Beginning July 1, 2010 businesses offering ultraviolet tanning services must collect a 10 percent excise tax as part of the excise tax requirement of the Affordable Care Act, enacted in March 2010. Businesses must collect the tax at the time the customer pays for service; if the customer doesn’t pay then the tanning service provider must pay it. This tax does not apply to spray-on tanning services.
The excise tax does not apply where a qualified physical fitness facility offers tanning services as an incidental service to its members and there is no separate identifiable fee for the tanning.
A qualified facility is one where: the predominant business or activity is to provide facilities, equipment and services to members for the purpose of exercise; tanning services cannot represent a substantial part of the facility’s business or be offered to the public for a fee; nor may the facility offer different pricing options to members based on tanning services.
A business that is not a qualified fitness facility must collect the tax on tanning services.
The Internal Revenue Service offers the following guidance on taxable services:
- 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.
- If the provider sells bundled services in which access to indoor tanning services over a period of time is bundled with other goods and services, it can be determined that the payment is made specifically for indoor tanning services at the time the bundled services are purchased because there is value attributable to the access to indoor 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.
Paying the Tax:
- Businesses required to collect the tax must report and pay the excise tax in full on a quarterly basis. The first quarterly return and payment, due Nov. 1, 2010 (Oct. 31, 2010 falls on a Sunday), covers taxes collected during July, Aug. and Sept.
- 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.
- Facilities that file and pay late or intentionally fail to collect and pay the tax may be subject to a penalty.
- Businesses can download Form 720 and get more information on the tanning excise tax at IRS.gov.
