New Excise Tax on Indoor Tanning Services

6/1/2010 | Written by: Karen Reed, EA

At the time of year when the sun’s rays are strongest, a new tax on indoor tanning services is going into effect. Beginning July 1, 2010, a 10–percent excise tax, added by the Patient Protection and Affordable Care Act, will be imposed on individuals who pay for indoor tanning services.

Tanning service providers will be required to collect the tax and pay the government on a quarterly basis. IRS Form 720, which currently includes environmental, fuel, communications, air transportation and other excise taxes, will be modified to include the new tax.

The excise tax does not apply to phototherapy services performed by, and on the premises of, a licensed medical professional. Phototherapy includes treatment for dermatological conditions, sleep disorders, seasonal affective disorder or other psychiatric disorders, neonatal jaundice, wound healing, or other medical conditions treatable by exposure to specific wavelengths of light.

The tax is collectable by a service provider at the time that a payment is made specifically for indoor tanning services. If an individual purchases a gift or payment card that may be, but does not have to be, redeemed for tanning services, the tax will be due when the card is redeemed for tanning services, not when the card is purchased. On the other hand, when a service provider sells tanning services bundled together with other goods and services, a tax will be imposed on the amount paid that is reasonably attributable to tanning services. The tax will not imposed on membership fees paid to qualified physical fitness facilities that provide access to tanning services as a benefit to its members.

If the tax is not separately stated in the service provider’s records, the IRS will presume that the amount paid to the provider includes the tax. A service provider that fails to collect the tax at the time of purchase will still be liable for the tax.