A 10% excise tax will be imposed on tanning salons, effective July 1, 2010. As part of the Patient Protection and Affordable Care Act (the new 2010 Health Care Bill), tanning salon customers will have 10% added to their bills for tanning services. This tax will be used to fund insurance to uninsured Americans, but according to NJ.com, the bill dealt another blow to the tanning industry, which already has to fight negative publicity.
How This Tax Affects Tanning Salons
Several issues arise from this new tax:
1. The tax is not imposed on other products or services in the tanning salon, so salon owners must separate out the actual tanning cost. If the services are bundled, the tax is imposed on the amount that is "reasonably attributable" to the tanning service. The Tax Lawyer's blog discusses this issue in more detail.
2. Like a sales tax, the excise tax is collected by the tanning salon at the time of service. But sales taxes are sent to the state where the salon is located, while excise taxes are a federal tax. This is a trust fund tax, meaning it must be saved by the salon and sent to the IRS periodically, and reported on Form 720 - Quarterly Federal Excise Tax Return.
3. If the tanning service is paid for by insurance, it is still subject to the tax.
4. No tax is imposed on tanning services provided at "qualified" fitness facilities. The IRS explains that tanning services in these facilities are "incidental" and it is difficult to separate out the cost of the tanning service from other services at the fitness center, so the tax is not imposed.
If you are a tanning salon, or are considering opening one, check with your tax advisor about how to collect and report this tax.
