I presume everyone knows that Congress, as part of the Health Care Legislation, has put a 10% excise tax on indoor tanning. This law goes into effect on July 1, 2010.
You've probably already heard that in the original bill there was going to be an excise tax on all cosmetic procedures. They called it the "Botax." The White House and Senate Democrats have turned to a proposal to tax breast implants, tummy tucks, wrinkle-smoothing injections and other procedures as they search for ways to pay for costly health care overhaul plans.
Vanity was an easy target as lawmakers scraped for cash for the nearly $1 trillion plan to expand health care to millions of Americans who lack insurance. But it was no joke to the drug makers, people who perform the cosmetic nips and tucks and most importantly people that could afford the procedures. They fought back and Congress and the President backed down and settled instead for a tax on tanning.
Here are some things you need to know if you provide tanning services.
• This is not a sales tax but it looks like a sales tax. The tax is what is known as an “excise tax.”
• The tax rate is 10% on all tanning after June 30, 2010.
• The tax is to be collected from the customer.
For example: Lisa Healthiglo, an ardent tanner, uses the tanning booths at Acme Tanning, Inc. to keep her tan during the fall and winter months. Typically, Lisa pays $30 for a 20-minute session. Under the 2010 Health Care Act, Lisa has to pay an additional $3.00 in tax (10% × $30) for each tanning session. Lisa does not, however, have to pay the tax on the grossed-up cost of the tanning services ($30 + $3).
• Tanning subject to the tax is defined as: defines “indoor tanning service” as a service that uses any electronic product that's designed to incorporate one or more ultraviolet lamps, and that's intended for the irradiation of an individual by ultraviolet radiation, with wavelengths in air between 200 and 400 nanometers, to induce skin tanning.
• The term “indoor tanning service” excludes any phototherapy service performed by a licensed medical professional.
For example: Jillian Jones, a psoriasis sufferer, undergoes phototherapy sessions at her dermatologist's office to keep the disease in check. Jillian pays $150 for a 30-minute session, a portion of which is paid for by insurance. Because phototherapy services performed by a licensed medical professional are exempt from the 10% tax on indoor tanning services, Jillian's treatment sessions are not subject to the tax.
• Spray tanning is not subject to the 10% tax.
• If the tax is not collected from the customer then the company must pay the 10% and remit to the IRS.
• The tax is remitted to the IRS quarterly using form 720 Quarterly Excise Tax Report. This IRS is including a new line on the form.
If you have any questions please let me know.
Larry Kopsa CPA
