Tuesday, May 24, 2011


As you know, beginning July 1, 2010, indoor tanning services became subject to a 10 percent excise tax under the Affordable Care Act. This new tax has been around for awhile, but I still am getting some questions and I am finding people doing it incorrectly.

The IRS has posted the following questions that may clear up some of the uncertainty:
• As a business promotion, an indoor tanning service provider offers a free tanning service. The free tanning service is not contingent upon the purchase of any other product or service and is not part of a bundle of other goods or services. Does the indoor tanning services tax apply to the value of the free tanning service that is received by the providers customer?
• Who must pay the indoor tanning services tax?
• What is taxable indoor tanning service?
• If the tax is not collected from the person paying for the service, or for an undesignated payment from the person redeeming the gift card, then who is liable for the tax?
• Who must report the tax to the government?
• How do I report the indoor tanning services tax?
• When is Form 720 due?
• Is phototherapy service exempt from the indoor tanning services tax?
• What is phototherapy service?
• If an indoor tanning service provider does not have an Employer Identification Number (EIN), what should they do?
• How does the indoor tanning service provider pay the tax due for indoor tanning services?
• If a taxpayer provides indoor tanning services at more than one tanning salon and each salon has a different EIN, can the taxpayer file one Form 720 to report the indoor tanning services tax for all the salons?
• If an invoice includes other goods and services in addition to indoor tanning services, how are the non-tanning services handled?
• How does a service provider handle a transaction when indoor tanning services are bundled with other services, including "free" or reduced rates for indoor tanning services? What about bundled services that include unlimited indoor tanning services?
• How does the service provider handle a transaction (such as the sale of a gift certificate) when the provider cannot determine at the time of sale what, if any, portion of the gift certificate will be redeemed for an indoor tanning service?
• If a customer redeems a gift card but does not use it for indoor tanning services, is the indoor tanning tax applicable?
• If a customer purchases a gift card for indoor tanning services, pays the tax and does not use the card, is the purchaser entitled to a refund of tax?
• How does insurance reimbursement affect the indoor tanning tax?
• A tax-exempt university charges students an activity fee that entitles them to indoor tanning services. Since the university is a tax-exempt educational institution, is it exempt from collecting and remitting the indoor tanning services tax?
• What is a qualified physical fitness facility?
• Are membership fees taxable when paid to a "qualified physical fitness facility" that provides access to indoor tanning services?
• Do indoor tanning services include spray tans or topical creams and lotions purchased at tanning salons?
• If a provider of indoor tanning services did not collect the tax at the time of payment, how is the tax computed?
• What are the requirements for keeping records for indoor tanning services?
• I operate an indoor tanning salon. How do I account for the indoor tanning services excise tax when the services are purchased through an online social buying service?

To read there answers click on the link below: http://www.irs.gov/businesses/small/article/0,,id=224600,00.html#keypoint1