The Health Care Reform Act has a number of little surprises tucked away in the legal verbiage prepared by our government leaders. As a tax professional licensed to practice before the Internal Revenue Service (IRS), the quest to discover the details of the “tanning tax” has been difficult at best. However, through research of technical documents, our firm has identified how the government is going to require you, as the tanning salon owner, to report, collect and remit the tax back to the appropriate government entity.
But before we begin talking details, let's look at a 30,000-foot view of what the law says about this new tax.
Who gets taxed?
Any consumer that utilizes an ‘indoor tanning service.’ This means any service employing any electronic product designed to incorporate one or more ultraviolet lamps and intended for the irradiation of an individual by ultraviolet radiation, with wavelengths in air between 200 and 400 nanometers, to induce skin tanning.¹
How much is the tax?
The tax is 10 percent of the amount paid for 'indoor tanning services.’
How is the tax paid?
Here is where things might get a little shaky. As mentioned previously, the tax is to be paid by the individual on whom the service is performed. But, the salon owner is to collect the tax from the individual and then remit the tax quarterly to the government. Furthermore, if the tax is not collected at the time of payment, then to the extent the tax is not collected, the tax has to be paid ... by the salon owner who performs the service. Wow!
Remember, this tax is only collected on UV tanning. If you don't have a method to account for income by service, feel free to call our firm. Do not pay more tax than you are required by law!
The tax collected is to be reported on an excise tax form already being used in a few other industries. This is a fairly obscure form and may not even be readily available to your current tax or accounting solution. We at Early & Smith LLC have teamed up with tax software industry veterans to create www.720filer.com. This solution allows you to either “prepare it yourself,” or to rely on the expertise of professionals who can legally represent you before the IRS. The fees for this service can range from $9.95 per quarter to $25 per quarter depending on the level of representation you desire. If you aren't sure which solution is best for your business, contact us at 888.885.5552 for a free consultation.
Payment of the collected tax to the government can also be automated. Again, feel free to contact us so we can explain the options that are available to you. It is our desire to help the tanning industry transition into this compliance requirement with relative ease.
In conclusion, no matter what direction you decide to take, just make sure your plan keeps you in compliance. Why? Because another one of the “little surprises” in the new Health Care Reform Law increases funding to dramatically increase the number of revenue field agents at the IRS!
1 Health Care Reform Act -SEC. 10907. EXCISE TAX ON INDOOR TANNING SERVICES IN LIEU OF ELECTIVE COSMETIC MEDICAL PROCEDURES.
Stephen E. Smith is an enrolled agent licensed to practice before the IRS. He and his partner Jean M. Early, CPA, represent clients across the U.S. Previously, Smith and Early worked for a professional tax software firm where Smith was a product manager leading a team that provided electronic filing services and support for the entire TurboTax personal income-tax product line. Early has extensive experience in the medical and insurance industries. For more information about Early & Smith LLC, visit www.earlysmith.com.
The information contained within this article is provided for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant.
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