Some Clubs Exempt from Tanning Tax

WASHINGTON, DC -- Health club operators who include tanning as part of their membership fees do not have to start collecting a new tax that goes into effect on July 1, according to regulations issued by the IRS this month. Operators who do charge above and beyond the membership fee for tanning must start charging the 10 percent tax next month.

The tax is part of the health care reform bill passed by Congress in late December.

The regulations specifically exempt “qualified physical fitness facilities” that offer tanning as an incidental service to members without a separately identifiable fee, according to an IRS statement. A qualified facility is one whose predominant business is providing facilities and service for the purpose of exercise. The regulations also exempt phototherapy services performed by a licensed medical professional on his or her premises.

For health club operators who still must collect the tax, they must do so at the time the purchaser pays for the tanning services. The provider then must pay these amounts to the government quarterly along with IRS Form 720, Quarterly Federal Excise Tax Return.

Even though collection of the tax must begin on July 1, the first time this form must be filed with the IRS is Nov. 1, 2010, according to Eric Smith in the media relations office of the IRS. Most of the form, which is used for a variety of excise taxes, won't need to be completed because not everything on the form pertains specifically to this tax. A good accountant will be aware of the changes and be able to assist club operators with the form, Smith says.

The tax was added to the health care reform bill after the American Medical Association and the Academy of Dermatology Association opposed a “Botox tax” that originally had been in the bill. That tax would have been added to certain cosmetic procedures, such as Botox injections and breast augmentations. Once the bill’s sponsors agreed to remove that tax and put in the tanning tax instead, the two groups agreed to support the legislation.

Legislators say that the tax will raise $2.7 billion during the next 10 years. However, Joseph Levy with the International Smart Tan Network, disputes that figure, saying it will raise $1.7 billion while the original Botox tax would have raised $5 billion.

“So they traded a tax on mostly rich doctors and patients for a tax on mostly middle-class women,” Levy says.

A Q&A with more details about the tax is available on the IRS website.

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