Today, the Indoor Tanning Association sent this memo to its membership:
TO: ITA Membership
DATE: Aug. 16, 2010
RE: Tan Tax Regulations — Industry Comments
We are continuing to gather comments from the membership on the temporary regulations issued by the Internal Revenue Service on June 15. Using feedback provided by you, we are crafting an industry response to submit to the IRS. We appreciate the feedback received thus far, but we ask those of you who have not yet responded to do so as soon as possible.
Please provide us with real world examples from your business or things you are observing in your area, focusing on these four primary areas:
1. Reporting and recording keeping:
The rules are difficult to apply, especially to memberships and/or combinations of taxable and non-taxable services (or products).
It would be too difficult, and too expensive, to keep the kind of records that the temporary regulations seem to call for, so you need to make assumptions based on your general experience, not individual customer transactions.
*** Please provide specific examples from your business.
2. Free tanning
There are situations where a customer receives the right to tanning when there is no “payment” to tax; e.g., promotions, upgrades, coupons and combination packages.
*** Please provide examples where your business has no “payment” to tax at the time when a customer gets the right to UV tanning services.
3. ‘Trifurcation’ of the industry
The IRS has unfairly divided businesses offering UV tanning into 3 groups that are treated differently under the regulations, resulting in competitive advantages and disadvantages among the groups:
professional tanning salons;
businesses that bundle UV tanning with goods or services unrelated to tanning (for example, movie rental, beauty or nail care, apartment rentals); and
(a) QPFFs (Qualified Physical Fitness Facilities) that offer UV tanning at no added charge, and (b) Phototherapy Services provided by and performed on the premises of a licensed medical professional
All three groups offer UV tanning and other goods or services, but only the first two groups must separate out a charge for UV tanning and pay the Tan Tax on those charges.
*** We are looking for examples of (i) businesses other than professional tanning salons that also provide UV tanning and need to collect the tax; and (ii) health clubs or licensed medical professionals that are exploiting the fact that they do not need to collect the tax.
4. Health Concerns
We understand that health clubs are exempted because the IRS decided that QPFFs encourage a healthy lifestyle, but this exemption will, ironically, cause more health concerns, not less health concerns.
Professional indoor tanning salons have trained staff to provide information on proper use of the equipment and are more likely to properly sanitize and maintain the equipment. Because the regulations exempt UV tanning services provided by QPFFs only if the QPFF do not charge extra for the tanning, they discourage proper maintenance of the equipment and training for the staff — both of which create an atmosphere where the customer is subject to more risk of injury or over-exposure.
*** We are looking for examples in your area where a QPFF is offering un-taxed UV tanning without (to your knowledge) the kind of staff training, equipment maintenance, and sanitizing done by your business.
Please provide us with your feedback by August 27 in order for us to meet the deadline for submitting comments.
Email your comments to admin@theita.com and use “Suntan Tax Comments” in the subject line.
Call (202) 367-1142 if you have any questions.
Three-quarters of U.S. tanning business owners say that the July 1 implementation of the federal 10 percent luxury tax on indoor tanning services has hurt their tanning sales this month, according to the results of a SmartTan.com poll. According to the poll, 76 percent believe the 10 percent tax has hurt tanning sales in their business. Only 24 percent felt the tax has had no impact on sales. None of those polled felt the tax helped their sales.
Michael Hicks, director of the Center for Business and Economic Research and an associate professor of economics at Ball State University in Muncie, Ind., wrote a column printed in the 
Check out the interesting discussion on Tan Today concerning how salon owners may present tan tax price increases to their customers. The questions, posted by Tan Guy, include, how will you present prices on your price sheet? Will they include the tan tax? How will you present your price when you advertise? Will the price include the tan tax? What price will you give over the phone? Will it include the tan tax or will you wait till they come in to add it? Join in on the discussion if you can.