Do Gyms Need to File the Indoor Tanning Excise Tax?
What is the Tanning Excise Tax?
The Indoor Tanning Excise Tax is a 10% federal excise tax that applies to services involving indoor tanning, which typically involves the use of ultraviolet (UV) lamps. This tax was introduced under the Affordable Care Act (ACA) and is designed to discourage the use of tanning services due to concerns about the risks associated with UV radiation.
As a business owner providing indoor tanning services, it is essential to know when this tax applies to your operations, as well as the exemptions available. Many gyms that offer tanning beds as part of their membership or as an add-on service may be required to comply with this tax, while others may be exempt.
When Are Gym Owners Required to Pay the Tanning Tax?
Gym owners are subject to the indoor tanning excise tax when they offer indoor tanning services as part of their gym membership or on a pay-per-use basis. According to the IRS FAQ on indoor tanning services, if a gym provides access to tanning beds or booths and charges a fee, they must collect and remit the excise tax. The tax applies regardless of whether the tanning services are included as part of the gym membership or charged separately.
However, not all gym owners are required to collect this tax. If the gym qualifies as a qualified physical fitness facility (QPFF) and offers tanning services as a free amenity without separately charging for it, the excise tax does not apply.
For example, if a gym offers tanning as an additional service to its members or allows members to use tanning beds for a specific fee, the gym owner must charge and remit the tanning excise tax. Even if the tanning service is offered as part of a package or at a discount, it still falls under the excise tax regulations unless the gym qualifies for exemption as a QPFF.When Can Gym Owners Be Exempt from the Tanning Excise Tax?
While gym owners are generally subject to the tanning excise tax, there are some exemptions. The IRS FAQ provides key information on these exemptions. Some common situations in which gym owners may be exempt include:
No Charge for Tanning Services: If the gym does not charge a fee for tanning services, then the tanning excise tax does not apply. For instance, if tanning beds are offered as a free amenity for gym members, and the gym meets the criteria for a QPFF, the gym owner would not need to collect the excise tax.
Qualified Physical Fitness Facility (QPFF): Gym owners who operate a qualified physical fitness facility (QPFF) are exempt from the tanning excise tax. To qualify as a QPFF, the gym must meet the following criteria:
The predominant business must be providing facilities, equipment, and services for exercise and physical fitness.
Indoor tanning services must not be a substantial part of the business, and tanning cannot be offered to the public for a fee.
The gym cannot offer different membership tiers based on access to tanning services.
Additionally, gyms may be exempt if tanning services are offered as a complimentary service for a limited time or for certain medical conditions (e.g., a doctor's prescription may be required for tanning).
Example Scenario: Gym and Tanning Excise Tax
The Federal Register provides an Example 7 scenario where a gym is not required to pay the tanning excise tax. The scenario details a gym that offers tanning beds as an additional service but does not charge an extra fee for the tanning services. Since the gym charges no additional fee for tanning, and it qualifies as a QPFF, the gym owner is exempt from the excise tax.
This example reinforces that gyms must be mindful of how they offer tanning services. If the tanning service is bundled with the gym membership or if the gym meets the QPFF criteria, it may be exempt from the tax.
For gym owners, it’s crucial to understand the correct way to file the tanning excise tax. The excise tax is filed quarterly on Form 720, and gym owners must make sure they are charging the correct amount of tax and submitting the form on time. Missing the filing deadline could result in penalties and interest on any overdue tax amounts.
It’s also important to ensure the correct taxable amount is reported. The excise tax applies to the cost of the tanning session, including any associated fees. Gym owners should ensure that they are charging the correct amount and collecting the right amount of tax.
If tanning services are bundled with other gym services and the tax is not separately stated, the gym owner should allocate the charge reasonably attributable to tanning to calculate the excise tax.How is the Tax Paid?
When is the Tanning Tax Due?
The tanning tax is due quarterly, along with other excise taxes reported on Form 720. The IRS requires businesses to file this form by the 30th day of the month following the end of each calendar quarter.
Conclusion
In conclusion, gym owners offering indoor tanning services need to be aware of when the indoor tanning excise tax applies and when they may qualify for an exemption. While many gyms may have exemptions for tanning services (such as when tanning is offered free of charge or with specific conditions), it’s important to check the specific circumstances under which the tax applies.
By following the IRS guidelines and ensuring that the tanning excise tax is properly calculated and filed, gym owners can avoid penalties and stay compliant with federal tax laws. Always verify the latest updates and check the IRS’s official tanning tax page for the most current information.
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