Tax Lawyer's Blog

One of my favorite sin taxes of all time is the tanning tax, partly because I find it ironic that it was signed into law by a black President who, I think its safe to assume, does not frequent tanning booths.¹

Seriously, though, I anticipate a constitutional challenge to the tax along the following lines:

1. It discriminates against women who comprise 80% of the indoor tanning market and own nearly 70% of the indoor tanning businesses;
2. It discriminates against white people who comprise 99.99% of consumers; and
3. It gives an unfair advantage to competing industries (i.e. the bottle tan industry, etc.) 

The Journal of Accountancy (JOA) reports that on Friday, the IRS issued final, temporary and proposed regulations to provide guidance on the new 10% indoor tanning services excise tax (TD 9486; REG-112841-10):

The Patient Protection and Affordable Care Act (PL 111-148) created a new 10% excise tax on amounts paid for indoor tanning services after June 30, 2010. Like a sales tax, the excise tax will be collected from the person tanning when payment for the tanning services is made.

The regulations provide that “amount paid” includes all amounts paid to a tanning services provider for indoor tanning services, including any amount paid by insurance. However, because many tanning salons sell other goods and services in addition to tanning services, the regulations provide rules for determining the tax when the provider charges for various goods and services in addition to the tanning services.

Tanning providers avoid collecting tax on other goods and services if the charges are separable, do not exceed the fair market value of the other goods and services, and are shown in exact amounts in the records pertaining to the indoor tanning services charge. If the charges are not separately stated and the total amount paid includes indoor tanning services, the tax will be based on the portion of the amount paid that can be reasonably attributed to the tanning services.

Liability for the tax arises at the time payment is made for the services, but in some cases (such as when a gift card is purchased), it may not be possible at the time of purchase to determine if the payment is for tanning services. The regulations provide that in that case, payment is treated as being made (and liability for the tax arises) at the time it can be reasonably determined that the payment is made specifically for indoor tanning services (for example, when the gift card is redeemed to pay specifically for indoor tanning services). 

The JOA describes the collection and payment procedures included in the regulations:

Providers of tanning services must collect the tax and pay it over quarterly to the government. In cases where the tax is not separately stated, the amount paid is presumed to include the tax. If the payor does not pay the tax, the service provider must pay the tax.

The tax is reported by the tanning services provider on Form 720, Quarterly Federal Excise Tax Return. Full payment of the tax is due when the quarterly Form 720 is timely filed; the regulations do not require semimonthly tax deposits.

It makes me very nervous when the federal government chooses to penalize an entire industry merely because it’s current (and temporary) leaders disapprove of the product that industry produces and sells.

The opportunities for government control of private behavior through the tax mechanism are unlimited and, therefore, extremely dangerous.³

Footnotes:

¹  Of course, I say this with my tongue partly implanted in my cheek. I don’t really believe that Obama is singling out white people. What I do believe, however, is that he and Congress are desperate to raise revenues and open to any cockamamie idea that won’t cost them dearly at the polls. But for fun let’s speculate as to what the left’s reaction would be if a white Republican President proposed a similar surtax on one of the following industries:

• Hip-Hop Music
• Burritos
• Burkas
• Chop Sticks
• Yarmulkes 
• Bandannas

The decibel levels of the accusations of racism, anti-semitism and homophobia would reach those found only at a Metallica concert.

²  People who go to tanning booths know the risks and choose to accept them. It is a free exchange and the government should not insert itself into that exchange in order to influence personal and private choices.

³  We do risky, unhealthy things every day of our lives (just getting into a car is one of the most unhealthy things we do). To single out for taxation a specific unhealthy behavior while leaving other specific unhealthy behaviors free of taxation is inequitable and unfair.*

*  I should be careful what I wish for, however, because the left’s solution to the inequity might be to simply tax everything.

Related Posts:

• Tanning Tax? How About a Tax on Hip Hop Music?
• Tax on George Hamilton?
• A Chap from Hawaii

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