The IRS has issued temporary regulations regarding the new 10% excise tax on indoor tanning salons. The excise tax is effective July 1, 2010. The IRS is requesting comments regarding the implementation of the tax. Therefore, the final regulations may be different from the current temporary regulations. Briefly, the tax is applied only to the tanning services. If the services are bundled with merchandise, such as eyewear, towels, etc, the fair market value of the merchandise may be excluded from the taxable services. 

Taxes will not be imposed if the facility is a qualified physical fitness facility and a membership fee includes access to the indoor tanning services. The IRS believes that the service is incidental to the facility and it would prove too difficult to calculate the usage of the services. 

The tax must be reported and paid on a quarterly basis using Form 720, Federal Quarterly Excise Tax Return. Once a company has filed a Form 720, it is required to file each quarter thereafter, even if no liability is incurred.

IRS Reg 49.5000B was used as the source document for this information.

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