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12-06-2013, 06:35 PM | #1 (permalink) |
Join Date: Dec 1 2013
Posts: 35
Rep Power: 0 | IRS Rules Tanning Tax Question I was reading through the IRS rules for the tanning tax. Let me know if I understand this correctly (as it is stated below). If I give someone a free tan, or a discounted tan, I will be responsible to pay 10% of the regular retail price of the session even if I collect no money? How does a service provider handle a transaction when indoor tanning services are bundled with other services, including "free" or reduced rates for indoor tanning services? What about bundled services that include unlimited indoor tanning services? A. If the invoice shows bundled services that include indoor tanning services, the service provider calculates the tax using a ratio based on the non-bundled price of each service. If the provider does not normally charge for a certain service separately, the provider should use the fair market value for purposes of this calculation. To create the ratio, divide the non-bundled price for the indoor tanning services by the charge for the total non-bundled price of all services in the bundle and apply that ratio to the bundled charge to obtain the taxable amount. The tax is 10 percent of the taxable amount. If the invoice shows bundled services that include unlimited indoor tanning services, the service provider calculates the tax the same way. Example: A salon operator offers a special bundle price for 10 swimming lessons and two “free” indoor tanning services for $200. Outside of the bundled service, the operator charges $20 for each swim lesson and $15 for each tanning service, for a total regular charge of $230. The amount subject to tax for the bundled service is computed as 30/230 x 200 = $26.08. The indoor tanning tax is 10 percent of $26.08, which is $2.60. |
12-07-2013, 07:33 PM | #3 (permalink) |
Team TanTalk Join Date: Jul 13 2004 Location: Menomonie, Wi. Age: 82
Posts: 3,145
Rep Power: 22 | Re: IRS Rules Tanning Tax Question That's the way the rules reads, but what salon owner is going to pay tax for tanning sessions they give away free or discount from their regular pricing. Not that I would disobey the IRS rules, but I collect enough excise tax for the government without paying tax on "FREE" tanning. |
12-09-2013, 12:22 PM | #7 (permalink) | |
Join Date: Nov 21 2000 Location: Midwest
Posts: 198
Rep Power: 24 | Re: IRS Rules Tanning Tax Question Quote:
Say you charge $60 for a month of basic tanning. Let's say you also charge $60 for a one hour massage. Now you have a special and say buy a massage for $60 and get a month of tanning for free. The retail value of both put together is $120 and out of the $120 the tanning represents 50% and the massage represents 50%. In the eyes of the IRS, the special is really $30 for the massage and $30 for the tanning. You collect tan tax of $3 based on 10% of the $30. One more time: Say you have a lotion that sells for $100 and a month of tanning that sells for $60. Now you have a special and say buy the $100 lotion and get a free month of tanning. The retail price of the special is $160, out of which the lotion represents 62.5% (100/160) and the tanning represents 37.5% (60/160). Therefore, you take 37.5% of the special price 37.5% x $100 = $37.50 and assess 10% tan tax of $3.75. Not hard. | |
12-09-2013, 01:30 PM | #8 (permalink) |
Join Date: Mar 18 2005 Location: GA
Posts: 1,153
Rep Power: 20 | Re: IRS Rules Tanning Tax Question If you do the lotion special that you referred to, you would end up sending 10% of the lotion sale to the state for sales tax, so you really aren't getting anywhere. The walls are closing in on us, slowly but surely. |
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