WASHINGTON – A new U.S. tax on indoor tanning is producing far less revenue than expected, with the U.S. Internal Revenue Service having trouble implementing the measure, the tax-collecting agency’s auditor said Thursday.
An indoor tanning services excise tax was enacted in March 2010 as part of President Barack Obama’s healthcare law. The tax took effect on July 1, 2010. It is supposed to be paid by customers and passed on by service providers to the IRS.
The IRS quickly implemented the tax and alerted businesses about it, but the agency could have done more to tell taxpayers to file the proper forms and pay the tax, according to a report from the Treasury Inspector General for Tax Administration.
“Since this was a brand new tax imposed on a group of businesses and taxpayers with no previous experience with excise taxes, the IRS should have done more to inform taxpayers of their filing responsibilities and bring them into compliance,” said Russell George, the top official at TIGTA.
The tanning industry’s lobbying arm in Washington was not surprised. Estimates for tanning tax collection were “grossly overestimated” in part because the IRS “had no clue” about the size and scope of the industry, said John Overstreet, executive director of the Indoor Tanning Association.
After the healthcare law was passed, the IRS was left with the complex task of implementing the tax on an estimated 30,000 businesses that offer tanning — ranging from tanning-exclusive shops to those with tanning as part of a hair salon or gym.
To alleviate the implementation challenge, IRS exempted ”qualified physical fitness facilities” because it was deemed too hard to collect taxes on health clubs that include tanning as part of a package of services.
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Category: Business/ Economy
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