Included in the controversial Patient Protection and Affordable Care Act of 2010 was an excise tax on indoor tanning services equal to 10 percent of the amount paid for such services (now codified as section 5000B). The Joint Committee on Taxation originally estimated the tax would raise approximately $200 million in fiscal 2011. However, in its September 22, 2011 report, the Treasury Inspector General for Tax Administration (the “TIGTA”) stated the tanning tax has raised less than one-fifth of its expected revenue (the IRS has thus far collected only $36.6 million for fiscal year 2011). The TIGTA also stated the number of taxpayers filing tanning services excise tax returns is much lower than expected.
The recommendations provided in the report were as follows: that the IRS (i) perform further analyses of the data on tanning businesses, (ii) monitor the results from notices sent to taxpayers who could potentially owe the tanning tax, and (iii) update Publication 510, Excise Taxes (Including Fuel Tax Credits and Refunds), to include information related to the tanning tax. The IRS agreed with all three recommendations.