Most tanning salon owners can tell you their busiest tanning bed, their best-selling lotion, and exactly how many sessions a VIP member burns through each month. Ask the same owner how much of last quarter's revenue was federal excise tax, and you'll often get a shrug — or a number pulled from thin air. That gap is exactly where the IRS finds trouble.
Since 2010, indoor tanning services have carried a 10% federal excise tax, collected from the customer at the time of payment and remitted quarterly on Form 720. It sounds simple. In practice, it's one of the more misunderstood taxes a small business owner will ever deal with, and the mistakes are almost always the same: missed filing deadlines, sloppy bundling math, and no clean paper trail separating taxable tanning revenue from everything else a salon sells.
With roughly 27,000 tanning salons operating in the U.S. and average annual revenue per location around $247,000, this isn't a niche concern — it's a recurring, quarterly obligation for a real industry. Here's how the tax actually works, and how to keep your books clean enough to survive an audit without losing sleep.
What the Indoor Tanning Excise Tax Actually Covers
The tax applies to "indoor tanning services" — any service that uses an electronic device with ultraviolet lamps designed to induce skin tanning, and where the wavelength falls in the range the IRS defines as tanning-specific. In plain terms: tanning beds and tanning booths.
What's not covered is just as important:
- Spray tans and topical self-tanning products are not taxable. No UV lamp, no excise tax.
- Phototherapy performed by a licensed medical professional on their own premises is exempt — this covers legitimate dermatological treatment, not a salon selling "light therapy" packages to dodge the tax.
- Qualified Physical Fitness Facilities (QPFFs) get a specific carve-out: if your business is predominantly a gym or fitness facility, tanning isn't a substantial part of the business, and tanning access is bundled into a general membership fee without being separately identified or priced, that membership fee is exempt from the tax entirely.
That last exemption is the one that causes the most confusion, and it's worth getting right, because it determines whether an entire category of your revenue is taxable or not.
Calculating the Tax Correctly
The tax is 10% of the amount paid for a taxable tanning service. Two situations trip people up constantly:
1. Tax-inclusive pricing. If your posted price for a session already includes the tax rather than adding it at checkout, you can't just take 10% of the total charge — that would undercollect. The IRS formula for back-calculating tax from a tax-inclusive price is to multiply the total charge by 0.09091 (i.e., dividing by 1.10 and isolating the tax portion).
2. Bundled services. If a customer buys a package that includes tanning plus something else — a spray tan add-on, a skincare product, a haircut at a combined salon/spa — you only owe tax on the tanning portion. The IRS requires that when services are bundled, the invoice separately state the fair market value of each component. If you don't itemize, the safe assumption an examiner will make is that the entire bundled charge is taxable. Itemization isn't just good practice here; it's the only thing standing between you and paying tax on revenue that was never subject to it.
Gift cards and prepaid session packages have their own quirk: tax is owed when the tanning service is actually redeemed, not when the gift card or package is purchased. And if a customer never redeems it — the tax still isn't triggered, because no taxable service was ever provided. Keep your books tracking these as deferred revenue until redemption, the same way you'd handle any prepaid service liability.
Filing Form 720, Quarter by Quarter
Unlike income tax, this isn't an annual filing. Indoor tanning excise tax is reported on IRS Form 720, Part II, and it's due quarterly:
| Quarter Covered | Filing Deadline |
|---|---|
| Jan–Mar | April 30 |
| Apr–Jun | July 31 |
| Jul–Sep | October 31 |
| Oct–Dec | January 31 |
The good news: Part II excise taxes, including the tanning tax, do not require semi-monthly deposits like some other federal excise taxes do. You collect the tax throughout the quarter, hold it in a liability account, and remit the full amount when you file. That said, "hold it" matters — this is a collected tax, meaning the money was never yours. If you spend it as if it were regular revenue and can't cover the remittance, willfully failing to collect and pay it over can expose an owner personally to the Trust Fund Recovery Penalty under IRC §6672, separate from the business's own liability.
A few filing realities to plan around:
- You need an EIN to file Form 720, even if you're a sole proprietor who's never needed one before.
- Insurance reimbursement, gift cards, and tax-exempt customer status don't change anything. There's no exemption for who's paying — only for what service is being provided.
- A quarter with zero tanning revenue may still require a filing if you've registered as a filer; check current Form 720 instructions before assuming a $0 quarter means no paperwork.
The Bookkeeping Setup That Prevents Audit Pain
The IRS has published audit guidance specifically for this tax, which tells you two things: it's actively examined, and examiners have a checklist. The businesses that sail through are the ones whose books already answer the questions before they're asked.
Set up a dedicated liability account for collected tanning tax. Don't let it sit mixed into general sales revenue. Every time a taxable session is sold, the 10% should post to a separate "Excise Tax Payable" account, not to income. This does two things: it keeps your actual revenue figures accurate for profitability analysis, and it means the amount due each quarter is a balance you can read directly off your books instead of a number you have to reconstruct from POS reports under deadline pressure.
Tag every transaction by service type. Whether you use a point-of-sale system or a general ledger, your chart of accounts should distinguish taxable tanning sessions from spray tans, retail lotion sales, membership dues, and any bundled packages. When a bundle includes tanning, record the allocated fair-market-value split at the point of sale — reconstructing that allocation months later from memory is how errors happen.
Reconcile quarterly, not annually. Because the filing cadence is quarterly, your internal reconciliation should match. Close out the excise tax liability account against what you actually remit on Form 720 each quarter, and investigate any variance immediately rather than letting four quarters of small discrepancies compound into a real problem.
Keep membership fee documentation if you're claiming the QPFF exemption. If tanning is bundled into a general fitness membership and you're treating that fee as exempt, keep clear records showing tanning isn't separately priced and isn't the predominant part of your business. That's exactly the kind of judgment call an examiner will want supporting evidence for.
This is really the same discipline that separates well-run small businesses of every kind from the ones that get blindsided by a notice in the mail: don't mix personal and business expenses, don't let collected taxes blur into revenue, and don't wait until a filing deadline to figure out what you owe. Accurate, contemporaneous bookkeeping is what turns "I think this is right" into "here's the reconciliation."
The Three Mistakes That Trigger Notices
Talk to anyone who prepares Form 720 for salon clients and the same three errors come up again and again.
1. Treating the excise tax as optional below some revenue threshold. There isn't one. A single-bed salon collecting a few thousand dollars a quarter has the same filing obligation as a multi-location chain. Owners sometimes assume a "small" operation flies under the radar; the IRS audit technique guide for this tax exists specifically because that assumption is common and wrong.
2. Skipping quarters instead of filing a zero return. If you registered as a filer and then have a slow quarter, silence looks like noncompliance, not like an intentional zero. Confirm current filing requirements for a no-activity quarter rather than assuming a gap is safe.
3. Applying the QPFF exemption too broadly. A gym that added two tanning beds and started marketing "unlimited tanning" as a headline membership perk has arguably made tanning a substantial part of the business — which forfeits the exemption. The safer read of the QPFF rule is narrow: it protects a fitness business where tanning is genuinely incidental, not a tanning business wearing a gym membership as a wrapper.
Each of these is preventable with the same fix: quarterly bookkeeping discipline instead of once-a-year reconstruction. If your excise tax liability account, your service-type tagging, and your bundled-package allocations are current every month, filing Form 720 becomes a five-minute reconciliation instead of a research project.
Keep Your Tanning Salon's Books Audit-Ready
Tracking a collected excise tax alongside membership revenue, bundled packages, and retail sales is exactly the kind of multi-stream bookkeeping that breaks down in a spreadsheet or a system that hides the detail behind a single sales total. Beancount.io offers plain-text accounting that gives you complete transparency into every transaction — including a dedicated, auditable trail for tax collected but not yet remitted — with no black boxes and no vendor lock-in. Get started for free and see why finance-savvy business owners are switching to plain-text accounting.