[Federal Register Volume 75, Number 114 (Tuesday, June 15, 2010)]
[Rules and Regulations]
[Pages 33683-33688]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-14398]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 40, 49, and 602

[TD 9486]
RIN 1545-BJ41


Indoor Tanning Services; Cosmetic Services; Excise Taxes

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations.

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SUMMARY: This document contains final and temporary regulations that 
provide guidance on the indoor tanning services excise tax imposed by 
the Patient Protection and Affordable Care Act. These final and 
temporary regulations

[[Page 33684]]

affect persons that use, provide, or pay for indoor tanning services. 
The text of these temporary regulations also serves as the text of the 
proposed regulations set forth in the notice of proposed rulemaking on 
this subject in the Proposed Rules section of this issue of the Federal 
Register.

DATES: Effective Date: These regulations are effective on June 15, 
2010.
    Applicability Date: For dates of applicability, see Sec. Sec.  
40.0-1T(e) and 49.5000B-1T(h).

FOR FURTHER INFORMATION CONTACT: Taylor Cortright, (202) 622-3130 (not 
a toll-free number).

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act

    The collection of information contained in these regulations has 
been reviewed and approved by the Office of Management and Budget under 
control number 1545-2177. The information is required to be maintained 
in order for the provider of indoor tanning services to accurately 
calculate the tax on indoor tanning services when those services are 
offered with other goods and services, as described in Sec.  49.5000B-
1T(d)(2). An agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless the 
collection of information displays a valid control number.
    For further information concerning this collection of information, 
and where to submit comments on the collection of information and the 
accuracy of the estimated burden, and suggestions for reducing this 
burden, please refer to the preamble to the cross-reference notice of 
proposed rulemaking on this subject in the Proposed Rules section in 
this issue of the Federal Register.
    Books or records relating to a collection of information must be 
retained as long as their contents may become material in the 
administration of any internal revenue law. Generally, tax returns and 
tax return information are confidential, as required by 26 U.S.C. 6103.

Background

    This document amends the Excise Tax Procedural Regulations (26 CFR 
part 40) and the Facilities and Services Excise Tax Regulations (26 CFR 
part 49) under section 5000B of the Internal Revenue Code (Code). 
Section 5000B was added to the Code by section 10907 of the Patient 
Protection and Affordable Care Act, Public Law 111-148 (124 Stat. 119 
(2010)), to impose an excise tax on indoor tanning services.

Explanation of Provisions

    Section 5000B(a) imposes on any indoor tanning service a tax equal 
to 10 percent of the amount paid for such service. Indoor tanning 
service, as defined in section 5000B(b), does not include any 
phototherapy service provided by a licensed medical professional. The 
regulations define phototherapy service and clarify that such service 
must be performed by, and on the premises of, a licensed medical 
professional.
    The tax applies to amounts paid after June 30, 2010, for indoor 
tanning services. Liability for the tax arises at the time of payment 
for the indoor tanning services. In some cases (such as purchase of an 
undesignated payment card, discussed later in this preamble), it may 
not be possible to determine whether there is a payment for indoor 
tanning services. Thus, the regulations provide in those cases that a 
payment is treated as made, and the tax is imposed, at the time it can 
reasonably be determined that the payment is made specifically for 
indoor tanning services. In the case of membership fees paid to certain 
physical fitness facilities that provide indoor tanning services, the 
regulations provide a different rule, discussed later in this preamble.
    The regulations provide that the ``amount paid'' for purposes of 
determining the tax base includes all amounts paid to the provider for 
indoor tanning services, including any amount paid by insurance. 
Providers of indoor tanning services, however, often sell other goods 
and services (such as protective eyewear, footwear, towels, and tanning 
lotions; manicures, pedicures and other cosmetic or spa treatments; and 
access to sport or exercise facilities) in addition to indoor tanning 
services. Thus, the regulations provide rules for determining the tax 
when the provider charges for other goods and services in addition to 
indoor tanning services.
    Section 6001 requires taxpayers to keep books and records 
sufficient to show whether or not they are liable for tax. To that end, 
the regulations allow the provider to exclude charges for other goods 
and services if the charges are separable, do not exceed the fair 
market value of the other goods and services, and are shown in the 
exact amounts in the records pertaining to the indoor tanning services 
charge.
    If the charges are not separately stated, but the total amount paid 
covers indoor tanning services, then the tax is based on the portion of 
the amount paid that is reasonably attributable to the indoor tanning 
services. For example, if the provider sells bundled services in which 
the indoor tanning service is bundled with other goods and services, 
and the charge is not separately stated, the tax applies to the amount 
paid that is reasonably attributable to the indoor tanning services. 
This is consistent with the approach taken in Rev. Rul. 63-155 (1963-2 
CB 566) (relating to the application of the section 4261 tax on 
transportation by air to a package tour sold by a hotel that includes 
airfare, hotel accommodations, and other services not subject to the 
section 4261 tax).
    The regulations provide that a payment for indoor tanning services 
is treated as made, and liability for the tax is imposed, at the time 
it can reasonably be determined that the payment is made specifically 
for indoor tanning services. If a payment is made with a gift 
certificate, gift card or similar device with a monetary value that can 
be redeemed for goods or services that may, but do not necessarily, 
include indoor tanning services (an undesignated payment card), it can 
reasonably be determined that a payment is made specifically for indoor 
tanning services when the undesignated payment card is redeemed, in 
whole or in part, to pay specifically for indoor tanning services (and 
not when a payment is made to purchase the undesignated payment card). 
This is consistent with the approach taken in Rev. Rul. 56-157 (1956-1 
CB 523) (relating to the application of the section 4261 tax on 
transportation by air to a gift certificate that could be redeemed for 
air transportation or cash). In these cases, the provider of the 
services calculates the tax on the amount of the undesignated payment 
card that is redeemed for indoor tanning services at the time it is 
redeemed, and the rules of section 5000B(c) apply to determine the 
person liable for the tax.
    If, however, the provider sells bundled services in which access to 
indoor tanning services (in a specified or unlimited amount) over a 
period of time is bundled with other goods and services, it can 
reasonably be determined that the payment is made specifically for 
indoor tanning services at the time the bundled services are purchased, 
because there is value attributable to the access to indoor tanning 
services. This is different than the example of the gift certificate, 
because the gift certificate can be redeemed entirely for non-taxable 
services, but the purchase of bundled services will always include 
access to indoor tanning services in the ``bundle''. In addition, for 
purposes of these regulations, payments for indoor

[[Page 33685]]

tanning services are subject to tax, regardless of actual usage. Thus, 
the tax applies to the amount paid that is reasonably attributable to 
the access to indoor tanning services, and the rules of section 
5000B(c) apply to determine the person liable for the tax.
    On the other hand, in the case of a payment of a membership fee to 
a qualified physical fitness facility (QPFF) (as defined in the 
regulations) that includes access to indoor tanning services, the IRS 
and Treasury Department have determined that the access is incidental 
to the QPFF's predominant business or activity and any amount 
attributable to such access would be difficult to calculate and 
administer. Thus, an amount paid to a QPFF is not a payment for indoor 
tanning services and the tax is not imposed on the amount paid. The 
regulations narrowly define QPFF to require, among other things, that 
the predominant business or activity of the facility is to serve as a 
physical fitness facility, taking into consideration all of the facts 
and circumstances. Thus, for example, a business predominantly engaged 
in providing indoor tanning or other cosmetic services cannot become a 
QPFF by allowing users access to exercise classes or pieces of exercise 
equipment. The regulations further provide that a QPFF cannot charge 
separately for indoor tanning services, offer such services to the 
public, or offer different membership fee rates based on access to 
indoor tanning services. Thus, a physical fitness facility that 
distinguishes memberships based on access to indoor tanning services is 
not a QPFF.
    Section 5000B(c)(1) provides that the person liable for the tax is 
the individual on whom the indoor tanning service is performed. In some 
cases, a person might pay for services to be performed on someone else, 
such as by purchasing a gift certificate for indoor tanning services. 
Because the tax is calculated on the amount paid for the indoor tanning 
services, and because the statute contemplates that the tax will be 
collected at the time payment is made, the person who pays for the 
services (payor) is deemed to be the person on whom the services are 
performed for purposes of collecting the tax. Thus, the payor is liable 
for the tax on the services. If a person pays for a gift certificate 
for indoor tanning services (or for bundled services that includes 
indoor tanning services), then the liability for the tax arises at the 
time of payment.
    However, if a person purchases an undesignated payment card, then a 
payment has not been made for indoor tanning services until the 
undesignated payment card is redeemed specifically to pay for indoor 
tanning services. In that case, the liability for the tax arises at the 
time the undesignated payment card is redeemed. The person who redeems 
the card for indoor tanning services is deemed to be the person on whom 
the services are performed for purposes of collecting the tax, and that 
person is liable for the tax on the services.
    Section 5000B(c)(2) provides that the person receiving the payment 
on which tax is imposed (the provider) generally must collect the tax 
from the payor and pay the tax over quarterly to the government. These 
regulations provide that the amount paid by the payor to the provider 
is presumed to include the tax if the tax is not separately stated.
    In the Proposed Rules section in this issue of the Federal 
Register, the IRS and Treasury Department are requesting comments 
regarding these temporary regulations, including comments on whether 
the presumption relating to section 5000B(c)(2) (that the amount paid 
by the payor to the provider includes the tax if the tax is not 
separately stated) is consistent with the manner in which providers 
maintain books and records and specifically whether such a rule is 
useful for purposes of minimizing recordkeeping burdens of the 
providers.
    If the payor does not pay the tax at the time payment for the 
indoor tanning services is made, section 5000B(c)(3) provides that, to 
the extent the tax is not collected, the provider must pay the tax. 
Thus, the regulations provide that if the provider of the indoor 
tanning services fails to collect the tax from the payor at the time 
the payor makes a payment for indoor tanning services, the provider is 
liable for the tax.
    These regulations apply the existing excise tax procedural rules in 
26 CFR part 40 to the tax on indoor tanning services. Thus, the tax, 
whether paid by the payor or the provider under section 5000B(c), is 
reported by the provider on Form 720 ``Quarterly Federal Excise Tax 
Return.'' These temporary part 40 regulations do not require 
semimonthly deposits of tax; rather, full payment of the tax is due 
quarterly at the time Form 720 is timely filed. The existing 
regulations also provide that once a Form 720 is required to be filed 
for a calendar quarter, a Form 720 must be filed for each subsequent 
calendar quarter, whether or not liability is incurred (or tax must be 
collected and paid over) during that subsequent quarter, until a final 
return under Sec.  40.6011(a)-2 is filed.
    Some providers of indoor tanning services may operate more than one 
location at which the services are provided. Each business unit that 
has, or is required to have, a separate employer identification number 
is treated as a separate person that must file a separate Form 720.
    Collected taxes are held in special trust for the United States 
pursuant to section 7501, and any person who willfully fails to collect 
and pay over the tax may be subject to the penalty in section 6672. The 
IRS will generally administer the indoor tanning services tax (in 
Chapter 49 of the Code), the same way it administers the other 
collected excise taxes in Chapter 33 of the Code (the communications 
and transportation taxes). However, the reporting provisions in Sec.  
49.4291-1 of the regulations (relating to certain inabilities to 
collect or refusals to pay tax) do not apply to the tax on indoor 
tanning services because section 4291 provides that these rules apply 
only to the Chapter 33 taxes.

Availability of IRS Documents

    The IRS revenue rulings cited in this preamble are published in the 
Internal Revenue Cumulative Bulletin and are available from the 
Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 15250-
7954.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. It also has been 
determined that section 553(b) of the Administrative Procedure Act (5 
U.S.C. chapter 5) does not apply to these regulations. For 
applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6), 
please refer to the Special Analysis section in the preamble to the 
cross-referenced notice of proposed rulemaking in the Proposed Rules 
section in this issue of the Federal Register. Pursuant to section 
7805(f) of the Code, these regulations have been submitted to the Chief 
Counsel for Advocacy of the Small Business Administration for comment 
on their impact on small business.

Drafting Information

    The principal author of these regulations is Taylor Cortright, 
Office of the Associate Chief Counsel (Passthroughs and Special 
Industries). However, other personnel from the IRS and the Treasury 
Department participated in their development.

[[Page 33686]]

List of Subjects

26 CFR Part 40

    Excise taxes, Reporting and recordkeeping requirements.

26 CFR Part 49

    Excise taxes, Reporting and recordkeeping requirements, Telephone, 
Transportation.

26 CFR Part 602

    Reporting and recordkeeping requirements.

Amendments to the Regulations

0
Accordingly, 26 CFR parts 40, 49, and 602 are amended as follows:

PART 40--EXCISE TAX PROCEDURAL REGULATIONS

0
Paragraph 1. The authority citation for part 40 continues to read in 
part as follows:

    Authority:  26 U.S.C. 7805. * * *


0
Par. 2. Section 40.0-1 is amended as follows:
0
1. Paragraph (d) is redesignated as paragraph (f) and new paragraphs 
(d) and (e) are added.
0
2. The paragraph heading of redesignated paragraph (f) is revised.
    The addition and revision read as follows:


Sec.  40.0-1  Introduction.

* * * * *
    (d) [Reserved]. For further guidance, see Sec.  40.0-1T(d).
    (e) [Reserved]. For further guidance, see Sec.  40.0-1T(e).
    (f) Effective/applicability dates. * * *


0
Par. 3. Section 40.0-1T is added to read as follows:


Sec.  40.0-1T  Introduction (temporary).

    (a) through (c) [Reserved]. For further guidance, see Sec.  40.0-
1(a) through (c).
    (d) Indoor tanning services. The regulations in this part 40 also 
set forth administrative provisions relating to the excise taxes 
imposed by chapter 49, relating to cosmetic services.
    (e) Effective/applicability date. Paragraph (d) of this section 
applies to returns that relate to calendar quarters beginning after 
June 30, 2010.
    (f) [Reserved]. For further guidance, see Sec.  40.0-1(f).
    (g) Expiration date. Paragraph (d) of this section expires on or 
before June 11, 2013.


0
Par. 4. Section 40.6302(c)-1 is amended by:
0
1. In paragraph (a)(1), removing the language ``by statute'' and adding 
``by statute, by Sec.  40.6302(c)-1T(g),'' in its place.
0
2. Revising the paragraph heading in paragraph (f).
0
3. Adding paragraph (g).
    The revision and additions read as follows:


Sec.  40.6302(c)-1  Use of Government depositories.

* * * * *
    (f) Effective/applicability date. * * *
    (g) [Reserved]. For further guidance, see Sec.  40.6302(c)-1T(g).

0
Par. 5. Section 40.6302(c)-1T is added to read as follows:


Sec.  40.6302(c)-1T  Use of government depositaries (temporary).

    (a) through (f) [Reserved]. For further guidance, see Sec.  
40.6302(c)-1(a) through (f).
    (g) Exception for indoor tanning services. No deposit is required 
for the taxes imposed by section 5000B (relating to indoor tanning 
services) for any calendar quarter beginning after June 30, 2010.
    (h) Expiration date. This section expires on or before June 11, 
2013.

PART 49--FACILITIES AND SERVICES EXCISE TAX

0
Par. 6. The authority citation for part 49 continues to read in part as 
follows:

    Authority:  26 U.S.C. 7805. * * *


0
Par. 7. Section 49.0-3T is added to read as follows:


Sec.  49.0-3T  Introduction; cosmetic services (temporary).

    On and after July 1, 2010, this part 49 also applies to taxes 
imposed by chapter 49 of the Internal Revenue Code, relating to 
cosmetic services. See part 40 of this chapter for regulations relating 
to returns and payments of taxes imposed by chapter 49.

0
Par. 8. Subpart G is added to read as follows:

Subpart G--Cosmetic Services


Sec.  49.5000B-1T  Indoor tanning services (temporary).

    (a) Overview. This section provides rules for the tax imposed by 
section 5000B on any indoor tanning service.
    (b) Imposition of tax--(1) General rule. Tax is imposed by section 
5000B at the time of payment for any indoor tanning service.
    (2) Undesignated payment cards. In the case of an undesignated 
payment card (within the meaning of paragraph (c)(5) of this section), 
payment for indoor tanning services is made when it can reasonably be 
determined that a payment is made specifically for indoor tanning 
services. Thus, when the undesignated payment card is redeemed, in 
whole or in part, to pay for indoor tanning services (and not when a 
payment is made to purchase the undesignated payment card), it can 
reasonably be determined that a payment for indoor tanning services is 
made, and the tax is imposed.
    (3) Payments to qualified physical fitness facilities. No portion 
of a payment to a qualified physical fitness facility (within the 
meaning of paragraph (c)(4) of this section) that includes access to 
indoor tanning services is treated as a payment for indoor tanning 
services.
    (c) Definitions--(1) Indoor tanning service means a service 
employing any electronic product designed to incorporate one or more 
ultraviolet lamps and intended for the irradiation of an individual by 
ultraviolet radiation, with wavelengths in air between 200 and 400 
nanometers, to induce skin tanning. The term does not include 
phototherapy service performed by, and on the premises of, a licensed 
medical professional (such as a dermatologist, psychologist, or 
registered nurse).
    (2) Other goods and services include, but are not limited to, 
protective eyewear, footwear, towels, and tanning lotions; manicures, 
pedicures and other cosmetic or spa treatments; and access to sport or 
exercise facilities.
    (3) Phototherapy service means a service that exposes an individual 
to specific wavelengths of light for the treatment of--
    (i) Dermatological conditions (such as acne, psoriasis, and 
eczema);
    (ii) Sleep disorders;
    (iii) Seasonal affective disorder or other psychiatric disorder;
    (iv) Neonatal jaundice;
    (v) Wound healing; or
    (vi) Other medical condition determined by a licensed medical 
professional to be treatable by exposing the individual to specific 
wavelengths of light.
    (4) Qualified physical fitness facility means a facility--
    (i) In which the predominant business or activity is providing 
facilities, equipment, and services to its members for purposes of 
exercise and physical fitness (determined by taking into consideration 
all of the facts and circumstances, such as the cost of the equipment, 
variety of services offered, actual usage of services by customers, 
revenue generated by different services, and how the entity holds 
itself out to the public through advertising or other means);
    (ii) In which providing indoor tanning services is not a 
substantial part of the business or activity; and

[[Page 33687]]

    (iii) That does not sell indoor tanning services for a fee to the 
public or otherwise offer different pricing options to its members 
based in whole or in part on access to indoor tanning services.
    (5) Undesignated payment card means a gift certificate, gift card, 
or similar item that can be redeemed for goods or services that may, 
but do not necessarily, include indoor tanning services.
    (d) Application of tax--(1) Tax on total amount paid for indoor 
tanning services. The tax is imposed on the total amount paid for 
indoor tanning services, including any amount paid by insurance.
    (2) Charges for other goods and services; tanning services 
separately stated. If a payment covers charges for indoor tanning 
services as well as other goods and services, the charges for other 
goods and services may be excluded in computing the tax payable on the 
amount paid, if the charges--
    (i) Are separable (regardless of the manner of invoicing the 
charges);
    (ii) Do not exceed the fair market value of such other goods and 
services; and
    (iii) Are shown in the exact amounts in the records pertaining to 
the indoor tanning services charge.
    (3) Charges for other goods and services; tanning services bundled. 
This paragraph (d)(3) applies if paragraph (d)(2) of this section does 
not apply. If a provider offers indoor tanning services (whether of a 
specified or unlimited amount, including ``free'' or reduced-rate 
indoor tanning services) bundled with other goods and services, the 
payment for the bundled services includes an amount paid for indoor 
tanning services. The tax applies to that portion of the amount paid to 
the provider that is reasonably attributable to indoor tanning 
services. The amount reasonably attributable to indoor tanning services 
may be determined by applying to the total amount paid a ratio 
determined by comparing--
    (i) The provider's charge for indoor tanning services not in 
bundled services or, in the event the provider only charges for other 
goods and services as part of bundled services, the fair market value 
of similar services (based on the amount charged by comparable 
providers in the same geographic area); to
    (ii) The charge determined in paragraph (d)(3)(i) of this section 
plus the provider's charge for the other goods and services in the 
bundled services or, in the event the provider only charges for other 
goods and services as part of bundled services, the fair market value 
of similar goods and services (based on the amount charged by 
comparable providers in the same geographic area).
    (e) Person liable for the tax--(1) General rule. The person who 
pays for the indoor tanning service is deemed to be the person on whom 
the service is performed for purposes of collecting the tax. Thus, the 
person paying for the indoor tanning service is liable for the tax at 
the time of payment.
    (2) Undesignated payment cards. In the case of a payment made with 
an undesignated payment card (within the meaning of paragraph (c)(5) of 
this section) described in paragraph (b)(2) of this section, the person 
who redeems the card, in whole or in part, to pay specifically for 
indoor tanning services is the person who pays for the indoor tanning 
services. Thus, the person who redeems an undesignated payment card, in 
whole or in part, to pay specifically for indoor tanning services is 
liable for the tax at the time such payment is made.
    (3) Tax not collected at time of payment. If the person paying for 
the indoor tanning services does not pay the tax to the person 
receiving the payment for the services at the time of payment for the 
services, the person receiving the payment is liable for the tax.
    (f) Persons receiving payment must collect tax. Every person 
receiving a payment for indoor tanning services on which a tax is 
imposed under this section shall collect the amount of the tax from the 
person making that payment. The total amount paid is presumed to 
include the tax if the tax is not separately stated.
    (g) Examples. The following examples illustrate the application of 
section 5000B and this section.

    Example 1. A is a provider of indoor tanning services and other 
goods and services. On July 1, 2010, B, an individual, pays A for 
one 10-minute indoor tanning service (as defined in paragraph (c)(1) 
of this section) and one pair of protective eyewear. A charges 
$15.00 for the 10-minute indoor tanning service and $2.00 for a pair 
of protective eyewear. The $2.00 charge for the protective eyewear 
does not exceed its fair market value. The invoice from A is $17.00 
(exclusive of the tax imposed by section 5000B) and separately 
states the cost of the protective eyewear. Because the cost of the 
protective eyewear is separately stated, A calculates the section 
5000B tax on $15.00 as provided by paragraph (d)(2) of this section. 
B is liable for the tax when B pays for the services. If A does not 
collect the tax from B at the time B pays for the services, A is 
liable for the tax.
    Example 2. A, a provider of indoor tanning services and other 
goods and services, periodically offers bundled services to promote 
additional business. On July 1, 2010, C, an individual, buys bundled 
service from A that includes 10 swimming lessons, the use of towels 
while on A's premises, one pair of protective eyewear, and 2 
``free'' 10-minute indoor tanning services. A charges $252.00 
(exclusive of the tax imposed by section 5000B) for the bundled 
services. If these services are purchased separately, A charges 
(exclusive of the tax imposed by section 5000B) $25.00 per swimming 
lesson, $15.00 for a 10-minute indoor tanning service, $2.00 for the 
protective eyewear and does not charge for the use of towels while 
on A's premises. As determined under paragraph (d)(3) of this 
section, the section 5000B tax applies to the amount reasonably 
attributable to the indoor tanning service, which is $26.81 (($30/
$282) x $252).
    Example 3. On July 1, 2010, D buys bundled services (described 
in Example 2) from A as a gift for C. Under paragraph (e)(1) of this 
section, D is deemed to be the person on whom the indoor tanning 
services are performed for purposes of collecting the tax. 
Therefore, under paragraph (b)(1) of this section, D is liable for 
the tax when D pays for the services. The tax will be computed under 
the rules of paragraph (d)(3) of this section. If D does not pay the 
tax at the time D pays for the services, A is liable for the tax.
    Example 4. S operates a spa that provides a variety of cosmetic 
goods and services, including indoor tanning services. On July 1, 
2010, D buys a gift certificate in the amount of $100.00 from S as a 
gift for C. The gift certificate may be redeemed by C for C's choice 
among several services offered by S, including indoor tanning 
services. On July 15, 2010, C partially redeems the gift certificate 
to pay for one 10-minute indoor tanning service. Under paragraph 
(b)(2) of this section, a payment for indoor tanning services is 
made, and the tax under section 5000B is imposed, on July 15, 2010, 
when C partially redeems the gift certificate to pay for one indoor 
tanning service. Under paragraph (e)(2) of this section, C is the 
person who pays for the indoor tanning services. Therefore, C is 
liable for the tax, computed under the rules of paragraph (d) of 
this section, and pays the tax by permitting S to debit the amount 
of the tax from the balance of the gift certificate or by paying the 
amount of the tax to S in cash. If C does not pay the tax at the 
time C partially redeems the gift certificate to pay for the indoor 
tanning services, S is liable for the tax.
    Example 5. On July 1, 2010, E pays $1000 (exclusive of the tax 
imposed by section 5000B) to spa S for the right to use the 
following equipment and services during the month of July: up to 
four massages or facials, unlimited use of a sauna, steam room, 
showers, and towel service, and unlimited indoor tanning services. 
If the services are purchased separately, S charges (exclusive of 
the tax imposed by section 5000B) $150 for unlimited indoor tanning 
services during the month of July, and $900 for the other equipment 
and services during the month of July, not including indoor tanning 
services. Under paragraph (b) of this section, E has made a payment 
for indoor tanning services and the tax will be computed under the 
rules of paragraph (d)(3) of this section. As determined under 
paragraph (d)(3) of this section, the section 5000B tax applies to 
the amount reasonably attributable to the indoor

[[Page 33688]]

tanning services, which is $142.86 (($150/$1050) x $1000). If E does 
not pay the tax at the time E pays for the bundled services, S is 
liable for the tax.
    Example 6. G operates a full-service gym facility that offers 
fitness classes, multiple exercise machines (such as treadmills, 
stationary bicycles, weight training machines, and free weights), 
and has as its predominant business providing these facilities, 
equipment, and services to members for purposes of exercise and 
physical fitness. G provides its members with access to indoor 
tanning services, comprised of two tanning beds that meet the 
definition of indoor tanning services under paragraph (c)(1) of this 
section. G generally charges its members a fee for monthly usage of 
its facilities, equipment, and services, but also offers short-term 
or free trial memberships and allows non-members to purchase 
individual or a series of exercise classes. G does not charge any 
fee for the indoor tanning services, does not offer indoor tanning 
services separately from its other services, and has no membership 
tier or category that differs from others based on access to the 
indoor tanning services. G holds itself out to the public through 
advertising and marketing as providing equipment and services to 
improve physical fitness. On July 1, 2010, F pays a membership fee 
to G in return for use of G's facility during the month of July. 
Under paragraph (b)(3) of this section, no portion of F's membership 
fee payment is treated as a payment made for indoor tanning 
services, because G is a qualified physical fitness facility under 
paragraph (c)(4) of this section. Therefore, no liability for tax 
arises under section 5000B.

    (h) Effective/applicability date. This section applies to amounts 
paid after June 30, 2010, for indoor tanning services.
    (i) Expiration date. This section expires on or before June 11, 
2013.

PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

0
Par. 9. The authority citation for part 602 continues to read as 
follows:

    Authority: 26 U.S.C. 7805.


0
Par. 10. In Sec.  602.101, paragraph (b) is amended by adding the 
following entry in numerical order to the table to read as follows:


Sec.  602.101  OMB Control numbers.

* * * * *
    (b) * * *

------------------------------------------------------------------------
                                                             Current OMB
    CFR part or section where indentified and described      control No.
------------------------------------------------------------------------
 
                                * * * * *
1.5000B-1..................................................    1545-2177
 
                                * * * * *
------------------------------------------------------------------------


     Approved: June 9, 2010.
Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
Michael Mundaca,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2010-14398 Filed 6-11-10; 11:15 am]
BILLING CODE 4830-01-P