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Tanning tax collections lagging

Apparently Americans prefer natural tanning methods to tanning beds.

Or maybe the Internal Revenue Service is not doing as much as it could to collect the 10 percent excise tax on indoor tanning services that took effect in July 2010.

The missed collections is the theory that the IRS watchdog agency is going with.

The tanning tax has so far raised less than one-fifth of the revenue it was expected to bring in for the entire fiscal year. A new report on the tanning tax by the Treasury Inspector General for Tax Administration (TIGTA) says that as of March 31, the IRS had collected only $36.6 million for that year.

Follow-up fridayThis is the latest look at the tanning tax this week, qualifying it for Follow-up Friday mention. On Oct. 11, the IRS held a hearing on its rules with regard to collecting the tanning bed tax.

That session was timely, as TIGTA also found that the number of tanning excise tax returns filed since enactment of health care reform has been "much lower than expected."

According to IRS documents, in April 2010, the Indoor Tanning Association estimated that 25,000 businesses were providing indoor tanning services. However, the actual number of businesses liable for the tax has been difficult to determine with any degree of accuracy, says TIGTA.

Identifying these taxpayers has been one of the more challenging tasks the IRS has faced when implementing this provision, continued the report. For the first three applicable quarters, the number of Federal excise tax forms reporting tanning taxes has averaged approximately 10,300.

In addition, says TIGTA, the IRS has been slow in contacting potentially liable taxpayers and data used to identify the taxpayers may have been incomplete.

The IRS could have taken more timely actions to contact taxpayers who may owe the tax, says TIGTA. By the time notices were issued, tanning excise tax returns had been due for three quarters. Late filing of these returns would result in the taxpayer owing the unpaid tax, plus interest and penalties.

TIGTA recommended that the IRS further analyze its data on businesses that may provide tanning services, monitor results from notices sent to potentially liable taxpayers and update its Publication 510, Excise Taxes (Including Fuel Tax Credits and Refunds).

The IRS concurred with all of TIGTA's recommendations.

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