On Friday, a tax attorney for Akin Gump Strauss Hauer & Feld LLP finally reached the attorney at the U.S. Treasury responsible for drafting regulations concerning the tan tax. Below is the most recent information on implementation of the tan tax.

The Treasury official basically said that she was not able to say much because the guidance was still moving through the system, which implies that recommendations on the major policy decisions have been made by staff but that the ultimate decision makers have not yet reached a final decision. She said that the treasury department plans to issue temporary and proposed regulations in the near future, which means the guidance will be effective immediately upon issuance.

The Treasury official was not willing to estimate the time until the guidance would be issued but that is when she said that treasury department definitely understands that the delay is having an adverse affect on business in the indoor tanning industry.

She said the guidance will provide a “workable solution that is consistent with the statute.” In particular, she feels that the guidance they provide regarding the allocation of receipts among taxable tanning services and nontaxable items will be workable.

The Akin Gump tax attorney took that to mean the allocation guidance will be flexible because she understands that the affected businesses are small businesses. The Treasury official also said that there “will be” transition relief (not just transition proposals) but that the guidance could be changed because it will be both proposed and temporary guidance and there will be a comment period.

She said that the treasury department and the IRS were very aware of the services “purchased” vs. services “performed” issue but she just could not say more at this time.

She also said that this regulation project was receiving a lot of attention at the treasury department but she was sure that the department would be “hearing a lot of comments” as soon as the guidance was issued. Her comments were very guarded. The tax attorney at Akin Gump senses that the Treasury official believes that the guidance the treasury department will issue will be unpopular with at least one special interest group affected by it.

Accordingly, the Akin Gump tax attorney suspected that the Treasury official’s comments mean that the guidance will provide that the services are taxable when provided and not when purchased but that there will be some grandfather relief.