Representatives for the indoor tanning industry predict the country will never see the $2.7 billion tax on tanning services the healthcare law is supposed to collect.
The Joint Committee on Taxation (JCT) estimated that a 10 percent
tax on tanning-bed services would raise $2.7 billion over the next
decade, but the industry says there simply aren’t enough salons or
customer traffic to generate that much revenue.
Overstreet estimates there are roughly 25,000 businesses nationwide
offering tanning-bed services that would be subject to the tax.
These businesses include gyms and nail salons.
Each of these businesses would have to pay $108 million over 10 years to meet the $2.7 billion figure.
While some spas and gyms earn millions of dollars, Overstreet said a typical tanning salon grosses $250,000 each year.
The tax was added to the Senate healthcare bill at the eleventh hour
as lawmakers frantically sought a revenue offset 60 senators could
support. It became law as part of the healthcare bill signed by
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Overstreet’s group represents the salons that will collect the tax
once it kicks in on July 1, 2010. The levy exacts a 10 percent charge
on indoor tanning services that use ultraviolet lamps to enhance a
person’s glow. Medical services are exempt from the tax.
“For our industry, it [the tax] highlights the disconnect between
policymakers and the folks that actually pay the tax,” Overstreet said.
The JCT said it could not divulge the economic models it used to
come up with the revenue estimate. The Senate Finance Committee did not
immediately respond to inquiries on the matter.
Roughly 30 million Americans visit tanning salons at least once a
year and pay an estimated $7 for the service. Collectively, these
patrons would have to visit a tanning bed roughly 3.9 billion times
over the next 10 years to raise the amount of revenue Congress seeks.
However, the cost for most tanning sessions are commonly
incorporated into a broader membership fee that includes other services
or product purchases.
Overstreet said separating the tanning revenue from the overall fee
would be difficult for salon managers since members are rarely
consistent on using tanning services.
“I guess the IRS is going to issue regulations on it,” he said,
adding that salon owners are contacting him and asking for any insight
on how the tax might work.
“Those are the kinds of questions that people are asking me,” he said.
Over 200,000 voters have called their representative asking for the tax to be repealed. But lawmakers would need to locate another offset that raises a similar amount of revenue before they could entertain the idea of repeal.