Tanning industry says numbers are cooked in healthcare's $2.7B tax

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.

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“We call it fantasy land,” John Overstreet, executive director at the Indoor Tanning Association, told The Hill. “There is no one in this industry that thinks those are remotely reasonable revenue targets for the tax.”

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 President Barack Obama last week.  

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.