Bill's tax on indoor tanning worries Dallas salon owners
By: Health Insurance
Submitted: 2009-12-31 16:49:02 | Word Count: 924
Trying to keep that golden glow through the new year? It could cost you a little bit more.
A last-minute change in the federal health care bill ditched a proposed 5 percent tax on cosmetic medical procedures and replaced it with a 10 percent tax on indoor tanning services.
[ advertisement ]
Goodbye Botox tax. Hello tan tax.
Dallas is a big market for both cosmetic surgery and fake tans, so the region would have taken a hit either way. Texas is home to two of the nation's largest indoor tanning chains – Farmers Branch-based Palm Beach Tan, with more than 250 locations, and Houston-based Darque Tan, with more than 100 locations.
John Overstreet, executive director of the Indoor Tanning Association, said he's been getting frantic phone calls from tanning salon owners all week.
"They're scared to death," he said. "They're already suffering through this recession."
The International Smart Tan Network, a Jackson, Miss.-based educational trade association for the tanning salon industry, estimates the tax could cause 1,000 tanning business to shut down and up to 9,000 job cuts in 2010. Nationally, there are more than 20,000 indoor tanning salons and that doesn't count gyms, hair salons and other places that also offer tanning services.
Some Dallas-area independent tanning salon owners said they won't be able to absorb the 10 percent tax and will either have to pass the cost on to customers, cut staff or increase their own hours. One of them is Randy Ranew, owner of 12-year-old Inwood Tan in Dallas. He said the tax would amount to about $30,000 a year based on his annual revenue.
"Times are really tough right now," Ranew said. "I can't absorb this. I don't know how it will all work out, but I see it costing us business and eliminating a lot of smaller businesses."
Owners' dilemma
The impact to consumers is difficult to determine because salon owners could handle the tax differently. If an owner decided to pass along the full tax to the customer, then a $20 tanning session would increase to $22.
Tiffany Kirkland, owner of 18-month-old Golden Beach Tan in Allen with her husband, Scott, expects to lose customers if she has to raise prices. Scott Kirkland projects the tax would cost them $13,000 to $15,000 next year.
The tan tax popped up in the health care bill last weekend after powerful medical lobbies – including the American Academy of Dermatology Association, American Medical Association, American Society of Plastic Surgeons and Botox-maker Allergan – persuaded Congress to remove a tax on cosmetic medical procedures and replace it with a 10 percent surcharge on indoor tanning services.
"We were a sacrifice for another more politically powerful group," Overstreet said. "It speaks of what's wrong with Washington. You're taking it away from wealthy doctors and wealthy clients and putting the tax on working people."
Dallas plastic surgeon Dr. Steven White said his associations – the American Society of Plastic Surgeons and the American Society of Aesthetic Plastic Surgery – lobbied Congress extensively against a tax on cosmetic surgery.
"Since 90 percent of cosmetic surgery patients are women, this would have been a very discriminatory tax," said White, who opposed the cosmetic surgery tax.
The indoor tanning industry is made up of more than 20,000 small businesses, with at least 75 percent owned by women, according to the Indoor Tanning Association. Salon owner Ranew said 90 percent of his customers are women.
One concern with these so-called vanity taxes is there's no guarantee the demand for cosmetic surgeries, or a tan, will remain strong enough to generate the projected tax revenue. In 2004, New Jersey became the first and only state to tax cosmetic medical procedures, but less than one-third of the expected revenue was collected, White said.
The so-called Botax would have raised about $5 billion over 10 years, according to the International Smart Tan Network.
Revenue disagreement
Congress estimates the tan tax will generate $2.7 billion over 10 years, but industry groups say that figure is too high. The International Smart Tan Network estimates the tax would generate less than $170 million, based on 2009 data. The industry generates more than $5 billion in annual retail, manufacturing and distribution sales combined.
Another issue appears to be the source of ultraviolet light treatment. The American Academy of Dermatology warns of significant health risks caused by indoor tanning.
Indoor tanning industry groups note that dermatologists use tanning equipment in their offices for cosmetic skin conditions, such as eczema and psoriasis, in phototherapy treatments that cost up to $100 per visit billed to health insurance companies. In contrast, indoor tanning salons cost as little as $6 to $20 per session.
The tan tax would exempt phototherapy services performed by a licensed medical professional.
"This is like Coke being allowed to lobby the government to tax Pepsi, but that Coke be allowed to sell the same product and not be taxed for it," International Smart Tan Network Vice President Joseph Levy said in a statement. "It's unbelievable."
