Indoor tanning operators say they're getting burned by tax

Indoor tanning operators say they're getting burned by tax

Jackie Crosby
Minneapolis Star Tribune
December 16, 2011

The recession and a still-sluggish economy have pulled many businesses under. Indoor tanning salons say they've been dealt an additional blow, courtesy of the federal government.

The Indoor Tanning Association, an industry group, claims that 14 percent of tanning salons in Minnesota have gone out of business since 2009, a decline from 477 to 419. The group blames the additional burden of a 10 percent tax placed on salons starting July 1, 2010, as part of the health care reform law.

The industry continues to press Congress for repeal, saying women-owned businesses are being disproportionately affected and that the tax is being unfairly applied because many health clubs don't have to pay.

"Whether or not you think people should be sun-tanning, the government is picking winners and losers by using the tax code to punish businesses," said John Overstreet, executive director of the Indoor Tanning Association. "This is not the way to write tax policy. It's unfair, and it shouldn't be done."

State data, based on tax records, don't line up with the association's numbers -- though they also suggest the industry is shrinking. Minnesota's Department of Employment and Economic Development shows a loss of seven "personal care service" businesses, which includes tanning salons as well as businesses that offer hair replacement, ear piercing, tattoos and depilatory services.

Since the tax went into effect, 2.5 percent of such businesses have failed, going from 284 in the summer of 2010 to 277 in the first quarter of 2011.

Still, there's anecdotal evidence that salons are feeling the squeeze.

Steve Hine, the state's labor market information director, said a salon owner scrawled a note on one of the forms saying the 10 percent tax forced him to shutter one location.

"This is certainly an area that's sensitive to discretionary income," Hine said. "Leisure and hospitality in general have been affected by that."

The tax applies only to use of ultraviolet lamps, not to spray tans, topical creams and lotions, or for medical use of the lamps for certain skin conditions. It also doesn't apply if tanning is included as part of an overall club membership fee.

The tax was expected to generate $2.7 billion over 10 years to help fund health care overhaul, but so far it's not living up to expectations.

Opponents of the health care law jumped on an Internal Revenue Service report earlier this year in which the agency admitted collecting just half of the expected tax revenue because "compliance was lower than expected." The IRS said it couldn't easily identify the actual number of businesses that should be paying the tax. It expects to collect $200 million in 2011.

The indoor tanning business gets little sympathy from the global public health community, which cites a link between the tanning beds and increased rates of melanoma, the deadliest form of skin cancer, and potentially disfiguring basal cell carcinomas. The Food and Drug Administration also is considering whether to tighten regulation on tanning salons.

In October, California became the first state to ban indoor tanning use for those under 18. Howard County, Maryland, led the nation in passing a similar ban two years ago. Minnesota law requires those under 16 to get permission, in person, from parents. The state's health leaders are ramping up efforts to seek a ban on indoor tanning for minors, similar to California's law.

"It's obviously shortsighted to put profits over people's health," said DeAnn Lazovich, a professor in the School of Public Health at the University of Minnesota.

Among the clubs of Hastings-based Anytime Fitness, most have absorbed the tax as opposed to charging customers more, said spokesman Mark Daly. As the tanning service is used infrequently by Anytime Fitness members, there's not much grumbling.

Haley Nelson, an assistant manager at Planet Beach in Minneapolis, said the tax is included in all tanning services as well as all the products sold at the store. Consumers are used to it by now.

"They understand, and don't ask much about it," she said.

That was the whole objective of the tax. Similar to the existing cigarette taxes, gasoline taxes and proposed candy/soda taxes. It's made too expensive so people stop using them. But in the meantime, the gov't loses the tax dollars from the businesses that closed.

Really bright stuff there.

I have always wondered why the health spas didn't have the tax. I think the article may have answered that.

Maybe we should tax health clubs. Heck, ya might pull a muscle.