New tax has indoor tanning services worried

DALLAS — 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.

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.”

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 Kirkland, 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.

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.”

Via McClatchy-Tribune News Service.