TAX NEWS - 2010

Tanning Tax:New tax takes a bite out of tanning salons, businesses

Lisa Boyer has offered tanning services to her customers at Hair Care Center and Tanning Salon in Sturgis for at least ten years, but after the Sturgis Bike Rally she is going to discontinue her services due to a new initiative passed by the federal government.

As of July 1, tanning salons across the country will have to charge customers a 10 percent excise tax for tanning bed and booth sessions to help pay for the new $940 billion Patient Protection and Affordable Care Act (the new 2010 Health Care Bill). An initiative the Congressional Joint Committee on Taxation expects to generate $2.7 billion during the next decade.

A disgruntled Boyer said she first learned about the tax two weeks ago from her accountant and doesn't want to pass the cost onto her customers.

"I can raise my prices but that is unfair just because customers are being taxed on them," said Boyer who has three tanning beds in her salon. "I'm going to have to start putting up notes and ads in the paper telling everyone that I'm discontinuing it."

Boyer said she will join the rest of the Black Hills tanning salons that might lose money and customers due to the new initiative. She said she will lose 15-20 percent of her overall profit after discontinuing her tanning services.

Like Boyer, who realized the cost isn't worth it, Black Hills businesses are becoming more aware of the new tax and are looking at alternatives to keep the higher cost off of customers' shoulders.

Pure Tan owner Sarah Dittman said she will have to pass the cost onto her Spearfish customers but can sell lotion or other tanning products that have free minutes on it to lessen the blow of the tax. She said she has been running specials to allow customers to stock up on minutes before the tax is implemented.

"It's a sin tax," Dittman said. "It's very unfair that they are saying tanning beds are so unhealthy it's a burden on our healthcare system. I think they need to look at the problem with obesity and the issues associated with that more so than tanning beds."

Stacy Cline, co-owner of Sedona Sun Tanning & Day Spa on Jackson Boulevard, created a point system for her customers after the law was passed. For every dollar spent towards tanning minutes, customers get one point, or ten cents, back that they can use towards more minutes.

"Because 10 percent is quite a bit to handle, we figured we wanted to do something for everybody," Cline said.

Jeannie Bourne, Cline's mother and co-owner of Sedona, said they first heard about the new tax when the health bill became law in March. Sedona received a letter in the mail from the Internal Revenue Service on June 18 with information about the new tax.

She said the tax is unfair to tanning salons especially since her salon just opened up in May of 2009.

"I'm sure it will hurt other tanning salons that have been her longer than us," Bourne said. "I know salons are going to have to pass it to their customers."

Before walking into Tan World on E. St. Patrick St, Natalie Slack said the tax may not be fair for the salon but understands passing it onto the consumers.

Slack, a 25-year-old that tans about twice a month, said she probably won't stop tanning after the tax is implemented since ten percent won't be that big of a deal to consumers after awhile.

"It's like when the power company raised their prices so high," she said referring to the increase by Black Hills Power. "It seems drastic, but eventually I think people will get over it."

24-year-old Nicole Martin said taxing tanning salons isn't that necessary.

"I think they could use it on something better like taxing cigarettes or tobacco more," Martin said.

As tanning salons will see a change July 1, "qualified" fitness facilities that offer tanning services will not have to charge the additional 10 percent tax.

The IRS explains that tanning services in these facilities are "incidental" and it is difficult to separate out the cost of the tanning service from other services at the fitness center, so the tax is not imposed.

Boyer said the exemption is ridiculous.

"I don't think it's fair," she said. "If they are going to tax one entity then they should all be taxed."

The Indoor Tanning Association, who has about 380 registered member salons throughout the country, worked hard to keep the tax from passing.

John Overstreet, ITA executive director, said the exemptions could hurt tanning salons as fitness facilities could lure their customers with not having to pay the tax.

"It singles out one segment of the business," he said. "If you get a sun tan at a health club does that mean it's healthy?"

With health playing a large role in the determining factor of implementing the tax, Dr. Lycia Scott, a Dermatologist at the Skin Institute in the Rapid City Medical Center, said this is a win for the health industry.

She said that several studies indicate a 75 percent increased risk of melanoma for those who are exposed to UV radiations from indoor tanning.

"The last time I read there are more than 2 million teenagers using tanning beds in the U.S.," Scott said. "If they can target that money into healthcare, it's a positive step to pay for health damage and diseases that occur from tanning beds. This tax is a big step in raising awareness of the harmful effects of tanning."

She said avid tanners should look to spray on or airbrush tans because there are no harmful effects of UV radiation and the new tax doesn't apply to them.

As the new tax comes during the slowest time for tanning salons Overstreet thinks the tax won't last long.

"I would love to see the tax repealed," Overstreet said. "I'm openly optimistic that it will be. I don't think it will achieve the revenue they projected."