Tucked among the trillions of tax cuts in the House’s just-passed “big, beautiful bill” is the repeal of the tax on indoor tanning services. But before you rush to book a tanning bed appointment, remember that the Senate still has to act on this bill and that dermatologists are no fans of tanning.
About The Tax
The tanning tax, a 10% excise tax on indoor tanning services, dates back to 2010. It was part of the Patient Protection and Affordable Care Act—better known as Obamacare. When Congress wants to find money to pay for things that matter to them—like healthcare or tax cuts—they generally have to offset those costs. Sometimes, those offsets are in the form of reduced spending or benefit cuts, but more often than not, they show up as new or increased taxes. That’s what happened here. The tax was intended to help pay for the new healthcare law.
You can think of an excise tax as being like a sales tax. When it comes to the tanning excise tax, the rules require salons and other businesses providing ultraviolet tanning services to collect a 10% excise tax on the applicable services. Spray-on tans and phototherapy services (those used for medical reasons) are exempt from the tax. And if services are bundled, the portion attributable to tanning is taxable. If, however, the service is part of a gym or other fitness center package that isn’t separable, there’s no tax payable.
Previous Repeal Efforts
The tanning tax was intended not only to raise revenue but also to discourage the use of indoor tanning beds. As a result, it was championed by health organizations, including the American Academy of Dermatology (AADA) and the American Medical Association (AMA).
In a 2018 letter to then-House Speaker Paul Ryan (R-Wis.) and then-Minority Leader Nancy Pelosi (D-Calif.), the two joined dozens of other health organizations to oppose a planned repeal of the tanning tax, writing, “The United States Department of Health and Human Services and the World Health Organization’s International Agency of Research on Cancer panel have declared ultraviolet (UV) radiation from the sun and artificial sources, such as tanning beds and sun lamps, to be a known carcinogen (cancer-causing substance).” The letter went on to say that, “Researchers estimate that indoor tanning may cause upwards of 400,000 cases of skin cancer in the U.S. each year.”
The attempted repeal in 2018 eventually failed, as did a previous effort to repeal the tax in 2015.
The repeals might have failed on public policy grounds, or more likely, revenue-related results. One of the interesting things about excise taxes that are intended to impact behavior is that if they are successful, the revenue portion shrinks. In other words, if the goal is to curb behavior (other taxes try to reduce smoking, for example) by taxing the behavior, as success rates go up, dollars go down. That’s what happened here.
The tax was expected to raise $2.7 billion over the first decade. After five years, it had raised less than $500 million. According to the Office of Management and Budget, the feds only collected $92 million from the tax in 2014.
Champions of the tax say that’s because the tax worked, effectively discouraging the use of tanning beds. But businesses cried foul, claiming that the tax ruined their business. According to IBISWorld, in 2011, there were nearly 85,000 tanning salon establishments operating in the U.S. By 2024, that number had shrunk to less than 21,000.
Pop Culture
A 2023 National Institutes of Health study suggests that tanning bed behaviors were changing anyway. Concerns about aging and skin care, as well as the health risks, have resulted in a tilt towards self-applied sunless tanning products, such as lotion tanning and spray tanning.
Even pop culture caught on. The most-talked-about tanned celebrity of the early naughts—Snooki from MTV’s now-defunct reality show, “Jersey Shore”—lamented after the tax became law, “I don’t go tanning anymore because Obama put a 10% tax on tanning. And I feel like he did that intentionally for us.” Today, you can buy Snooki sunless tanning products online.
What’s Next
The planned repeal hasn’t gotten a lot of attention. To be honest, I didn’t even notice it when I first read through the bill—it’s a couple of paragraphs about halfway through the text, stuck between new Form 1099 thresholds and exclusion of interest from income on certain rural and agricultural loans.
The bill passed the House earlier this week with the tanning tax repeal still intact. It now moves to the Senate.
Read the full article here