The idea of taxing indoor tanning services was first proposed in 2009 by the then-Senator and now President Barack Obama, as part of his signature healthcare reform law known as the Patient Protection and Affordable Care Act (PPACA) or the ACA. The ACA aimed to improve access to healthcare for all Americans by expanding health insurance coverage, reducing costs, and improving quality. To finance some of the ACA’s provisions, such as subsidies for low-income individuals and small businesses to buy health insurance, the law included several revenue-raising measures, including the tanning tax.
The tanning tax required all indoor tanning services to collect a 10% excise tax on the amount paid for the service, starting July 1, 2010. The tax applied to both commercial tanning salons and businesses that offered tanning services such as spas, gyms, and hotels. It did not apply to outdoor tanning, spray tans, or self-tanning products.
The purpose of the tanning tax was twofold: to discourage the use of indoor tanning services, especially among young people, who were at higher risk of developing skin cancer due to their increased UV sensitivity, and to generate revenue for the federal government. According to the Congressional Budget Office (CBO), the tanning tax was expected to raise about $2.7 billion over ten years, from 2010 to 2019.
To enforce the tanning tax, the Internal Revenue Service (IRS) issued guidelines for tanning businesses and consumers. Tanning salons and other providers of indoor tanning services were required to register with the IRS and collect the tax from their customers. They also had to file quarterly excise tax returns and pay the tax to the IRS.
Consumers who used indoor tanning services were required to pay the tax at the time of the service. The tax was included in the price of the service and could not be waived or refunded. Consumers did not have to report the tax on their income tax returns unless they operated a tanning business or had other tax obligations related to the service.
The tanning tax had several effects on the tanning industry, public health, and revenue. Some of these effects are discussed below.
The tanning tax had a negative impact on the indoor tanning industry, which had already been struggling due to competition from outdoor tanning, self-tanning products, and economic recession. According to the Indoor Tanning Association (ITA), a trade group representing the indoor tanning industry, the tanning tax led to a decline in business, revenue, and jobs, as well as an increase in prices, taxes, and regulations.
The ITA claimed that many tanning salons closed or went out of business due to the tax, leaving their employees and customers without jobs or services. The ITA also argued that the tax was unfair and discriminatory, as it targeted a specific industry and product. The ITA filed a lawsuit against the tanning tax, claiming that it was unconstitutional and exceeded Congress’s taxation powers. However, the lawsuit was dismissed by a federal judge in 2012, who ruled that the tax was a valid exercise of Congress’s authority under the Commerce Clause.
The tanning tax had a positive impact on public health by reducing the use of indoor tanning services, which are known to cause skin cancer and other health problems. According to the Centers for Disease Control and Prevention (CDC), exposure to UV radiation from indoor tanning increases the risk of developing melanoma, the deadliest form of skin cancer, by 59%, compared to non-users. Indoor tanning also increases the risk of other skin cancers, such as basal cell carcinoma and squamous cell carcinoma.
The CDC, along with other public health organizations such as the American Cancer Society (ACS) and the Skin Cancer Foundation (SCF), supported the tanning tax as a way to discourage tanning bed use, especially among young people. According to the CDC, about 1 in 6 teenagers and young adults use indoor tanning services, despite the known risks. The CDC recommended that people protect themselves from UV radiation by avoiding tanning beds, using sunscreen, wearing protective clothing and hats, seeking shade, and getting regular skin cancer screenings.
The tanning tax had a mixed impact on revenue, as it raised some money for the government but also faced challenges in enforcement and compliance. According to the IRS, the tanning tax generated about $680 million in revenue from 2010 to 2018. However, this amount was lower than the CBO’s estimated revenue of $2.7 billion, as some tanning businesses closed or evaded the tax, and some consumers switched to outdoor tanning or other alternatives.
The IRS also faced difficulties in enforcing the tax, as some tanning businesses failed to register or report their returns, and some consumers refused to pay the tax or claimed exemptions. The IRS conducted audits and investigations of non-compliant businesses, which resulted in penalties and fines. However, the success rate of these efforts varied, and some businesses continued to operate without paying the tax.
The tanning tax faced criticism from various sources, including the tanning industry, some lawmakers, and some consumers. The main criticisms are summarized below.
Unfair and Discriminatory
The tanning tax was criticized as being unfair and discriminatory, as it targeted a specific industry and product that was already regulated and taxed by state and local governments. The tanning industry argued that the tax unfairly penalized small businesses and low-income consumers, who could not afford to pay higher prices or go to outdoor tanning facilities.
Some lawmakers who opposed the tanning tax also argued that it discriminated against women and young people, who were more likely to use indoor tanning services. They cited data showing that about 80% of indoor tanners were women, and many of them started tanning at a young age. They also argued that the tax was a regressive tax, which imposed a higher burden on lower-income individuals and families.
Ineffective and Inefficient
The tanning tax was criticized as being ineffective and inefficient, as it failed to achieve its stated goals of reducing tanning bed use and raising revenue. Some tanning businesses and consumers simply switched to outdoor tanning or other alternatives, such as spray tans or home tanning products, which were not subject to the tax. The tanning industry argued that the tax did not reduce skin cancer rates or improve public health, as many other factors, such as genetics, lifestyle, and environment, also played a role in skin cancer development.
Some critics also argued that the tanning tax was an example of government overreach and micromanagement, as it imposed a tax on a legal and popular activity that did not pose a direct threat to public health or safety. They compared it to other “sin taxes” on cigarettes, alcohol, and sugary drinks, which were also criticized for being paternalistic and punitive.
The tanning tax is still in effect, although its implementation and enforcement may vary depending on the state and local laws. The ACA, which included the tanning tax, has undergone several legal and political challenges, including a Supreme Court ruling in 2012 that upheld its constitutionality but allowed states to opt out of its Medicaid expansion provision. The ACA was also partially repealed in 2017 by the Tax Cuts and Jobs Act (TCJA), which eliminated the ACA’s individual mandate penalty but left the tanning tax intact.
The tanning tax may face further challenges and changes in the future, depending on the political and public health climate. Some lawmakers and public health advocates may push for a higher tax rate or broader coverage of indoor tanning services, while some tanning businesses and consumers may lobby for its repeal or modification. As of now, the tanning tax remains a controversial and complex issue that reflects the trade-off between public health and revenue, and the role of government in regulating risky behaviors.
What is the Tanning Tax?
Officially enacted on July 1st of 2010, the tanning tax was implemented as a means to collect revenue for President Obama’s health care reform bill. The tanning tax is a 10% levy on all indoor tanning services—those individuals who utilize tanning beds or any service related to indoor tanning (including spray tans) are subject to this taxation. When passed, congress claimed the tanning tax will bolster government revenue by nearly $3 billion over the next decade.
Information Regarding the Tanning Tax:
Who is Responsible for Paying the Tanning Tax?
All indoor tanning service providers are responsible for collecting the tanning tax from any client or person paying for the services provided by the tanning salon or provider. The government defines a “taxable indoor tanning service” as a service who employs any electronic product designed to incorporate one or multiple ultraviolet lamps intended for the irradiation of a customer via ultraviolet radiation; the beds or providers must have wavelengths in air between 200 and 400 nanometers.
How is the Tanning Tax Reported?
The individual receiving payment for providing tanning services must report the tanning tax on Form 720, the Quarterly Federal Excise Tax Return. This form is filed quarterly. Because an IRS form is required to file the tanning tax, all indoor tanning services are required to obtain employment identification numbers. Moreover, as with any other tax return, all tanning service providers must maintain sufficient records and books demonstrating the amount of revenue obtained from supplying indoor tanning services.