Tanning Tax Not So Hot

June 20, 2013

Nicole “Snooki” Polizzi from MTV’s Jersey Shore is not normally associated with politics, but she famously attacked the new federal tanning tax, which Congress passed to help fund Obamacare. Snooki felt that the 10 percent tax on all indoor tanning salons was unfair. She said, “I really don’t see the reason why there would be a tax on tanning . . . People go tanning because they like to feel tan. You feel more sexy when you’re tan and I don’t understand why you would tax on that, because you’re making yourself feel more happy about yourself.”

Don’t look now, Snooki, but the IRS just published the tax’s final regulations. They estimate that it will raise $2.7 billion over 10 years to offset the costs of the healthcare plan.

Proponents of the tax cite health concerns as the main reason for the tax. Since tanning is linked with higher chances of cancer, instituting a tax should deter tanning and, thus, lower the probability of cancer. Preventing the chance of cancer could also prevent the spillover of healthcare costs to people who do not tan.

One argument against the tanning tax comes from small businesses. With federal taxes added onto the state and local taxes on tanning salons, it could seriously harm the tanning industry. In Nebraska, tanning services could face up to a 17 percent tax.

Others object that the tax deviates from the principles of sound tax policy. The federal tax on tanning has a very small base, a high rate, and singles out one product for special treatment. At the state and local level, tanning is part of a broader sales and use tax base. For example, Minnesota, Iowa, New Jersey, South Dakota, New York City, Washington don’t single out tanning for a specific tax, but do include it in their sales tax base.

Many are also concerned with the “loopholes” of the tanning tax. According to the IRS regulations, the tanning tax exempts purchases made at Qualified Physical Fitness Facilities, including gyms with tanning beds. The regulation also exempts spray-on tanning services, topical creams and lotions, and phototherapy services performed by a licensed medical professional. This gives an unfair disadvantage to tanning salons while favoring their competitors.

See our April Fool’s Day post on tanning taxes here.

Follow Noah on Twitter @NoahGlyn.


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