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Health care bill burns local tanning industry

March 26, 2010

The tanning salon industry took a big hit when the health care reform bill championed by President Barack Obama was passed this week.

Included in that bill is a 10-percent tax on tanning-salon sessions that salon operators and makers of  tanning products think could cause the loss of thousands of jobs nationwide.

The impact is likely going to be felt even harder in central Indiana, where dozens of tanning salons have popped up over the last two decades and where one of the nation’s largest makers of tanning beds and lotions made especially for tanning salons is headquartered.

The so-called tanning tax caught many in the industry by surprise.

“That whole tan tax thing was a fluke of a deal,” said Bill Pipp, CEO of Indianapolis-based ETS LLC, ranked by several industry groups as the top-selling manufacturer of tanning beds and lotions. “It was going to be a 5-percent tanning tax and another 5-percent on cosmetic surgery.”

But lobbyists for the American Medical Association and American Academy of Dermatology successfully lobbied to have the tax on cosmetic procedures, such as Botox treatments, facials and lifts, removed from the bill at the eleventh hour. And the tanning tax was doubled to 10 percent, Pipp said.

“It’s difficult to say how badly this will hurt the tanning industry, but it’s safe to say it will hurt,” Pipp said. “Anything that charges your customers something and delivers no additional value is going to hurt your business.”

The tanning tax takes effect July 1 and will apply to electronic products designed for tanning that use one or more ultraviolet lamps with wavelengths between 200 and 400 nanometers.

Rick Kueber, founder and CEO of Sun Tan City, which has 16 central Indiana locations, said the impact is already being felt.

“My customers are starting to become aware of this and are asking about it,” he said. “This will have a negative impact on everyone in the industry.”

Indoor tanning prices vary, but most require a monthly membership charge in the $20 to $30 range with an additional $3 to $10 per-session charge.

Kueber thinks central Indiana will be hit especially hard. He said tanning salons have become popular in the Midwest and northern states due to its climate.

“The impact here will be far greater than almost anywhere not only due to the number of salons, but because ETS is located here and they’re an industry leader in manufacturing both tanning beds and lotion,” he said.

Industry sources estimate that there are more than 1,000 people working in the tanning industry in central Indiana alone. There are 200 working in Indianapolis for ETS, Pipp said.

Kueber predicts the number of local jobs in the industry will decline as a result of the tax.

“The mom and pops will be hurt worse, with some likely going out of business,” Kueber said. “The impact will run right on up the line to the manufacturers. This measure is definitely going to cost some jobs.”

Industry sources estimate that indoor tanning has mushroomed into a $6 billion annual industry in recent years. Authors of the health care bill estimate the new tanning tax will raise $2.7 billion over the next 10 years.

Tanning industry officials, Pipp said, have been given no reason by legislators why this tax was tied into the bill. Presumably, its because many health care authorities— including the World Health Organization and American Cancer Society—consider tanning a significant cancer hazard.

“I’m not sure why they did this," Pip said. "This tax will be passed on to everyday people, while people who opt for high-end cosmetic surgery get a pass.”

Pipp scoffed at the notion that the tanning tax is a sin tax comparable to taxes on tobacco and alcohol.

“We know smoking causes cancer,” Pipp said. “There’s still a lot of science that says there’s no concrete evidence that tanning, when done properly, causes any harm.

“If tanning is harmful, shouldn’t we shut down all city-run swimming pools and the public beaches in Florida and shouldn’t we require everyone on a golf course to wear hats and sun screen.”

Pipp also points out that the tanning industry is regulated by the Food and Drug Administration, and recent studies show sun exposure promotes production of Vitamin D in the body, which is good for people. The FDA regulates tanning beds as medical devices, setting limits on how often a person can use a bed, for how long and which light bulbs can be used, Pipp said.

Kueber said this tax represents a broken promise by Obama.

“Let’s call this what it is,” Kueber said. “It’s a tax on working, white women. That’s 80 percent of our client base. President Obama pledged he wouldn’t raise taxes on the middle class, and with this, that’s what he’d done. That’s disappointing."

ETS may get a back-handed benefit from the tax.

ETS also manufactures a growing line of ultraviolet-light-free spray-tan booths and hand-applied tanning sprays, and those items are unaffected by the new tax. Some tanners may flee convential tanning methods for the newer ones to avoid the tax.

“The spray booths are one of the fastest growing parts of our industry,” Pipp said. “And this will certainly raise the awareness of sunless spray-on tanning. Still, this tax is nothing the industry would ever wish on itself.”
 

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