'Tanning Tax' in Health Care Law Has Patrons, Industry Burning

March 25, 2010— -- Tan-a-holics, prepare to be singed. Uncle Sam will begin collecting a 10 percent tax on all indoor tanning sessions starting July 1, as part of a little-known provision in the new health care reform law.

"That's a pretty big chunk," said James Sims, 28, an avid indoor tanner in New York, who typically spends about $400 a year on a package of 10-minute tanning sessions.

"I'd never buy a plan like that now. … I'm already nickel and dimed on stuff," and with growing health worries, it's just not worth it, he told ABC News.

Sims, one of an estimated 28 million Americans to lie under indoor ultraviolet rays each year, said the so-called "tanning tax" caught him by surprise.

The measure is buried on page 902 of the 906-page health reform bill and was added in late December after lawmakers removed the "Botax" on elective cosmetic procedures, such as Botox and breast implants.

The measure also has members of the body-bronzing industry fuming.

"If you're going to tax us, you should tax the travel industry and cruise industry, which also profit from sun worshippers," said Don Feltham, chief financial officer of JK Products and Services in Jonesboro, Ark., the world's largest manufacturer of indoor tanning equipment.

Feltham said the new tax would likely hurt profits at thousands of small independent tanning salons across the country, already under pressure from the recession.

Industry leaders fear consumers may cut back on the number of sessions they buy because of the higher cost, which in turn would hinder expansion of salons and financially imperil others. It might also encourage would-be new salon entrepreneurs to stay out of the business.

"I find it absurd," said Jerry Deveney, author of "Sun Business" and longtime sales manager at JK Products, of the tax. "We don't mind paying a tax on our industry, but it should be fair across all of the cosmetic industry."

Tanning Industry Decries Lack of Notice, Public Hearing on New Tax

The tanning tax will raise an estimated $2.7 billion over 10 years to help pay for the $940 billion health care overhaul, according to the Joint Committee on Taxation.

It was added to the bill following stiff opposition by the American Academy of Cosmetic Surgery and the American Academy of Dermatologists Association to an earlier provision that would have levied a 5 percent fee on cosmetic procedures.

"It was a tax largely against women," said Dr. Mark Berman, president of AACS, of his group's opposition to the original tax on elective cosmetic procedures.

The majority of customers for cosmetic surgery are women between the ages of 35 and 50, with an average income of $55,000 a year, according to AACS.

"Cosmetic surgery is a substantial industry" critical to the economy, he said. "Breast implant procedures are an economic stimulus" because of the thousands of people involved in the process along the way.

But the indoor tanning industry contends it is economically important too -- and serves a majority female clientelle. Deveney and others say politics were at play in the singling out of tanning salons for taxation, decrying the little notice or public hearing lawmakers gave the measure before it was added to the bill.

"They slipped it in in the middle of the night three days before the [Senate] bill passed on Christmas Eve," said John Overstreet of the Indoor Tanning Association.

Overstreet and many of the group's 1,000 members have been urging Congress to eliminate the tax during the ongoing reconciliation battle in the Senate, but they're not holding out hope. Any changes to the bill at this stage would require sending it back to the House for another vote – something Democrats don't want to do.

"A lot of these people [members of Congress] probably didn't even know it was in the bill until it was too late," said Deveney.

Tanning Industry in Government Cross-Hairs

Industry groups say the government estimate of $2.7 billion in revenue over 10 years from the new tax is overstated. "It's a fantasy," said Overstreet. "We wish we made that much each year."

The average indoor tanning patron spends $75 per year on sessions at one of more than 18,000 salons across the country, according to industry statistics. Each small business brings in an average annual gross revenue of $150,000.

The industry has struggled since its heyday in the late 1980s and early 1990s after some scientific studies uncovered a link between ultraviolet rays and skin cancer. The recent recession has also hurt business, since many people see tanning as a luxury.

The U.S. Department of Health and Human Services and the World Health Organization have both declared UV radiation from the sun and other sources as cancer-causing, in the same category as tobacco smoke and asbestos.

And now the Food and Drug Administration is considering new restrictions on the indoor tanning industry.

William James, president of the AADA, which represents more than 12,000 dermatologists and is pushing greater regulation, wants the FDA to ban the use and sale of tanning beds in the U.S. outright.

"As dermatologists, we find ourselves facing what can only be called an epidemic of skin cancer in this country," he said in statement to the FDA. "The AADA strongly supports increased regulation of tanning beds that create skin damage that can dramatically increase one's risk of developing skin cancer."

Overstreet disagrees, saying UV rays from indoor tanning are no different from the outdoor sun and can actually have healthful effects, such as increasing the body's absorption of vitamin D.

More than 1 million people tan in tanning salons each day, according to the Journal of American Academy of Dermatology.