Monday, July 05, 2010

Federal Tan Tax Burns Some Badly but Keeps Everybody in the Dark

From the Wall Street Journal:

When Jeanne Chamberlain turns up at work Thursday, she's going to have to grapple with America's first federal tax on tanning services, a 10% levy designed to help pay for Congress's health-care overhaul.

Ms. Chamberlain runs a video-rental store.

These would normally be unrelated facts, but 20 years ago, Ms. Chamberlain followed a number of her peers in adding tanning services to smooth out the bumps in her Rice Lake, Wis., business. Today, she wants to offer one free tan for every three rentals. Should that freebie be taxed? Ms. Chamberlain doesn't know, and even if she did, she doesn't yet have the software in place to help with the calculations.

It's a universal truth in Washington: There's no such thing as a simple tax. Free tans at video-rental stores might be taxable, but tanning services offered by health clubs mostly aren't, thanks to a late exemption. Ultraviolet tans are taxed. Spray tans aren't. Tanning salons are fretting over how to calculate unlimited memberships that combine taxed and non-taxed tans. Customers, meanwhile, have been racing to cram in tanning sessions to avoid the levy.

"It's just total confusion," said Ted Engen, president of Video Buyers Group in Coon Rapids, Minn., who has encouraged numerous video chains to add tanning services. "How come gyms got to be exempt?...Why don't we have that for the video side?"

When they completed their health bill last year, Senate Democrats searched high and low for new taxes to pay for the legislation. One idea, a tax on cosmetic surgery dubbed the “Botax,” was scotched by lobbying by the American Medical Association. Instead, lawmakers turned to the indoor tanning industry.

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