There are a host of taxes and revenue enhancers that are part of the funding package for the healthcare reforms provided by the Patient Protection and Patient Protection & Affordable Care Act (PPACA). Some are large, some are small, and some have generated great media attention. One of the funding vehicles for the PPACA that has not shared much of the limelight is the “Tanning Bed Tax.” This articles explores what it is, how it works, and how it affects healthcare reform.
Effective July 1, 2010, through the provisions of the Patient Protection & Affordable Care Act and the amendments made through the Health Care and Education Reconciliation Act of 2010, a 10 percent tax was imposed on tanning sessions at indoor tanning salons.This excise tax has been codified in the Internal Revenue Code at section 5000B. What the tax requires is that recipients of any indoor tanning service are responsible for paying an excise tax equal to 10 percent of the amount paid for the tanning services.
Background of the tax
As initially enacted by Section 9017 of the Patient Protection & Affordable Care Act, the excise tax was aimed at “Elective Cosmetic Procedures” and would have levied a five percent tax on elective surgeries such as breast augmentation, tummy tucks, Botox injections and other elective surgeries. However, after a great deal of lobbying from medical and dermatology interests, Section 9017 — derisively nicknamed the “Botax” — was nullified by Section 10907, which substituted the tax on tanning services.
The tanning bed tax was expected to generate $2.7 billion over ten years, significantly less than the $5.8 billion that the “Botax” was supposed to raise. However, the tanning industry was a weaker target and the “Snooki Tax” (nicknamed after the reality television star) replaced the “Botax.” Individuals connected to the tanning industry were infuriated, feeling singled out by a tax they argued was directed at the middle-class, and at an industry dominated by women owners who were far less able to absorb the tax than the wealthier individuals who would have been impacted by the cosmetic services tax.
What services are covered
As defined by the code, an “indoor tanning service” is a service that uses any electronic product designed to incorporate one or more ultraviolet lamps, and intended for the irradiation of an individual by ultraviolet radiation, with wavelengths in air between 200 and 400 nanometers, to induce skin tanning. However, as with most laws, there are certain important exclusions we need to discuss.
Medical exclusions: Phototherapy
The term “indoor tanning service” excludes any phototherapy service performed by a licensed medical professional, on the medical professional’s premises. These types of phototherapy services are exempt from the indoor tanning services excise tax.
Phototherapy service is defined as a service that exposes an individual to specific wavelengths of light for treatment of:
- dermatological conditions (e.g., acne, psoriasis, or eczema);
- sleep disorders;
- Seasonal Affective Disorder (SAD) or other psychiatric disorders;
- neonatal jaundice;
- wound healing; or
- other medical conditions determined by a licensed medical professional to be treatable by exposing the individual to specific wavelengths of light.
Qualified physical fitness facilities exclusion
There is also an exclusion for “Qualified Physical Fitness Facilities” (QPFF) that meet specific criteria and offer tanning as an incidental service to members without a separately identifiable fee. The membership fee to the facility is not taxable if the facility meets the definition below of a “Qualified Physical Fitness Facility.” However, if the facility does NOT qualify as a QPFF, then the membership fee IS taxable, even if the member does not utilize the tanning services.
A “qualified physical fitness facility” is a facility:
(i) in which the predominant business or activity is providing facilities, equipment and services to its members for purposes of exercise and physical fitness,
(ii) indoor tanning services is not a substantial part of its business and,
(iii) it does not offer tanning services to the public for a fee or offer different pricing options to its members based on indoor tanning services.