Is the Tanning Industry About to Be Burned?

Even if you've been following the health care hubbub in Congress, you may have easily missed the news that a 10% tax on indoor tanning services is being considered.

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Even if you've been following the health care hubbub in Congress, you may have easily missed the news that a 10% tax on indoor tanning services is being considered.

The idea is that since tanning -- outdoor or in -- can lead to skin cancer, a tax on the tanning industry should be implemented, and the money, about $270 billion over the next 10 years, would help fund health insurance reform. Unless you're a regular indoor tanning customer or someone who works in the industry, the tax was probably an afterthought.

But Karen Brutsche noticed.

Brutsche is the owner of the Suntan Shop, a small chain of indoor tanning salons in Virginia, and after a conversation with her, you suddenly realize how a seemingly hastily added amendment to a government bill can really affect a business owner. Brutsche began her business in 1983 at the age of 28 after several years of managing a retail store.

"My son was a toddler, and it was hard to keep up retail management hours and a family," says Brutsche. "Around the corner from where my sister worked, a T-shirt store had added tanning. She thought it might be a good business for me to start."

That seemed to be the case. Her business flourished over the years -- not as a national household name or anything -- but when politicians praise small business owners, Brutsche seems to be the model. She managed to open not just one store, but create jobs at four locations, and she has partnered with other tanning salons in the area, so she can offer her customers who have memberships 25 places in the region to tan. When the Great Recession hit, Brutsche was hit like everyone else -- losing 30% of her business in 2009 -- but she managed to keep the company going and not lay off any employees.

"I've cut back as much as I can, but I've not let the recession hurt my staff," says Brutsche, acknowledging that she no longer can do an annual goodbye dinner to students leaving her employment for college and had to stop giving employees birthday gifts. Otherwise, "my staff has gotten their raises, I've paid my manager's health insurance, and kicked in for another staffer's health care."

But this tax could level her business in ways that the recession hasn't, says Brutsche. "If people already think your rates are high, then you add 10% ..." She trails off, then adds, "Some people will stay. They love it, and this is a lifestyle for them, but those people on the fence -- they'll be gone."

What really hurt Brutsche was the timing. She had been "sweating bullets" over a lease renewal for a year, but finally had signed with her landlord, having crunched the numbers and decided that signing the new lease would be a smart decision. That was on a Friday over the holidays; two days later, she awoke on a Sunday morning to learn about the possible indoor tanning tax.

"I was floored," says Brutsche. "I spent most of the day in tears."

Of course, you could argue that health care has to be funded, so why not tax a practice believed to be unhealthy? If that puts someone out of business like Brutsche, it's a regrettable part of the equation. But if Brutsche is right, the tax would just put a lot of tanning businesses out of business -- which would remove the funding the tax is supposed to generate. Brutsche predicts, "They will not make $270 billion from us."

She may have a point even if every tanning business managed to stay open after a 10% tax. The Big Money recently ran a story with a headline that said it all: "Projections on tanning-parlor tax appear to be far too high." If the International Smart Tan Network, a Jackson, MI-based industry group, is correct, the tax "overestimates tanning revenues by 40 to 50%."

Regardless of whether the tax is successful, Brutsche is certain that if it's implemented it will be the undoing of many tanning industry owners. "67% of tanning salons are female-owned and most are small, individually owned businesses," says Brutsche, who paints a portrait of tanning bed operators as part of the American fabric: "We live in the neighborhoods, raise our children, give to local charities and events, mentor young adults in how to hold a job, manage money, market, sell, plunge a toilet and change a vacuum cleaner bag -- life skills for college and careers. Regardless of one's knowledge or perspective of indoor tanning, it seems that Congress is voting for big business over small mom and pops."

She is referring to the fact that before the tanning tax was conceived, there was going to be a "botox" tax, a proposed 5% tax on all cosmetic procedures. Lobbyists rallied, however, on the claims that it would have discriminated against women. But, of course, this tanning tax may wind up discriminating against women business owners.

"The money won," says Brutsche. "We are such a small, fragmented industry, most of us didn't even see this coming. We don't have the political power or experience to fight -- we never have. A fragmented industry like ours has no way to fight the dermatologists, plastic surgeons, cosmetic or the drug companies."

Brutsche acknowledges that not everyone is a fan of indoor tanning. "We've been punching bags for a lot of different things," she says, "and some might be legit, and some might not."

In any case, for the critics who decry the tanning industry, the tax may be a godsend: "They've got us," she says, sounding, at least for a moment, like a business owner whose sunniest days are behind her. "This will totally cause us to go under."

Geoff Williams is a frequent contributor to Aol Small Business. He is also the co-author of the new book Living Well with Bad Credit.

Tags: tan, tanning, tax, taxes


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