Beauty Industry Gets a Taste of New Tax Threats

Some beauty salon owners in Rhode Island are riled up at the prospect of a new 6 percent state sales tax aimed at their services, which are currently exempt. More than 100 beauty professionals gathered Monday evening at the Paul Mitchell Skin School in Cranston to discuss the issue. The group dubs themselves “Rhode Island Salons Against Taxing Services.”

The potential tax is part of Gov. Lincoln Chafee’s proposed 2012 budget, which seeks to reconcile a “historic budget deficit” in what Chafee states is “the worst budget climate since 1933.” The governor anticipated there would be opposition, but he’s more interested in entertaining viable ideas for fixing the deficit.

Much like the federal 10 percent tan tax … If the state tax passes as part of the budget overhaul, it will be interesting to see if it produces the results forecasted by government officials. Besides traditional beauty services, weight-loss businesses and those that offer body piercing and tattooing would also be affected. State officials estimate the tax will bring in $18.5 million in its first year.

Local radio talk-show host John DePetro also attended the meeting, urging the group to continue their fight against the new tax. He intimated that existing salon customers may opt to drive to nearby businesses across state lines to avoid the tax altogether. DePetro was quick to point out what he believes to be excessive salary packages of some Rhode Island government officials as an option for trimming excess dollars.

The salon group has a rally planned on May 3.

Rhode Island’s governor isn’t the only one looking at the beauty industry for potential taxes to aid ailing state budgets. Connecticut’s Gov. Dannel Malloy is also proposing the implementation of a 6.25 percent state sales tax on hair and nail services.

While state taxes are new to some in the personal services industry, others are all-too familiar with them. Tanning salon owners in Nebraska are actively seeking an exemption from the state’s 7 percent sales tax, as customers are being taxed nearly 20 percent between that and the federal excise. However, if the state Legislature exempts the salons, they’ll be facing an estimated $1 million a year in lost revenue – an amount not easily made up elsewhere, especially when the budget is already troublesome.

In the salon owners’ defense, Nebraska Indoor Tanning Association Chairman Barton Bonn reports that more than 40 salons have closed since the 10 percent federal tax went into effect as part of the national health care reform bill.

Currently, 31 states do not collect a sales tax from indoor tanning salons.

Sources

East Greenwich Patch: Salon Owners Told To Hold Firm Against Proposed New State Tax

Brookfield Patch: Hairdressers, Barbers Fear New Tax Will Trim Their Bottom Lines

JournalStar.com: Tanning salons want tax exemption