Paying the Price for Tax Increases

By Rebecca Pray

Two quarterly installments of the new nationwide 10 percent tax on UV tanning services have already been collected, with the third deadline just days away. As more elements of President Obama’s healthcare reforms are implemented (the tan tax was among the earliest provisions to go live), the associated costs are becoming a reality. This is especially true for the Internal Revenue Service, as it reviews its upcoming budget requirements.

According to the IRS, more than 1,000 new employees (including auditors) are needed to handle the increased workload created by healthcare reform. For the workers and accompanying workplace resources, the estimated cost to taxpayers is in excess of $359 million in fiscal year 2012 alone. The tan tax is responsible for 81 of those employees at an estimated cost of $11.5 million.

While tax law amendments are still getting the kinks worked out at the federal level, one state battle may be losing steam. Nebraska lawmakers have been debating a bill by Bellevue Sen. Abbie Cornett – one intended to alleviate the financial strain of the federal 10 percent tax on UV services.

LB252 proposes to exempt tanning salons from local and state sales taxes to the tune of 7 percent. When combined with the federal tax, Nebraska salons are losing nearly one-fifth of their gross revenue to customer taxation. Cornett’s attempt to save jobs and reduce the tax burden hasn’t been met with enthusiastic support from fellow lawmakers. Besides the state’s own budget deficit problems, the senators likely shy from supporting the exemption, as it would be difficult to excuse other business segments from future tax legislation.

When the legislative body dismissed for a long holiday weekend, observer sentiment was that Nebraska’s LB252 discussions were not looking favorable for salon owners. However, the debate is expected to continue this week.

At press time, 31 states do not charge indoor tanning professionals a state sales tax on top of the 10 percent federal excise tax for UV services.

Rebecca Pray is the Program Administrator for the National Tanning Training Institute (NTTI), which provides online tanning certification 24/7 with no membership fee.

Sources

Rockford Register Star: Obama's health care reform law requires more federal staffers

JournalStar.com: Tanning sales tax exemption could become Wyuka tax exemption