By JAMES FINK
jfink@bizjournals.com | 716-541-1611

Rachel Mitchell is angry.

Very angry.

You can hear it in her voice.

Fueling the anger is a little-known part of the national health-care reform package, enacted by Congress in December, that will institute a 10 percent tax on tanning beds, sunlamps and stand-up booth operations.

The tax, which takes effect July 1, serves two purposes: It is estimated to raise $2.7 billion during the next decade, though industry officials question that figure, and it could help deter people from using tanning devices that some health-care advocates say may lead to an increase in skin cancer.

However, Mitchell - director of operations for Total Tan - said she sees it as nothing more than another tax burden on small businesses. The tax, she contends, comes at the worst possible time: The industry, which already is battling health advocates, is facing a drop in business because of the weakened national economy.

The combination of the new tax and weak economy may prove to be a critical one-two economic punch for the indoor tanning industry.

"I don't understand why the government is doing this," Mitchell said. "I feel like we are being punished and singled out."

Business at Total Tan's operations are off for economic reasons, she said, and now customers are threatening not to come back once the new tax takes hold.

"Tanning is already a luxury item, and now the government wants to make it more expensive," she said.

Her Hamburg-based company has 30 locations in New York and Pennsylvania, including 18 in Western New York. The company employs 400 people on a full- and part-time basis.

The average customer pays approximately $20 a month for a number of sessions, while solo sessions run about $7.

On the average monthly tab, the new tax may add $2.

Mitchell said the principle of the matter offends her customers and the industry at large more than the additional money they will have to pay.

"We're a small business that employs a lot of people and the government isn't treating us like one," she said.

National petition drive

Total Tan joined a nationwide effort for a petition drive to repeal the tax. The company is encouraging its customers to contact Reps. Brian Higgins, Chris Lee and Louise Slaughter, as well as Sens. Charles Schumer and Kirsten Gillibrand, to voice their opposition. Salons in other states are onboard, as well.

"I'm hoping they will hear our message," Mitchell said.

According to the Washington, D.C.-based Indoor Tanning Association, member salons have gross annual revenues ranging from $125,000 to $250,000. Once operating costs are subtracted, some salon owners find they barely clear $30,000 a year, it said.

The salon tax replaced a proposed 5 percent tax that was supposed to be added to Botox treatments and cosmetic surgery but was eliminated after lobbying by industry interests, said John Overstreet, executive director, Indoor Tanning Association.

Salons such as those operated by Mitchell typically maintain 10 tanning beds and have limited revenue sources, he said.

"I wish we were an industry that could generate $2.7 billion in new tax revenues, but that's just not a realistic expectation," he said.

On top of the new tax, salons are already collecting sales tax, and in many locales they are paying extra licensing and inspection fees.

Salon-tax supporters point to documented studies that teens and young adults who frequent indoor tanning facilities increase their risk of contracting melanoma and related diseases by 75 percent.

"The tax on indoor tanning services serves as a signal from the federal government to young people that indoor tanning is dangerous and should be avoided," said Dr. William James, president of the American Academy of Dermatology in Schaumburg, Ill.

Tanning salons are visited by 30 million U.S. citizens each year. According to the International Smart Tan Network, a poll conducted earlier this year found that only 41 percent of the salons will be able to pass the extra tax on to their customers. The remainder will try to absorb the cost.

The same poll showed that 77 percent of the salons contacted for the survey are fearful of laying off employees and possibly being forced to close their doors. In fact, the tanning association is predicting an estimated 1,000 salons might close because of the new tax, putting 9,000 people out of work nationwide.

But James counters that "reducing the use of indoor tanning beds will help reduce the cost of treating skin cancer and save money and lives in the long run."

Not surprisingly, salon operators have a different viewpoint. Mitchell and others say the tax is nothing more than another attack on small businesses.

"To say our industry is afraid would be a gross understatement," she said.