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Jain N, Rademaker A, Robinson JK. Implementation of the Federal Excise Tax on Indoor Tanning Services in Illinois. Arch Dermatol. 2012;148(1):122–124. doi:10.1001/archderm.148.1.122
Author Affiliations: Departments of Dermatology (Dr Robinson and Mr Jain) and Preventive Medicine (Dr Rademaker), Biostatistics Collaboration Center, Northwestern University, Feinberg School of Medicine, Chicago, Illinois.
In July 2010, a 10% federal excise tax on the use of indoor tanning services was implemented as part of the Patient Protection and Affordable Care Act.1 The tax was intended to be borne by indoor tanning clients to discourage utilization of indoor tanning services because exposure to indoor tanning dramatically increases the risk of developing melanoma.2-5 The tax code permits tanning salon owners to absorb the tax themselves if they fail to collect it from their clients.1 Salon owners' fear of losing clients and associated profits may drive cost shifting of the tax, which would hinder attempts at achieving a reduction in consumer demand.
This study sought to determine (1) whether salon owners or clients were paying the tax; (2) what factors influenced the salon owners' decisions to pay the tax or to pass it on to clients; and (3) general attitudes regarding the tanning tax as well as opinions on legislation banning indoor tanning for all minors younger than 18 years.
A database of indoor tanning salons in Illinois was compiled by searching listings of indoor tanning businesses on an online version of the Yellow Pages. Inclusion criteria for the study were as follows: (1) subject willing to answer questions over the telephone; (2) subject 18 years old or older; (3) salon contact information searchable on the Internet; (4) salon offered UV light tanning services; (5) salon located in Illinois; (5) primary service provided by the salon was tanning, or reference to tanning was included in salon name; and (6) salon had a working telephone number. Taxation on tanning services was exempt for salons that existed as part of a fitness facility1; therefore, these salons were excluded from the study.
The location of each salon was defined as urban or rural using the Office of Management and Budget6 definition of metropolitan and nonmetropolitan counties, respectively. Median family income for the zip code of the location of the salon was obtained from US Census 20007 data. The owners or employees at indoor tanning salons in the state of Illinois reported the approximate number of clients per day (Table 1). Additional questions were asked about the tax and the potential tanning ban for minors younger than 18 years (Table 2). The institutional review board of Northwestern University deemed this study as qualifying in the exempt category.
For statistical analysis, the categorical variables (number of clients per day, median family income) were recoded to be the category midpoint or the upper or lower limit for open-ended extreme categories. Associations between (1) salons that pay the tax and (2) salons reporting fewer clients since the tax was levied were related to rural or urban status using the Fisher exact test, and to number of clients per day and median family income using the Wilcoxon rank sum test. Responses that were missing or unknown were excluded from the statistical analysis.
From the initial Yellow Pages search, 726 salons were identified as potentially meeting inclusion criteria. Of the 726 salons called, 647 met our criteria: 168 rural and 558 urban. A total of 308 salons were surveyed (48%) (Table 1). The response rates for urban and rural salons were similar at 47% and 51%, respectively.
Most salons were collecting the tax from clients (80%) (Table 2). Eighty-four percent of rural salons collected the tax from clients (63 of 75), while 79% of urban salons did so (185 of 233) (P = .11). The median number of clients per day was similar at 41 for salons that collected the tax from clients and for those paying the tax (P = .17). The median family income was similar at $51 000 for salons that collected the tax from clients and for those paying the tax (P = .45).
Twenty-four percent of rural salons (18 of 74) reported fewer clients after the tax was implemented, while 26% of urban salons did so (60 of 228) (P = .88) (Table 2). The median number of clients per day was similar at 41 for salons that reported fewer clients and for those that did not (P = .61). The median family income was similar at $51 000 for salons that reported fewer clients and for those that did not (P = .79).
This study found that the tax on indoor tanning was implemented as it was intended, with most clients paying the tax. Although it was hypothesized that variables including rural vs urban location of the salon, number of clients per day, and median family income of the zip code where the salon was located would influence whether the salon collected the tax from clients or absorbed the tax and if the salon would experience a decline in clients following implementation of the tax, no such associations were found.
The impact of the tax on consumer behavior remains unclear. Only 26% of salons surveyed reported experiencing fewer clients after implementation of the tax, and distinguishing the impact of the tax from the current economic climate as the source of decline was difficult. Furthermore, a large number of respondents (78%) reported that clients did not seem to care about the tax. Research on taxation of tobacco led to the hypothesis that, owing to the limited income of younger clients, a price increase might be a greater deterrent for younger than for older clients8; however, this may not be the case for indoor tanning, the utilization of which has steadily increased in the last 2 decades.9-11 The often female indoor tanners have fair skin and a positive attitude about looking more attractive with a tan.9,10 Study participants frequently reported that the salon's younger and first-time clients were less likely than its older clients to notice or care about the increased prices resulting from the tax. Taken as a whole, these results may indicate that the demand for indoor tanning services is somewhat inelastic and perhaps insensitive to a 10% tax level.
Further research on how the tax affects individual indoor tanning practices is necessary for future health policy development. If the survey comments about younger clients failing to be influenced by the tax accurately reflect youth tanning practices, stricter teenage bans on indoor tanning may be more effective than taxation at limiting tanning bed utilization.
Correspondence: Dr Robinson, Department of Dermatology, Northwestern University Feinberg School of Medicine, 132 E Delaware Pl, Ste 5806, Chicago, IL 60611 (firstname.lastname@example.org).
Author Contributions: All authors had full access to all of the data in the study and take responsibility for the integrity of the data and the accuracy of the data analysis. Study concept and design: Robinson. Acquisition of data: Jain. Analysis and interpretation of data: Jain, Rademaker, and Robinson. Drafting of the manuscript: Jain and Robinson. Critical revision of the manuscript for important intellectual content: Rademaker. Statistical analysis: Rademaker. Obtained funding: Robinson. Administrative, technical, and material support: Jain. Study supervision: Robinson.
Financial Disclosure: None reported.
Disclaimer: Dr Robinson is Editor of the Archives of Dermatology but was not involved in the editorial evaluation or editorial decision to accept this article for publication.