More than a year after President Obama’s health care law imposed a new tax on tanning, revenues are a bit pale.
Intended to help pay for the health care overhaul, the tax has brought in far lower revenues than expected, a government watchdog reported this week.
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After collection began in July 2010, revenues totaled $17.8 million in the first three months, far from the $50 million maximum benchmark predicted by the Congressional Joint Committee on Taxation. And while the tax was projected to generate $200 million for fiscal year 2011, it brought in just $36.6 million in the first six months.
The 10 percent tax on indoor tanning services is one of a number of new taxes and fees created by the 2010 Affordable Care Act that are expected to raise $409 billion through 2019. It applies to hair salons and movie rental outlets with tanning beds, but not gyms or health centers.
J. Russell George, the Treasury Department’s inspector general for tax administration, offered two main reasons for the lackadaiscal results: Fewer businesses than expected complied and taxpayer notices sent by the IRS were delayed and needed improvement.
Mr. George said the IRS should have done more to inform taxpayers of their filing responsibilities and bring them into compliance early on.
An average of 10,300 businesses have filed returns, even though the IRS had estimated 25,000 businesses provided indoor tanning services last year.
“If this estimate is used as a general baseline, it is apparent that compliance with the provision is much lower than expected,” the report said, although it acknowledged that identifying the actual number of businesses liable for the tax has been difficult.
