The Indoor Tanning service providers are charged with 10% of excise tax for the tanning service they offer. One of the first revenue provisions in the Affordable Care Act to be implemented was the indoor tanning services excise tax, which went into effect on July 1, 2010. The provision applies to almost all businesses that operate ultraviolet tanning lamps, which are required to collect a 10-percent tax on all sales of tanning services.

IRS Tax Form 720 – 2nd Quarter Return is Due now by July 31. eFile it at TaxExcise.com, the only website to eFile Federal Excise Tax Returns wit the IRS.

For instance, in the initial revenue estimates, the indoor tanning tax was projected to bring in $300 million in 2014. However, according to the Office of Management and Budget, the federal government only collected $92 million from the indoor tanning tax in 2014, less than half of the initial estimate.

These revenue shortfalls led the Joint Committee on Taxation in 2012 to revise its initial estimates for the revenue brought in by the indoor tanning tax over ten years, from $2.7 billion to $1.5 billion.

Another explanation is that some tanning businesses have not complied with the new tax; the Treasury Inspector General for Tax Administration reported in 2011 that fewer than 11,000 of an estimated 25,000 tanning businesses had paid the indoor tanning tax each quarter.

The indoor tanning services excise tax represents a very small portion of federal revenues, and pays for less than 0.1% of the cost of the Affordable Care Act. Yet, its lower-than-expected revenues are a reminder that taxing something usually leads to less of it, and that narrowly targeted taxes are often imprudent and distortionary.