Obamacare Repeal and Replace: Promising News for Salons

As most of you are probably already aware, on May 4, 2017 the House of Representatives voted fairly consistently along party lines to make dramatic changes to former President Obama’s defining achievement of his eight years in office. The final vote was 217 to 213 in favor of passage of the House Republicans’ alternative to Obamacare, the American Health Care Act (AHCA). In order to move any bill out of the House of Representatives, the Republicans could only afford to lose 22 members to be able to garner a majority. In the final vote, there were 20 Republican defections to go with 193 Democrats. While this is certainly good news for our industry, this is not the end but the first step in a process that will take weeks and probably months to complete. Furthermore, if there is no consensus among Senate Republicans regarding how to proceed, the Senate may start over with a new bill. For this legislation to be enacted into law, the next step is for the Senate to pass a version of this bill. While it is possible the Senate will pass the House bill without any changes, that scenario is highly unlikely. The Senate is more closely divided along party lines (52 Republicans/48 Democrats and Independents) than the House, and right now it is impossible to predict what the Senate will do. Once the Senate passes its version, if there are any differences, the two bills have to be reconciled through a conference committee made up of both House and Senate members (including members of both parties). Ultimately, both the House and Senate have to pass the exact same version of the bill for it to become law. Of special note, the bill passed by the House does have the language that repeals all the Obamacare taxes – including the Tan Tax. The repeal is retroactive to 1/1/2017. If the repeal of the Tan Tax is enacted into law, no one knows (right now) what will happen to the money remitted to the IRS by the salons in the quarter(s) going back to 1/1/17. An excise tax (which the Tan Tax is) has never been retroactively repealed. Without a precedent for the IRS to follow, the IRS will have to determine how to handle the Tan Tax collections once the bill becomes law. It is unlikely the IRS will want to refund the money, but rather, they will try to redirect those dollars – applying it against other taxes the business will owe in 2017 (income tax, FICA). Because of the administrative burden, it is unlikely the salons will be required to refund it to their customers, but all of this is just speculation. The ball is in the Senate’s court. We will keep you up-to-date
on developments.
While this news is certainly promising, until this becomes law, salons will still be required to pay the Tan Tax.