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English vocal-and-synth duo Soft Cell became aware of the song through its status as a UK "Northern soul" hit. In 2010, DJ Ian "Frank" Dewhirst recalled he put "Tainted Love" on when Marc Almond, the duo's singer who worked as a cloakroom guy, came to ask if it was Jones' recording, before asking to tape it. Some time after, Soft Cell began performing the song in their live setlist, choosing it instead of Frankie Valli's "The Night". (a song they would go on to record in 2003). Eventually, a Phonogram Records A&R manager Roger Ames opted the band to record the single at a London-based Advision Studios, with producer Mike Thorne. There, Soft Cell's version was recorded in a day and a half with Almond's first vocal take being used on the record. Thorne commented that he was surprised by the choice as he had not been impressed by the 1976 version on hearing it, but was impressed by the new arrangement and Almond's sinister vocal: "You could smell the coke on that second, Northern Soul version, it was really so over-ramped and so frantic. It was good for the dance floor, but I didn't like the record...when Soft Cell performed the song I heard a very novel sound and a very nice voice, so off we went."
The Soft Cell recording features a slower tempo than Jones' version and is in the key of G rather than the original C to match Marc Almond's lower voice. Synthesizers and rhythm machines replace the original's guitars, bass, drums, and horns.
Phonogram Records chose to release "Tainted Love" in 1981 as Soft Cell's second single (their first was "Memorabilia", which did not chart). The label's representatives implied that this single would be Soft Cell's final release on Some Bizzare if it did not sell. The 12" single version (extended dance version) was a medley, transitioning to a cover of the Supremes' "Where Did Our Love Go" halfway through the song, which gives a progressive dimension to this version.
Thanks to a memorable performance on the BBC's Top of the Pops chart show, "Tainted Love" reached number one on the UK Singles Chart, and was known as the best-selling single of 1981 in the UK, until the Official Charts Company recalculated the data in 2021 (giving the title to "Don't You Want Me" by The Human League). "Tainted Love" had 1.05 million sales in the UK in 1981, with that total increasing to 1.35 million copies as of August 2017.
Buoyed by the then-dominant new wave sound of the time, "Tainted Love" became a major hit in the US during the Second British Invasion, with the song spending a then-record breaking 43 weeks on the US Billboard Hot 100. On the US chart dated January 16, 1982, the song entered the Billboard Hot 100 at number 90. It appeared to peak at number 64 and fell to number 100 on February 27. After spending a second week at number 100, it started climbing again. It took 19 weeks to crack the American Top 40 and reached number 8 during the summer of 1982.
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