FICA Tax Legislation
For the last 20 years, salon owners have been burdened by unequal taxation in comparison with other industries. The Professional Beauty Association is fighting hard for tax equality but needs your help! We sat down with Bridget Sharpe from PBA to figure exactly what all this tax talk means..
How will this legislation directly impact hairdressers and salon owners?
The Small Business Tax Equalization and Compliance Act, known commonly in the beauty industry as the FICA Tip Tax Fairness legislation, would extend the current 45(b) FICA tax credit to salon/spa owners – a credit granted to restaurant owners in 1993 – while providing equality and increased compliance for America’s small businesses in the salon/spa industry.
Like the restaurant industry, salon/spa professionals receive a significant amount of their income through tips, which by law must be reported as income. Salon/spa owners do NOT receive any of this tip income, yet are required to pay taxes on it: Beauty industry employers are responsible for paying the 7.65% FICA (Social Security and Medicare) taxes on all employee income, including customer-paid tips.
While the restaurant and salon/spa industries share tip reporting burdens, salon owners continue to shoulder the added burden of paying FICA taxes on the tip income of their employees. Along with ensuring tax fairness, the FICA credit could help offset administrative costs associated with ensuring employee compliance on reporting tips and allow business owners to reinvest in their business and employees.
What role does PBA play in fighting for tax equality for the pro. beauty industry?
PBA’s Government Affairs team hosts several lobby days in Washington, DC every year, pulling in members of the industry from all segments to voice their need for tax fairness. PBA’s lobbying firm sets up meetings with Congressional members from key states and key committees to discuss the FICA Tip Tax Fairness Legislation.
Members of the industry play an active role in these meetings, as Congressional members and their staff want to hear from their constituents and the issues that matter most to them. Members of the industry talk about the positive affect this legislation would have on the salon industry, and give key examples of how they can grow their small business if the FICA Tip Tax Fairness legislation became law. We also help members of the industry understand the legislation and are always available to answer questions or provide information.