SUPPORT THE SMALL BUSINESS TAX FAIRNESS AND COMPLIANCE SIMPLIFICATION ACT
In early September 2018, Congressman Darin LaHood (R-IL) and Congresswoman Suzan DelBene (D-WA) introduced House Resolution (H.R.) 6736, which would extend the Federal Insurance Contribution Act (FICA) 45(b) tip tax credit to salon and small beauty businesses. This credit is currently available to the restaurant industry and would improve tip reporting, promote tax fairness, and help small businesses by recognizing that tips are a gratuity paid to salon employees by their clients. Employers should not be responsible for paying FICA taxes on tip income not paid by them to their employees.
Professional Beauty Association (PBA) Executive Director Steve Sleeper said, “In our rapidly growing beauty industry, the 45(b) tip tax credit will help salon professionals and small businesses continue to flourish. An expansion of this existing credit will improve tip reporting and promote tax fairness, which will allow our salon business owners to create new employment opportunities and reinvest in their businesses. The team at PBA, its volunteer leaders, and loyal members have worked tirelessly to be an effective advocate on this issue as well as others. It’s why you join an association, and it’s at the core of what we do to elevate, unite and serve the beauty industry and the professionals who improve people’s lives.”
The beauty industry has outpaced the overall U.S. economy in 16 of the last 18 years, and the Bureau of Labor Statistics predicts personal appearance jobs will increase 13 percent between 2016 and 2026. The beauty industry is an industry of small businesses; according to the U.S. Census Bureau, 58 percent of salon industry establishments with payroll employees have fewer than five employees, while 83 percent employ fewer than ten.
“Salon owners that employ licensed beauty professionals have an opportunity now to share with Congress the importance of tax fairness and how expanding the tip tax credit will positively impact their business,” PBA Director of Government Affairs Myra Reddy said. “Compliant salon owners are working daily to keep up with the growing number of state and federal laws that place heavy burdens on their businesses and prevent employment growth. This credit is needed for employer-based salons to thrive.”
This legislation would support America’s economy and provide salon owners relief by 1) allowing an Employer Tip Reporting Safe Harbor from an IRS audit if the employer practices proper tip reporting education, procedures, rule compliance, and employee tip record maintenance and 2) simplifying and coordinating income reporting between rental space owners and renters who provide professional beauty services.
Learn more about H.R. 6736 and take action! For additional information, contact the PBA Government Affairs team at 800.468.2274 or email Myra Reddy, PBA Director of Government Affairs at firstname.lastname@example.org.
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• FICA H.R. 6736 Summary
• FICA H.R. 6736 Full Bill
• FICA H.R. 6736 Press Release
• 2018 Economic Snapshot of the Salon Industry
• Credit for Portion of Employer Social Security Paid with Respect to Employee Cash Tips (IRC 45 B Credit) Are You Getting the Credit You Deserve?
• 45B Tip Tax Credit Q&A - Internal Revenue Bulletin: 2012-26