INDUSTRY | Tax Fairness Act

Congresswoman Nancy Johnson from Connecticut leads legislative initiative to support the professional salon industry.

Recognizing the significant costs salon and spa employers incur in complying with Federal tax laws on tip income, Rep Johnson has introduced HR1345 in the 109th Congress.

The legislation extends an existing tax credit to salons, providing them with a little extra money to pay for health insurance and other benefits for their employees.

Rep Johnson has met with salon owners on several occasions in the district to learn about their concerns as small business owners.  Hearing their experiences with the IRS focusing on tip income, she took the solution to a national legislative level.

Through his company Bright Futures, George Christman interacts with hundreds of salons in Connecticut and around the country and has been the district link on the issue, providing Rep Johnson with feedback from salon owners and employees from the district.

Please support Nancy Johnson.  Visit her at www.johnsonforcongress.com.  Show support for a member of Congress who recognizes the professional salon community for its role as an important member of the small business community.

Through the efforts of George Christman for the past several years, and his association with TSA, The Salon Association, The Tax Fairness Act may soon become a reality. For those not familiar with this legislation and how it affects their business, please review the following information.

An Overview of HR 2133-S879
The Cosmetology Tax Fairness and Compliance Act of 2002 is before Congress and your support is needed to get this bill passed. How does this legislation benefit the industry? The answer is threefold.

Tax Credits for Salon Owners
First, it gives us a tax credit for the FICA tax we pay on our employees’ tips. The IRS has targeted the salon industry for compliance, and we must encourage tip reporting by our employees. Then, we, as salon owners, are required to pay FICA (Social Security and Medicare) taxes on those tips. If this legislation is passed, we will receive a tax credit – similar to what the restaurant industry receives – against those FICA taxes.

That means more cash for our businesses. When salons flourish, the trickle up factor helps the entire industry. We can expand, remodel, add services and product lines. We can service our clients better, pay our team better and buy more products and equipment from our distributors and manufacturers.

Level the Playing field
Second, it helps ensure fair competition. The “compliance” section of the bill requires salon owners (and others who lease space to hairstylists and other cosmetologists) to provide a standard IRS form to all stylists and other cosmetologists performing services in the facility, regardless of whether they are employees, booth renters or other independent contractors and to provide the IRS with their names and tax identification numbers and social security numbers. It also requires owners to provide a copy of an IRS publication describing their tax obligations. Extra paperwork will not be required by the stylist or cosmetologist. Most other industries are already required to file such paperwork.

The nation’s labor shortage has hit the salon industry hard. Salons are more popular than ever, and we can’t keep up with the demand because of a lack of licensed cosmetologists. What’s worse is that we are faced with unfair competition from illegal or unlicensed operators that lure our stylists away by promising they won’t have to pay taxes.

We believe legitimate competition is vital and healthy for our industry. What’s not healthy is unfair competition – from those who pay under the table or do not pay taxes at all.

Attract More Cosmetologists
Third, our beauty schools face many obstacles to attracting people. Because many in our industry do not pay taxes, The Bureau of Labor Statistics shows that cosmetologists earn artificially low wages. As a result, the profession is not considered viable, and the government discourages people from entering the field. We know that many cosmetologists earn a wonderful living. The government will acknowledge that only when their numbers say so.

We must make our industry competitive, healthy and attractive to talented workers. We urge you to contact us for more information about this issue.