New Bill Would Change Salon Tax Rules

Small business committee Sens. Mary Landrieu (D-La.) and Olympia Snowe (R-Maine) have introduced a bill that would enable the salon industry to have the same tax rules on tips paid to employees as is allowed in the restaurant industry.

“Salons are quintessential small businesses on Main Streets across America, and by extending the tip tax credit to salon owners we would be allowing them to reinvest in their businesses and employees and create new jobs,” said Snowe.  “Furthermore, since 84 percent of the workforce in the salon industry is female, this issue has special relevance for women.  Our legislation would increase compliance with payroll tax obligations and will make sure that the women who work in the salon industry earn all the Social Security retirement and disability benefits that should available to them.”

The tax credit contained in the Snowe-Landrieu bill is designed for employers to offset the matching Social Security and Medicare taxes that the salon pays on the tips that employees receive from customers. The lawmakers say the bill would help to balance IRS enforcement of laws on payroll and income taxes. 

The Small Business Tax Equalization and Compliance Act, S. 3430, is supported by the Professional Beauty Association, the largest association in the professional beauty industry.