Two members of Congress joined forces on Friday to introduce a bipartisan bill that would provide tax credits on tip income for beauty salon owners and workers.
Rep. Suzan DelBene, D-Washington, and Darin LaHood, R-Illinois jointly introduced the Small Business Simplification Act to Simplify Fairness and Compliance, which would provide tax breaks to beauty professionals and salon owners through the extension of the Federal Insurance Contribution Act (FICA). Beauty industry tax credit. The credit helps with the more accurate reporting of tips. The legislation would also allow small businesses to implement tip reporting systems.
The tip is already available for restaurants, bars and other parts of the food service industry. When the credit was made available in the food and beverage industry, it improved reporting on tip income, and its proponents argue it was time to put parity in the beauty industry. The legislation also comes at a time when small service businesses like beauty salons have been hit by the COVID-19 pandemic, forcing many of them to close or limit the number of customers in the salon, along with installing safeguards to protect staff and the customer from infections.
Tips are usually paid by a customer directly to the employee offering the service. Employers must pay FICA taxes on these tips, even though they are intended to be the sole property of the employee and the employer is often not directly involved in the tip transaction.
The beauty industry is mostly made up of small businesses, according to legislators, and the majority of beauty salons are owned by women and people of color.
“Beauty workers – mostly women of the color – rely heavily on tips to support their families,” DelBene said in a statement. “They should be given the same tax equity as those in other industries that currently have a fairer and simpler administrative system for tipped workers. This bipartisan bill would bring sensible tax breaks to beauty salons and their workers. “
Over 80 percent of the US’s 1.2 million beauty salon companies currently have fewer than 10 employees, she and her colleague found.
“In the beauty industry, the majority of businesses are owned by women and minorities, and workers are largely dependent on tips,” LaHood said in a statement. “Our non-partisan law will provide direct tax breaks to thousands of small business owners and professionals, much as similar industries have benefited from it for decades. As small businesses continue to cope with the COVID-19 pandemic, our bill will provide fairness and support to the beauty industry and its workers. “