FICA Tax Fairness Legislation
Support small business in the salon/spa industry

Support the Small Business Tax Equalization and Compliance Act

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.

Job growth in the salon industry has outpaced the overall economy in eight of the past nine years; 2008 marked the industry's 16th consecutive year of job growth. Home to a large number of entry-level jobs with significant potential for training and upward mobility, the vast majority of managers and salaried employees in salons/spas started out in entry-level positions. Additionally, the salon industry is one of America's most diverse industries. According to the Bureau of Labor Statistics, the salon industry employs a higher proportion of African-Americans, Asians and women than the overall U.S. workforce. Even so, this industry is not immune to the current economic crisis. Extending the 45(b) tax credit to salons will help this vibrant and important sector.

The Small Business Tax Equalization and Compliance Act is the professional beauty industry's opportunity to gain tax fairness through a dollar-for-dollar tax credit on all FICA taxes paid on employees tips.

For more information please contact PBA's government affairs team at 800.468.2274 ext. 3451
or email Myra Irizarry.

Also, please check out these helpful resources below:

FICA One-Pager

FICA District Events Toolkit

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