The Professional Beauty Association's Government Affairs team is working hard to get the FICA Tax Tip Credit included in the “Year End Bill.” A big part of the process is helping Congress to understand the importance of including it. As the second-highest tipped industry behind restaurants, the salon industry should receive parity in the tax code. The restaurant industry claims a dollar-for-dollar tax tip credit on the employer portion of FICA taxes that businesses pay on tips yet the beauty industry doesn’t get the same benefit.
Hair salons, barbershops and other beauty service establishments are some of the most reliable paths to the middle class for women and minorities, employing more than two-times the national average.
The FICA Tax Tip Credit for salons is an initiative that will directly help women, minorities and small business owners while shrinking the tax gap and increasing tip reporting compliance. Extending this credit to salons is long overdue, and Congress needs to act to extend it to our industry by the end of the year.
The 45B tax credit, which provides a dollar-for-dollar credit to salons on FICA taxes paid on customer-paid tips, would allow salons to keep money in their business and extend the benefits to their employees.