The following was released from U.S. Senator Olympia Snowe’s Press Office 5/25/2011.

Washington, D.C. – U.S. Senator Olympia J. Snowe (R-Maine) today welcomed Tiffany Conway, owner of CoCo Cheveux Salon in South Portland, to the nation’s capitol to discuss key tax priorities affecting her business. To address an inequity in the current tax code between cosmetology industry and other tip-dependent businesses, Santor Snowe recently introduced the Small Business Tax Equilazation and Compliance Act, which would provide the cosmetology industry with the same tip tax credit currently available to restaurants.

“Tiffany’s situation is a prime example of where a small business owner is suffering from an inequity built into our tax code. People in tip-dependent business operations deserve fair treatment and I am committed to ensuring our tax code is competitive and allows small businesses to grow and prosper,” said Senator Snowe, the Ranking Member of the Senate Committee on Small Business and Entrepreneurship and a senior member of the Senate Finance Committee, which has jurisdiction over U.S. tax policy. “Extending the tip tax credit to salon and barber shop professionals, as my legislation would do, will protect them from unfair tax wages and allow them to reinvest in their businesses, create jobs, and provide for new economic opportunities in their local communities.”

Background: According to the U.S. Census Bureau, 98 percent of cosmetolgy industry firms have only one establishment: 92 percent of salon establishments have sales less than $500,000: and 82 percent of salon establishments have fewer than 10 employees. Currently, these employees receive gratuities from customers rather than from the business in the form of wages, while their employers generally remain liable for reporting and paying any Social Security and Medicare taxes on those gratuities. In the restaurant industry, there is a corresponding tax credit to offset these liabilities, since the business was not the one that paid the gratuities. Thus, this bill would protect salon and barber shop owners from unnecessary tax and reporting burdens, just as restaurant owners are currently protected.

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