The Professional Beauty Association (PBA) has made significant progress regarding the Small Business Tax Equalization and Compliance Act; commonly known as the FICA Tip Tax Fairness Legislation. This legislation has been at the forefront of PBA’s agenda for several years and has made incredible advances in the 113th Congress with a tax reform-focused agenda, specifically in the House of Representatives Ways and Means Committee.
The professional beauty industry is the second highest tipped industry in the U.S., just behind the restaurant industry. Every salon/spa professional who receives tips is required by federal law to report that money as part of their income. Compliant beauty professionals not only report tip income, they pay the required FICA (social security and Medicare) taxes on it. Salon and spa owners pay on average $11,000 in taxes per year on employee tip income; income that the owner doesn’t benefit from.Congress has unfairly segmented the restaurant industry since 1993 allowing them a dollar-for-dollar tax credit on employee tip income.
If passed by Congress, the Tip Tax Fairness Legislation would provide salon/spa owners a dollar-for-dollar credit on FICA taxes paid on employee tip income. The passage of the FICA Tip Tax Fairness Legislation would affect salons and spas in a positive way leading to potential reinvestment back into the business. Salon owners could use the credit they receive to reinvest in employee training and education and for business expansion, resulting in a stronger industry for all segments.
House Ways and Means Committee Chairman Dave Camp (R-MI) has made it his goal to pass tax reform in the 113th Congress while establishing 11 tax reform working groups led by members of the committee. These groups are responsible for compiling feedback on their topic from interested stakeholders both in writing and face-to-face. The bipartisan leaders of the small business working group, which is where the FICA tip tax fairness legislation would fall under, are Reps. Vern Buchanan (R-FL) and Allyson Schwartz (D-PA). Both Buchanan and Schwartz’s staff, along with Ways and Means Committee staff, met with PBA in January and encouraged PBA to submit comments to the committee, which was done in March.
A study analyzing the economic impact of this legislation was conducted in the spring of this year by Alex Brill, CEO of Matrix Global Advisors in Washington DC. The findings of this study, which were very favorable, will be provided to Congressional Members as well as the Joint Committee on Taxation (JCT) staff. This document will be useful to the JCT as they develop a score for the legislation: Meeting with the JCT is the next step in the process. Senator Debbie Stabenow (D-MI), Congressman Sam Johnson (R-TX) and Congressman John Lewis (D-GA) will be the bill’s sponsors.
To get the attention this issue deserves, it is imperative that industry professionals from all segments get involved and tell decision makers what this credit can do for the industry and for small businesses across the nation. It is every professional’s responsibility to help advance the industry, increase legitimacy, and educate colleagues about the importance of compliance and advocating for tax fairness for the industry.
Next Steps… How to Get Involved
PBA believes all beauty professionals should be active and aware of the laws and regulations governing our industry. There are a number of ways to get involved and show your support of the FICA Tax Fairness Legislation:
Sign Our Letter to Congress to help make our collective voice loud and clear.
Become a PBA State Captain to help PBA advocate on behalf of the professional beauty industry.
Contact Us to learn more about how you can be an advocate for positive change.
About PBA Advocacy
The Professional Beauty Association (PBA) advocates for the rights of every member and is dedicated to tracking, introducing and responding to legislation at both the state and federal levels with potential to affect the beauty industry. Along with our Government Advocacy program, PBA provides our members with Education, Signature Events, Charitable Outreach, Research and Business Resources. Visit probeauty.org for more information.