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Support FICA Tax Tip Fairness Legislation

The FICA Tax Tip Fairness legislation would extend the current 45(b) FICA tax tip credit to salon and spa owners - a credit granted to restaurant owners in 1993 - while providing equality and increased compliance for America's small businesses in the salon and spa industry.

Like the restaurant industry, salon and spa professionals receive a significant amount of their income through tips, which by law must be reported as income. Salon and 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 and 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 U.S. economy in 16 of the last 18 years. According to the Bureau of Labor Statistics, the number of personal appearance jobs is projected to increase 13 percent between 2016 and 2026, which is nearly double the projected 7 percent growth in total U.S. employment during the same period. Even so, this industry is not immune to economic challenges. Extending the 45(b) tip tax credit to salons will help this vibrant and important sector.

FICA Tax Tip Fairness legislation is the professional beauty industry's opportunity to gain tax fairness through a dollar-for-dollar tip tax credit on all FICA taxes paid on employees' tips.

Congressional Sponsors:

Headshot of Darin LaHood

Darin LaHood (R-IL)

Headshot of Suzan DelBene

Suzan DelBene (D-WA)

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

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