U.S. Reps. Darin LaHood (R-IL) and Suzan DelBene (D-WA) introduced a bill this week that would extend the Federal Insurance Contribution Act (FICA) tax tip credit to salon and beauty service establishments.
The tax tip credit is currently only available to the food service industry, but tipping is also customary in beauty salons. Their bill, the Small Business Tax Fairness and Compliance Simplification Act (H.R. 45), would rectify that.
“Our bipartisan Small Business Tax Fairness and Compliance Simplification Act will level the playing field and provide direct relief to millions of salon and beauty care professionals who rely on tips,” LaHood said. “I am proud to continue to champion this bill with Congresswoman DelBene, to strengthen small businesses, improve reporting of tip income, and help businesses navigate IRS administrative rules and procedures.”
More than 80 percent of the 1.2 million beauty industry businesses currently employ less than 10 employees. They are predominantly owned and operated by women and minorities. The credit acts as a reimbursement for the costs employers incur in accounting for tip income.
Extending the FICA tax tip credit will reduce tax burdens and improve reporting of tip income, as it has done for the food and beverage industry.
“The beauty industry is largely comprised of small businesses, predominantly owned by women and women of color, with workers who rely heavily on tips. Unfortunately, our tax code does not treat the salon industry the same as other tipped industries that enjoy a fairer and simpler tax administration,” DelBene said. “Extending this tax relief to the beauty industry would provide parity with other industries, like food service, that already take advantage of this credit. This bipartisan legislation would bring commonsense tax relief to salons and their workers, support women-owned businesses, and expand our middle class.”
LaHood and DelBene are members of the House Ways and Means Committee and introduced this bill in the last Congress.
“Extending the FICA Tip Tax credit will allow me to expand benefits for my staff, offset rising costs, and strengthen my business operation. This legislation will bring parity to the beauty industry in relation to the restaurant industry, which has had this tax credit for the last 30 years, and finally level the playing for myself and thousands of other small business owners around the country,” Paola Hinton, owner of Five Senses Spa, Salon & Barbershop in Peoria, Ill., said.