PBA Members Advocate for Salon-Friendly Legislation

More than a dozen PBA members and executives from beauty companies across the U.S. joined forces on Capitol Hill Thursday, October 13 for the 2011 PBA Lobby Day with the goal to speak with one voice and advocate for salon-friendly legislation on the federal level. The team, which included ICA members Scott Buchanan and Oliver Steinnagel, discussed the importance of the Small Business Tax Equalization and Compliance Act, commonly known as the FICA Tip Tax Credit, for the professional beauty industry.

Every salon/spa professional, including practitioners and salon/spa owners, is required by federal law to report tips as part of their income. Compliant beauty professionals not only report tip income but also pay the required FICA (social security and Medicare) taxes on those tips. This legislation has been at the top of PBA’s political agenda for several years and many advances have been made.

"Last year our Bill was introduced in both the House and Senate and it’s all because of the hard work and dedication of industry advocates," said Myra Irizarry, PBA Director of Government Affairs. "But this is only the beginning. There is still a lot of work to be done to get this legislation passed into law."

With economic recovery following the recession at the top of most politicians’ minds, the current political landscape offers several opportunities as well as setbacks to getting the FICA Tip Tax Bill passed.

"Not getting involved is handing over a check every year to the federal government for taxes on money that you, as the employer or business owner, did not earn, do not profit from and that you can’t use to grow your business," said Serena Chreky, PBA Government Affairs advocate and owner of Andre Chreky Salon in Washington, D.C.

The professional beauty industry is the second highest tipped industry in the U.S., just behind the restaurant industry. Congress has segmented the restaurant industry by allowing them since 1993 to claim a dollar-for-dollar FICA Tip Tax Credit on employee tip income. 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.

"This issue creates a trickle-up effect," said Joe Kendy, Sen. Vice President and General Counsel for Shiseido. "Everyone is affected, from students to stylists to salon owners, from the smallest distributor to the largest manufacturer."

Compliance is a responsibility under federal law. Every working professional is required to report their full income, including tips, whether they are a business owner, employee, or licensed contractor. Failing to correctly report full income undervalues Bureau of Labor and Statics reporting on the average cosmetology salary, which in turn lowers available federal loans for cosmetology students. It also reduces the potential to receive personal loans for large items such as vehicles, homes and small business loans. Additionally, under-reporting opens the door to IRS audits that could lead to legal action and thousands of dollars in IRS fines and legal fees.

"Because my team is compliant and reports their actual income, several of them have been able to secure large loans for cars and mortgages, including a 26-year-old stylist who just purchased her first home completely on her own," explained Tiffany Conway, owner of CoCo Cheveux Salon in Portland, Maine and a PBA Government Affairs advocate.

How to Get Involved:

• Join the PBA Grassroots Movement

• Sign On to PBA’s letter to Congress

• Stay Informed. Be a PBA Government Affairs Advocate

Build your spa business with spa marketing and spa management tips • Read about professional spa products • Enter for a chance to win spa skincare, face & facial products, skin cleansers and more • Subscribe to DAYSPASubscribe to DAYSPA's eNewsletter 

Related: Storm Watch for Spas | First Quarter Forecast | Free Agents | DAYSPA Advisory Board