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Legislative bills

Bipartisan Legislation Aims to Simplify Tax Compliance for Small Beauty Businesses

Strategic Insights

— 1 min read

U.S. Senators Tim Scott (R-S.C.) and Angela Alsobrooks (D-Md.) have introduced the Small Business Tax Fairness and Compliance Simplification Act, a bipartisan legislation aimed at simplifying tax compliance for small beauty businesses, including hair stylists, barbers, and nail technicians. The bill would allow these businesses to qualify for the Section 45(B) federal tax credit, a move that could reduce their federal tax burden and enable them to hire more employees.

Key Takeaways:

  • The beauty industry is the second-largest tip-based sector, employing over 1.3 million Americans, and is currently excluded from the Section 45(B) federal tip tax credit.
  • The Small Business Tax Fairness and Compliance Simplification Act would provide a safe harbor for beauty industry small businesses to establish procedures for tipped employees to report their wages without attracting additional tax liability.
  • The bill has broad industry support, including the Professional Beauty Association, the International Spa Association, and the National Association of Barber Boards of America.
  • Derick Ausby, a small business owner in the beauty industry and State of Maryland Barber Board Member, expressed support for the bill, stating that it would provide the "tools to operate more transparently, take care of our teams, and build for the future without the fear of unexpected tax penalties."
  • The legislation aims to simplify tax compliance for small beauty businesses and provide them with a fair shot at success, as stated by Senator Scott.

Statistics:

  • The beauty industry employs over 1.3 million professionals.
  • The industry is projected to grow by close to 20% by 2030.
  • The Section 45(B) federal tip tax credit is currently only available to the restaurant industry.
  • The Small Business Tax Fairness and Compliance Simplification Act would provide a safe harbor for beauty industry small businesses with tipped employees.

Sources:

  • United States Senator for South Carolina Tim Scott
  • Angela Alsobrooks (D-Md.)
  • Megan Patton, Chair of the National Association of Women Business Owners (NAWBO) Board of Directors
  • Derick Ausby, State of Maryland Barber Board Member and Owner of the Groomatory Mens Club
  • Professional Beauty Association (PBA)
  • International Spa Association
  • National Association of Barber Boards of America
  • Professional Beauty Employment Coalition
  • National Association of Women Business Owners
  • Personal Care Products Council
  • International SalonSpa Business Network
  • Esthetics Council
  • Representatives LaHood (R-Ill.-16) and DelBene (D-Wash.-01)

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