Salons and barbershops across the country are struggling financially, and given the last three months, many will not make it through this crisis. Sign on to the letter below to ask Congress to include a retroactive FICA tax tip credit for salons in the next stimulus package because every little bit helps. Salons and shops have been the hardest hit by this pandemic and need funds now to ensure they will remain in business.
The professional beauty industry has been overlooked and significantly impacted by the economic crisis resulting from the coronavirus pandemic. Between February and April 2020, the number of jobs at employment-based salons plunged by 84 percent, according to data from the Bureau of Labor Statistics. Only 93,000 people were on payroll at employment-based salons in April – down from 569,000 in February. This represents the fewest number of salon jobs in well over five decades.
Eighty-three percent of salon businesses have fewer than 10 employees. These small businesses, owned 60% by women and 34% by minorities, employed a workforce of roughly 1.3 million professionals. Salons are the hardest hit, and last to reopen. Many salons will never reopen.
A solution to provide funding to salons now is to allow access to an existing credit in the IRS tax code, the 45B FICA Tax Tip Credit. Congress passed the credit in 1993 allowing restaurants to claim a dollar for dollar tax tip credit on the employer portion of FICA taxes paid on tips. A temporary retroactive application of this credit would provide immediate liquidity to struggling salons across our country.
Congressman Darin LaHood shared his concerns for the professional beauty industry during the House Ways and Means Select Revenue Measures Subcommittee hearing on Tax Relief to Support Workers and Families during the COVID-19 recession. Congressman LaHood and Congresswoman DelBene introduced H.R.1349, The Small Business Tax Fairness and Compliance Act which includes the 45B FICA Tax Tip Credit proposal. This bipartisan, bicameral legislation in the Senate, S.2634, is championed by Senator Ben Cardin and Senator Rob Portman.
A recent Bloomberg Tax article, “Struggling Salons Seek Tax Parity with Pandemic-Hit Restaurants” shared the following regarding salons:
They can’t offer takeout and delivery like restaurants, must invest in protective equipment, and have to operate at limited capacity. Some standard services, such as facials and beard trims, can’t be provided. And the rules keep changing. The industry, which has a substantial percentage of women- and minority-owned businesses, is now turning to Congress (…).
POLITICO’S Morning Tax explained, “…hoping for help from the next Covid-19 measure — barbershops and beauty salons, lots of which are owned by minorities and/or women and can’t offer takeout like restaurants. The Professional Beauty Association is seeking the same kind of [reimbursement] currently available to restaurants, which can get a tax credit for payroll taxes paid on customer tips (…).
Providing this temporary retroactive existing 45B FICA Tax Tip Credit to salon business owners is an existing way to ensure that small businesses salons make it through this unprecedented emergency. As states are now reconsidering another temporary shutdown, small business salons are in desperate need of help. Please include the 45B FICA Tax Tip provision in the next COVID Relief package.