Salons, Barbers & Spas

Every chair is a classification decision.

A 30-minute consultation is $150, credited against your first engagement if you go ahead with us.

A salon owner makes two decisions that drive almost everything on the tax return, and usually makes both without advice. The first is whether the person in the chair is an employee or a booth renter. The second is what happens to tips. Get either wrong and the exposure compounds quietly, quarter after quarter, until a notice arrives.

Booth rent or employee — the test is control, not the label

Calling someone a booth renter does not make them one. The classification turns on the common-law control test: who sets the hours, who sets the prices, who supplies the product, who owns the client relationship, who can work elsewhere (IRS: Independent contractor or employee?). A stylist who pays you rent but works your schedule at your prices with your product is an employee in substance, whatever the agreement says.

Getting it right in both directions matters. Genuine booth renters mean rental income to you and 1099 obligations depending on what you are paying for, and no payroll tax on their earnings. Misclassified employees mean unpaid FICA, unpaid unemployment, and penalties that reach back. We review the arrangements you actually have, tell you which ones will hold up, and put the paperwork behind the ones that will.

The tip credit that just became yours

This is the item most salon owners do not know about yet. The section 45B credit refunds the employer's share of FICA — 7.65% — on qualifying employee tips above an applicable minimum-wage threshold, and until recently it was available only to food and beverage establishments. The One Big Beautiful Bill Act extended it to businesses where tipping is customary, which includes salons, barbershops and spas, for tax years beginning in 2025. It is claimed on Form 8846 (IRS: About Form 8846).

Two conditions matter. The credit only exists on tips your employees actually reported, and only for employees — not booth renters (IRS: Tip recordkeeping and reporting). That makes accurate tip reporting worth real money rather than just being a compliance chore, and it makes the classification question above a cash question as well as a risk question.

Two businesses under one roof

You sell services and you sell product, and they behave differently. Back bar supplies consumed in performing a service are an operating expense; retail inventory sitting on the shelf is not deductible until it is sold. We separate the two in the books so your service margin and your retail margin are each visible, and so inventory is stated correctly at year end. Sales tax on retail product is a state matter and we scope it per engagement rather than assuming it away.

Bookings, cash, and the POS

We reconcile your booking and payment system to the bank rather than trusting either in isolation — card settlements net of processor fees, cash deposits, gift certificates carried as a liability until redeemed, and prepaid packages recognized as they are used. Owner draws get separated from business spending, which is what makes the return defensible and the books usable for a lender.

Common questions

My stylists pay booth rent. Are they contractors?

Maybe, and the rent is not what decides it. The question is who controls the work: the hours, the prices, the product, the client relationship, and whether they can work elsewhere. Tell us how the chair actually operates and we will tell you plainly whether the arrangement holds up — and if it does not, what fixing it costs against what leaving it costs.

Do I qualify for the tip credit?

If you have employees who report tips, quite possibly, for tax years beginning in 2025. It does not apply to booth renters, and it only reaches tips that were actually reported, so it turns on your classification and your tip records rather than on your revenue. Both are things we can fix going forward even if last year was messy.

Do I have to charge sales tax on the products I sell?

Almost certainly somewhere, and the answer is set by your state rather than by the federal code. Retail product and services are often treated differently by the same state. We scope it per engagement rather than assuming it away, because getting it wrong on retail is a small error repeated every day.

This page is about whether we recognize your situation. The classification factors, the tip-reporting mechanics and the credit calculation are worked through against your own arrangements in an engagement, not from a web page — and the two decisions at the top of this page are worth getting right before the next quarter rather than after it.