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Representative Darin LaHood

Representing the 18th District of Illinois

Beauty industry seeks lawmakers help to qualify for FICA Tax Tip credit

October 11, 2018
In The News

Peoria, Ill. - The beauty service industry is asking federal lawmakers for tax relief. 

Salon owners want changes to the FICA Tip Tax credit, that's currently available for restaurants, but not hair salons and spas. 

Not being part of that credit, cost four local salons, nearly $200,000 dollars in additional taxes last year.

"The impact is so large," said Paola Hinton, Five Senses owner." It's not just here for Peoria Illinois, it's for the whole nation."

"It's really about tax fairness," said Rep. Darin LaHood (R-IL). 

It's not often that you see stylists and salon owners sitting in beautician chairs, but on Wednesday, Congressman Darin LaHood listened to their grievances with the FICA Tip Tax law that currently helps tipped restaurant workers.

The law requires businesses to pay taxes on tips given to employees.  

Most restaurants take some money from servers' tips to cover this cost, but at salons, the entire tip goes to the beautician. 
That leaves the salon owner is responsible for paying the entire tax on that tip. 

That law in already in place, and all we want to do is have the beauty industry involved and included in that," said Hinton.  

The Professional Beauty Association, or PBA, has been lobbying this issue for more than a decade.
Congressman LaHood says he is a part of a bipartisan bill that will change this tax issue, which left four Central Illinois salons paying nearly $200,000 additional dollars in taxes in 2017.

"When you look at that extra money they would get back under our legislation, they talked a lot about where that would go," said LaHood. "Again, they would be reinvesting in their business. Hiring more people. Doing more education. Giving more money and bonuses back to their employees so that's real money that could be spent here locally instead of the IRS taking that."

The bill would add salon and spa businesses and employees to section 45B FICA Tip Tax credit. Right now, tipping establishments have to pay 11% on taxes and fees on all tips received. 

"The thing that's the most challenging is, we [as a business] don't get any of that gratuity, so that $20 tip, just cost the business about $2.24," said Hinton.

Salon owners say these taxes hinder their growth for expanding business in myriad ways. 

"We are all trying to play the game and right now there's just some inefficiencies making it very off balanced, and for myself, it's the difference between hiring more people, education, equipment, growing my company, and on and on and on," said Hinton. "I want to be bale to give back and to be able to help Peoria thrive."

The bill is co-sponsored by Democrat Congresswoman Suzan Delbene of Washington.  

It has been referred to the house Ways and Means Committee for review.