A group of salon owners across the Commonwealth of Massachusetts is urging passage of federal legislation H.R. 821, which if enacted into law would extend the Internal Revenue Code 45B tax credit to include the beauty service industry as has already been done for the restaurant industry.
The effort is being spearheaded by Frank Zona, owner of Zona Salons in Norwell, MA and other South Shore locations. He is joined in the effort by Tim Fisk, owner of The Herdis Salon in Northampton; Judy Puffer of Puffer’s in Westfield; Troy Ochoa of Ochoa Salon and Spa with locations in East Longmeadow and South Hadley; Bart and Catherine Boncaldo, who operate a salon at the Center for Extended Care in Western Massachusetts, and Christine Perkins, owner of Pyara Salon in Cambridge.
The legislation has broad bi-partisan support, but these seven salon owners recognize the critical leadership role the Massachusetts delegation plays in Federal tax legislation.
The salon industry has been particularly hard hit by COVID-19. With restrictions on the number of patrons allowed in a facility at one time and the hands-on nature of the industry, salon owners are looking for tax relief to help keep their doors open and prepare them for the post-COVID era. The attempt to extend fairness to the beauty care industry was first introduced as federal legislation in 2019 as H.R. 1349, the “Small Business Tax Fairness and Compliance Simplification Act,” and re-introduced in the 117th Congress as H.R. 821. It would support salon owners by extending the tax credit for a portion of the employer-paid Social Security taxes for employee cash tips to include beauty service establishments. The law as it exists is known as the I.R.C. (Internal Revenue Code) 45B tax credit.
If enacted, salon owners will enjoy temporary tax relief similar to what the restaurant industry now has. Salon owners would receive a dollar for dollar tax credit equal to the employer’s share of FICA on employee tips.
A third generation salon owner with locations on the South Shore, Frank Zona has perhaps the most history with the issue. “I first became aware of the 45B tax credit restaurants have when a group of salons in Connecticut were audited by the IRS over the reporting of tips by their employees.” He added, “It was actually a Congresswoman from Connecticut, Nancy Johnson, who contacted our trade group and asked if the 45B would help salon employers comply with tip reporting laws. Today it’s a lifeline of liquidity for an industry that desperately needs to preserve its employment base. We’re hoping that a supportive Massachusetts delegation can get it done for us.”
Zona added, “As an example, for a salon owner with five employees, each of whom earn $10,000 in tips, that’s $50,000 in employee income that a salon owner would be required to pay FICA tax on these employee tips at the rate of 7.65%, which is $3,825 in taxes. Our proposal would keep our employees whole and provide us the credit.”
The salon owners hope that the legislation would be retroactive so that salons could go back and claim credit for one or two years prior.
Under the current provisions, the Small Business Tax Fairness and Compliance Simplification Act is limited to tips received for providing, serving or delivering food or beverages. If extended, the credit would apply to tips received in connection with providing beauty services to a customer or client if tipping employees who provide the service is customary.
In Massachusetts, last year’s bill earned the support of U.S. Representatives William Keating, Stephen Lynch, James McGovern, Lori Trahan, and former Representative Joseph Kennedy.
Zona’s support for the legislation is echoed by colleague Tim Fisk, who owns Herdis the Salon on Main Street in Northampton. He said, “Downtowns require a mix of businesses and we want to be here on the other side to bring back the daily downtown foot traffic. This credit is essential to help us rebuild.” He said, “Having the support of my Congressman, Jim McGovern, is very important.”
Judy Puffer, owner of Puffer’s in Westfield, recalls, “I remember how hard it was just trying to get set up to re-open.” Puffer says she’s managed because she was able to connect with other owners through webinars and that she’s aware that her Congressman Neal chairs the committee with jurisdiction over the tip issue. “He knows how important it is to keep people on payroll, and I want my employees to be able to rebuild earnings and savings.” She compared the challenge of running a business to the challenges representatives in government face. “We’re all working in circumstances we could never imagine. I just hope they can get this done for us.”
Margaret, Troy and Myles Ochoa own and operate Ochoa Salon and Spa with locations in East Longmeadow and South Hadley. At the heart of everything the Ochoas do is the commitment to being a great employer, and the pandemic has required every bit of that spirit. “Like most family businesses, we’re naturally optimistic. But this has been very challenging. It’s the first time in our family’s business that we’ve encountered this type of external situation. We believe employment in the industry needs help. It’s common sense to use an existing credit already in the tax code.”
Beginning in 1997 salon owners Bart and Catherine Boncaldo established a network of salons serving over 300 retirement, assisted living, memory and long-term care communities across 20 states including the Center for Extended Care in western Massachusetts. “As we serve a growing senior population, we cannot just hire anyone. Our employees must hold an occupational license in each state, have extensive training to work with residents who have Alzheimer’s, dementia, and physical challenges. Tips are a reality between the service provider and our clients and the credit would serve as a resource to prepare our employees and communities for a new reality.”
Christine Perkins, owner of Pyara Salon in Cambridge, said she believes the industry deserves the 45B credit. “We’ve done a very good job of keep everyone safe,” she said. “If you have a business that employs hands-on service providers, the business and the paycheck go hand-in-hand.” With her business operating at mandated 25% capacity, Perkins said she faces significant economic challenges. “Salons and restaurants operate on small margins,” she said. “We do it because we love it, not because we want to make a ton of money.” She added, “We are in an industry that by default has taken a huge hit but have been largely overlooked.”
Zona added, “There are additional challenges within our industry which make our need for relief even more imperative. Personal service providers are uniquely challenged because there is no practical way to provide haircuts and hair services six feet apart. Additionally, individuals within our industry must be licensed, making retention and development of employees more challenging than hiring in other Main Street industries.”
The salon owners urge anyone who is able to contact their United States Representative and urge passage of this legislation. For additional information, please visit https://www.probeauty.org/advocacy/fica
