Scott, Cardin Introduce Bipartisan Legislation to Create U.S. Tax Code Parity for Small Businesses

WASHINGTON – U.S. Senator Tim Scott (R-S.C.) and Senate Committee on Small Business & Entrepreneurship Chair Senator Ben Cardin (D-Md.) introduced the Small Business Tax Fairness and Compliance Simplification Act (S. 45). This legislation empowers hundreds of South Carolina beauty services providers, such as barbers, manicurists, skincare specialists, and hairstylists, by expanding the Federal Insurance Contribution Act (FICA) tax tip credit so these businesses are treated similarly to the food and beverage sector, which is also heavily tip dependent. Today, more than 80 percent of the 1.2 million establishments that provide beauty services, such as hair and nail salons, have 10 or fewer employees and the majority are owned and operated by women and minorities. 

“Entrepreneurs in the rapidly growing beauty services industry are responsible for employing more than 1.3 million hard-working Americans,” said Senator Scott. “This critical tax code modernization effort will benefit small businesses, such as salons and barbershops, simply by creating a level playing field. I am proud to introduce this bipartisan legislation to make it easier for these small business owners and their employees to create wealth and make their American Dream a reality.”

“Workers in the beauty services industry are as reliant on tips as food and beverage workers, and it is time for the tax code to catch up. I am proud to introduce this bill with Senator Scott to modernize the tax code so local barbershops, nail salons, and other beauty service establishments can grow their businesses and create jobs in Maryland and across the country,” said Senator Cardin. “These salons provide a reliable path to the middle class for women and minorities across the country and they deserve parity in our tax code.”

S. 45 has broad industry support, including the Professional Beauty Association, 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 and The Esthetics Council.

Additionally, 53 small business employers in South Carolina signed onto a letter to Congress in support of the Small Business Tax Fairness and Compliance Simplification Act.

“We are grateful for our champions in Congress and hope the small businesses in the beauty industry will finally have access to the existing 45b FICA Tax Tip credit that has been utilized by other industries since 1993,” said Myra Reddy, Government Affairs Director for Professional Beauty Association. “Small business salons and barber shops are deserving of tools for IRS compliance, a fair and level playing field, and the ability to grow their businesses while continuing to employ members of their community.”

“As a South Carolina salon owner, it’s hard to reconcile why our highly-tipped industry doesn’t have access to same tip credit as our restaurant neighbors. This credit would keep needed funds in my business and in turn be a huge benefit to my hard-working employees,” said Archie Todd Currie, 5 location Sport Clips owner, Charleston, S.C.

“The Small Business Tax Fairness and Compliance Simplification Act will offer beauty services establishments parity with the food and beverage industry on the tip credit for federal payroll taxes. This is a commonsense measure and we applaud Senators Scott and Cardin for leading the charge,” said Andrew Lautz, Director of Federal Policy, National Taxpayers Union.