Canton Salon Owner Lobbies for Small Business in Washington D.C.

A Canton business owner has taken up lobbying on behalf of the salon industry in order to promote small business growth in the industry as well as tax fairness.

Melissa Huetter, owner of Indigo Salon, Spa & Boutique, spent three days earlier this month in Washington D.C. talking to legislators from Indiana and Michigan, including Sen. Debbie Stabenow, asking that salons be added to the credit that currently exempts restaurants from having to pay taxes on their employees’ tips.

“If you come in and have a haircut with me as your stylist, you provide a payment to the company for the cost of the service,” Huetter explained. “That money also has to be taxed through FICA, as the employer has to pay out in payroll - well it gets matched by the employee and employer. Well you like and love what I’ve provided to you, so you give me a gratuity, you give me a $20 tip. My employer has to pay, I think it is 7.89 or 7.65 percent FICA tax on that gratuity that you’ve given to me. Even though my employer sees nothing of it. So I as an employer not only have to pay FICA tax on their wages, but also on their gratuity, even though it's not coming in to my business.”

FICA (Federal Insurance Contributions Act) is the percent of earned income up to an annual limit that must be paid into social security and Medicare. Both the employee and the employer make contributions. 

According to Huetter, last year, her business ran more than $125,000 in tips through her drawer and she was required to pay tax on that on top of what she already contributes.

Huetter was contacted by the Professional Beauty Association (PBA), of which she is a member, to join their government affairs group in D.C. along with four other salon owners from around the U.S. as well as industry manufacturers and distributors.

“I think that she was very pleased with the information that she had received and seemed very receptive and understanding of the nature of the bill and the necessity of how it would apply to the beauty industry,” Huetter said of Stabenow.

Huetter said being added to the tax credit bill could level the playing field for the salon industry and potentially become an income or revenue generator for the federal government.

According to Huetter, there are currently two different kinds of businesses in the industry: employee based businesses that employ their employees and pay all of their required taxes and something called booth rental. Booth rentals allow independent contractors to rent space from them and those people are responsible for reporting their own tips.

Booth rental salons make up 87 percent of salons in the industry, but their reported sales only represent 36 percent of total salon industry revenues, implying a significant under-reporting of income, according to the PBA.

“Our goal as business professionals is to level the playing field for the better good of our industry and also to be able to use the funds that we’re currently paying out in matching FICA tax to invest back into my people,” Huetter said.

Indigo Salon, Spa & Boutique opened in October 2005. Huetter was previously a massage therapist working for somebody else, and also a business coach for the salon industry.

Huetter is not done lobbying on behalf of her industry - she has plans to return to D.C. in August, this time to lobby against Obamacare and what it means for the salon industry.