ARE YOU A BOOTH RENTER OR EMPLOYEE?
There seems to be an awful lot of "Independent Contractors" in the beauty industry. More commonly known
as "Booth Renters." However, the IRS says that very few people working as hair stylists or nail technicians
actually qualify as Independent Contractors, according to their definitions.
So lets be clear. An employee is not an Independent Contractor -- and a Booth Renter is not an Independent
contractor. Even though a Booth Renter pays taxes in a manner similar to an Independent Contractor, the
source of their income is very dissimilar. In addition, their obligations to the IRS for reporting income and
expenses is quite different.
As a matter-of-fact, the Employee has more in common with an Independent Contractor than with a Booth
Renter. Specifically concerning the Form 1099 Report of Income. Employers give the form 1099 to Employees
and to Independent Contractors. Booth Renters give the Form 1099 to those they are leasing
business space from.
Employers withhold taxes, provide a paycheck and also pay Employer taxes. As an Independent Contractor,
those who employed you, will pay your bill or invoice in full. You are responsible for paying your taxes.
As a Booth Renter, you pay rent to who you rent business space from. The rest of the money you make is yours.
It is solely your reponsibility to pay taxes on it.
So remember, it is the IRS who can decide if you are an independent contractor or not. The same folks who can
audit and fine you thousands of dollars! So if you really want to know whether or not you are an Independent
Contractor, find out what the IRS has to say about it.
What Is An Independent Contractor?
An independent contractor is not someone who comes to work at the salon day after day,
week after week, with a split commission pay plan between themselves and the salon owner. That sounds
like an Employee, someone who is supposed to be on the payroll. You can be paid by the hour or you can be
paid a commission and certain aspects of the minimum wage laws also would apply to you. Your Employer
tells you when to come to work and when to go home. Your Clients are not really your clients, they
are the Clients of the Salon Owner and you should receive a paycheck. Your paycheck should have deductions
for Federal, State and Local taxes and deductions for Medicaid, Social Security, etc.
In addition, the Salon Owner as Employer, must pay their share of your Social Security and your Workers
Compensation. And because the Employer pays you, at the end of the year the Employer is supposed to
provide you with the Form 1099, which reports money paid to you and taxes deducted on your behalf.
Also, if you are an Independent Contractor, the Employer also is supposed to provide you with a 1099 Income
Form, reporting money paid to you. But no responsibility for paying taxes. Do you see why some Salon Owners
like paying you as if you were an Independent Contractor? When really, you are working as an Employee. They
like not having to pay their share of ALL those Employee taxes.
Most people in the Beauty Industry who think they are an Independent Contractors, are actually Booth Renters.
But as far as the IRS is concerned, you cannot be part Booth Renter and part Employee. For tax purposes you
have to do everything expected of a Booth Renter, which would then place you in the Independent Business
Person's tax classification.
A Booth Renter leases space within the Salon. Space in which to operate their own business for their own benefit.
Not to work under the control of the Salon Owner for the benefit of the Salon Owner. You pay a specified
rent, not a commission or a split of your income. You collect and control the money and give the Salon Owner a
check for the rent amount. You must have your own key to the Business as proof to the IRS that you can
enter and leave as you wish and therefore determine your own working hours.
So you see, if you are in a work situation where you are called an "Independent Contractor" or you are a Booth Renter,
or you are a "Booth Renter" that is being called an "Independent Contractor," and they don't allow you to have a key,
or they can tell you what time to come to work in the morning, or the Clients pay a central cashier or cash register
instead of paying you, or they tell you which products you are going to use, or you're being paid some sort of split
commission... well... maybe everything is just fine.
Unless the IRS comes knocking on the door. Then you're going to have to explain why you are NOT the
Employee the IRS thinks you are.
And about the Form 1099. At the end of the year, a Booth Renter is supposed to provide a Form 1099 to the Salon
Owner. Showing the untaxed income that YOU provided to the Salon Owner. And as for your own tax return,
you file as the Operator, as an Independent Business.
Booth Renters should have a signed Booth Rental Agreement. For the protection of the Salon Owner and the Booth
For a lot of reasons! The main one being, IF the IRS ever knocks on your door or the door of the Salon
Owner, it is proof of who is supposed to have been paying all those taxes!!!
So... As a Booth Renter, you lease a work space for a set period of time, at a specified price that does not vary as
income varies. And you work as an Independent Business Person.
Everyone involved in Booth Rental NEEDS a signed Booth Rental Agreement. You can download a sample Booth Rental Agreement right now that you can print and use!