TR 06: Barbers and Beauty Shop Operators

Booth or chair rental in a barber or beauty shop is a taxable transaction for the portion of the rental contract that is for the use of tangible personal property or fixed assets associated with that space. Commission paid to the owner of the booth or chair in addition to the rental amount is not subject to sales/use tax. If the rental contract between the owner of the shop and the independent contractor does not separately state the portion applicable to tangible personal property and fixed assets, then 50% of the total charge to the independent contractor will be subject to sales tax.

Barbers and beauty shop owners are retailers and must collect sales tax on the sale of any supplies sold to customers. They are also consumers of any supplies used in providing their services and therefore, must pay sales tax or remit use tax on these supplies. These supplies include, but are not limited to, shampoo, conditioner, tints, colors, combs, brushes, hair dryers and curling irons.

Examples:

1. A contract between a beauty shop owner and an independent contractor states that the independent contractor will pay the owner $250 for booth rental and 20% of the income derived from use of the space. The $250 is taxable and the 20% would be exempt from sales tax. If the contract stated a flat $400 for use of the space, $200 would be subject to sales tax.
   
   
2. A beauty shop owner orders 2 cases of shampoo, one for use in the shop and the other for resale to customers. The owner must pay tax on the case purchased for use in the shop. If tax is not charged, the owner must report use tax. The owner must also collect tax on the sale of the shampoo to customers.
   
   

Last Updated on Wednesday, 11 July 2012 12:22