After 15 years of agitating Congress, beauty and grooming businesses with tipped employees are now eligible for a significant tax credit long available to bars and restaurants.
“Beauty professionals finally have the tax fairness they deserve,” says the Professional Beauty Association, which has championed the 45B FICA Tax Tip Credit update for the past 15 years.
“This is a victory for small businesses. This is a win for women and diverse entrepreneurs.”
U.S. President Donald Trump signed the bipartisan legislation into federal law on July 4 as part of the U.S. budget mega-bill dubbed the “Big Beautiful Bill.”
The 45B victory didn’t come without one final nail-biter: in mid-June, the specific legislation that included salons, spas, and barbershops was removed from the budget bill’s Senate version.
Along with supporters from both sides of the aisle, the industry responded with enough backlash to get 45B added back 11 days later.
“This moment is the result of an extraordinary, united push over the past few years,” PBA said as it congratulated industry professionals for making their voices heard during what seemed like an endless uphill climb.
PBA plans to make resources available soon to beauty professionals about the new law — which is permanent — and about “No Tax on Tips,” the separate provision of the budget bill that lets workers, including beauty professionals, deduct up to $25K in tips. That law potentially expires in 2028.
The Long Road to Tax Fairness
In 1993, the 45B FICA Tax Tip Credit was extended to food and beverage businesses with tipped employees. Businesses were required to withhold and “match” taxes on staff tips, but the Clinton-era budget bill made the employer’s match refundable to bars and restaurants, dollar for dollar.
The Professional Beauty Association began lobbying in 2010 for that same tax credit to extend to salons, spas, and barbershops as well.
In an Instagram Live discussing the new tax law, PBA President Leslie Perry thanked the two women who led the years-long, protracted lobbying efforts for 45B: Myra Reddy and Kati Rapoza, first- and second-in-command of the PBA’s Government Affairs Team.
“Thank you for your literally tireless efforts,” Perry told them. “We are so fortunate in our industry to have two of the most dynamic, smart, hard-working, amazing women — working moms — who get it done. And you do it all because you love what you do. You love the industry.”
Perry saluted the International Salon and Spa Business Network for that organization's efforts as well.
Reddy had said last year that if 45B were to be left out of the 2025 federal budget, its supporters could kiss the opportunity goodbye.
“There’s nowhere for it to go until the next tax bill,” Reddy told American Salon at the time, “and that could take years. One way or another, (the fight) is coming to an end.”