June 18, 2025
WASHINGTON, DC – U.S. Senators Angela Alsobrooks (D-Md.) and Tim Scott (R-S.C.) introduced the Small Business Tax Fairness and Compliance Simplification Act. This legislation allows beauty industry small businesses, such as hair stylists, barbers, and nail technicians, to qualify for the Section 45(B) federal tax credit and provides a safe harbor for these businesses to establish procedures for tipped employees to better report their wages without attracting additional tax liability.
The beauty industry is the second largest tip-based sector but is excluded from the Section 45(B) federal tip tax credit. Currently, the tax credit is only available for the restaurant industry and not the beauty industry. Providing beauty industry small businesses with access to the Section 45(B) credit would allow them to hire more employees and decrease their federal tax burden.
“It is long past time that we allow small businesses in the beauty industry to qualify for this federal tax credit so they have more opportunities to grow their businesses, create more jobs, and fuel our economy. Small businesses are the backbone of Maryland, the backbone of our country, and this legislation would allow Maryland’s small businesses in the beauty industry to flourish,” said Senator Alsobrooks.
“The beauty services industry is expanding rapidly, with entrepreneurs supporting over 1.3 million hardworking Americans. This important effort to modernize the tax code ensures small businesses—like salons and barbershops—have a fair shot at success. I’m proud to lead this bipartisan legislation that will support these business owners and their employees in building wealth and achieving their own American Dream,” said Senator Scott.
“The beauty industry is powered by women-owned small businesses, employing over more than one million professionals and offering countless entry-level opportunities,” said Megan Patton, Chair of the National Association of Women Business Owners (NAWBO) Board of Directors. “This bill relieves owners of the burden of unpredictable tip taxation, paving the way for greater financial stability. With projected industry growth of close to 20% by 2030, now is the time to act,” continued Patton. “This legislation will not only support small businesses but also strengthen retirement security for spa, beauty, and barbering professionals across the country.”
“As a longtime small business owner in the beauty industry, I know firsthand how important it is to have policies that reflect the realities we face every day. The Small Business Tax Fairness and Compliance Simplification Act is a game-changer for businesses like mine. It gives us the tools to operate more transparently, take care of our teams, and build for the future without the fear of unexpected tax penalties. This kind of support can make all the difference for barbers, stylists, and salon owners working hard to stay afloat and serve their communities,” said Derick Ausby, State of Maryland Barber Board Member and Owner of the Groomatory Mens Club.
The Small Business Tax Fairness and Compliance Simplification Act has broad industry support, including the Professional Beauty Association (PBA), the International Spa Association, the National Association of Barber Boards of America, the Professional Beauty Employment Coalition, the National Association of Women Business Owners, the Personal Care Products Council, the International SalonSpa Business Network, and the Esthetics Council.
Representatives LaHood (R-Ill.-16) and DelBene (D-Wash.-01) reintroduced this bill in the House last month with bipartisan support.
Read the full text of the Small Business Tax Fairness and Compliance Simplification Act here.
###