S 45 — Small Business Tax Fairness and Compliance Simplification Act

Summary

Small Business Tax Fairness and Compliance Simplification Act This bill expands the tax credit for a portion of the employer-paid Social Security taxes for employee cash tips to include beauty service establishments. (Under current law, the credit is limited to tips received for providing, serving, or delivering food or beverages.) The credit applies to tips received in connection with providing beauty services to a customer or client if tipping employees who provide the service is customary. Beauty services include barbering and hair care, nail care, esthetics, and body and spa treatments. The bill also (1) establishes an employer tip reporting safe harbor for beauty service establishments, and (2) specifies reporting requirements for income received from renting space to individuals who provide beauty services. The employer tip reporting safe harbor for beauty service establishments provides an exemption from certain Internal Revenue Service tip examinations for employers who meet certain requirements for educational programs, reporting procedures, compliance with tax law, and recordkeeping. The Government Accountability Office must study and report on the impact of the extension of the employer social security tax credit on employers and employees.

Bill Text

• Introduced Introduced in Senate Current html January 24, 2023

AI-generated reading aid from the bill's amendatory text — verify against the official bill.

The bill extends tax credits and reporting requirements to beauty service establishments and simplifies compliance for employers in the beauty service industry.

• Section 45B(b)(2)

  In applying paragraph (1) there shall be taken into account only tips received from customers or clients in connection with the following services: (A) The providing, delivering, or serving of food or beverages for consumption, if the tipping of employees delivering or serving food or beverages by customers is customary. → In applying paragraph (1) there shall be taken into account only tips received from customers or clients in connection with the following services: (A) The providing, delivering, or serving of food or beverages for consumption, if the tipping of employees delivering or serving food or beverages by customers is customary. (B) The providing of beauty services to a customer or client if the tipping of employees providing such services is customary.

  This change allows beauty service providers to be included in tip credit eligibility.

• Section 45B

  For purposes of this section, the term `beauty service' means any of the following: (1) Barbering and hair care. (2) Nail care. (3) Esthetics. (4) Body and spa treatments.

  This definition clarifies which services qualify as beauty services for tax purposes.

• Section 45B(b)(1)(B)

  as in effect on January 1, 2007, and → , and in the case of food or beverage establishments, as in effect on January 1, 2007

  This change modifies the reference for determining minimum wage to include a specific date for food and beverage establishments.

• Section 3121(q)

  so much as precedes "of this chapter" → (q) Tips Included for Both Employee and Employer Taxes.-- (1) In general.--For purposes

  This change rephrases the beginning of the section to clarify the context concerning tips as remuneration.

• Section 3121(q)

  (2) Tip program safe harbor.--In the case of an employer who employs one or more employees who receive tips in the course of such employment which are attributable to the performance of beauty services (as such term is defined in section 45B) are considered remuneration for such employment under this section, no IRS tip examination with respect to such employer shall be initiated (except in the case of a tip examination of a current or former employee) if the employer-- (A) establishes an educational program regarding applicable laws relating to proper reporting of tips received by employees for-- (i) new employees, which shall include both verbal explanation and written materials, and (ii) existing employees, which shall be conducted quarterly, (B) establishes procedures for tipped employees to provide monthly reporting of cash and charged services and related tip income of at least $20 under section 6053(a), (C) complies with all applicable Federal tax law requirements applicable to employers for purposes of filing returns, and collection and payment of taxes imposed, with respect to tip income received by employees, and (D) maintains employee records related to-- (i) contact information for such employees, and (ii) gross receipts from any services subject to tipping, and charge receipts for such services, for a period of not less than 4 calendar years after the calendar year to which the records relate.

  This introduces a safe harbor provision for employers in the beauty service industry regarding tip reporting, allowing them to avoid IRS examinations if they meet specific educational and reporting requirements.

• Any person who, in the course of a trade or business and for any calendar year, receives rental payments from two or more individuals providing beauty services (as defined in section 45B(e)) aggregating $600 or more each for the lease of space to provide such services to third-party patrons shall make the return described in subsection (b)

  This establishes a reporting requirement for rental income received from beauty service providers to ensure compliance.

• Subpart B of part III of subchapter A of chapter 61

  Sec. 6050AA. Returns relating to income from certain rentals of space in the beauty service industry.

  This adds a new section to the tax code specifically addressing reporting for income from rentals in the beauty service industry.

Action History

1. January 24, 2023

   Introduced in Senate

2. January 24, 2023

   Read twice and referred to the Committee on Finance.

Sponsors

• Benjamin L. Cardin · Primary

Subjects