By Aaron Allen
The Seattle Medium
Last week, a controversial bill, SB 5326, was withdrawn from the State Senate Labor and Commerce committee by Senator Karen Keiser. According to Keiser, prime sponsor of the bill, the purpose was to bring forth the question of tax fairness in the beauty salon industry—for both the salon owners and stylist and whether two individuals performing equal work are getting equal treatment.
According to Senator Keiser’s office, a Spokane woman who owns a small salon contacted the Keiser to consider what she called the unfair treatment of salon owners who employ cosmetologists. After speaking with her own hair stylist, a salon owner herself, Keiser realized that there were some problems in the industry including proper treatment of independent contractors and discrepancies in tax liabilities.
“I spoke to my own hair salon owner who agreed there was a big problem in the industry with some salon owners treating booth renters more like employees than true independent contractors,” Senator Keiser states.
In 1991, the state Legislature passed a law stating that stylist, manicurist and barbers were independent contractor giving them autonomy as business owners for the purpose of state B&O tax.
Keiser says that the current law creates an unequal tax burden between salons that have booth renters versus salons that employ cosmetologists.
In a press release announcing a public hearing on the bill, Keiser offered the following scenario that illustrated the disparity in tax treatment:
Consider two salons: One is a salon owner who employs six cosmetologists, each of whom generates $50,000 a year in services and product sales. The salon owner has revenues of $300,000 a year and is subject to our gross receipts tax, known as the B & O tax. The salon owner must pay B & O taxes on those $300,000 dollars in revenues.
Or take the second case: Another salon owner rents six booths to six cosmetologists who each generate $50,000 a year. Each individual booth renter is separately reporting gross receipts that fall below the minimum tax rate of $56,000 a year, that is our state’s small business B & O tax exemption.
So not one penny of B & O tax is generated from the same $300,000 in gross receipts from the same activities.
Keiser in an earnest effort to level the playing field as well as provide stylist with needed resources like unemployment and industry insurances introduced SB 5326 to address these issues. However, the bill drew sharp opposition from many in the industry.
Ed Prince the executive director for the Washington State Commission of African American Affairs, says “benefits are important to have but at what expense?”
“Do we punish small business owners such as stylist and barbers or “Booth Renters” by placing financial burdens through more taxes? On the other hand it is important that people have benefit,” adds Prince, who says the commission has not taken an official position on the bill.
Rayna Fulmer, owner of Rayna’s Hair Studio in Kent, believes the bill is an attack on both aspects the business.
“This bill sets up small business owners to fail,” says Fulmer. “It puts an undo burden on stylist as these taxes cannot be written off this is an attack on the salon business structure.”
“From my perspective as having been a booth renter and now a salon owner our government should be focused more on the killing of unarmed Black people not on booth renters and small salon owners who are trying to provide for their families,” added Fulmer.
Entrepreneurship is not an easy road and small businesses such as booth renters and salon owners must navigate their finances as responsible as possible in order to survive and provide for their families. Booth renters as independent contractors must balance their budgets as they work to produce the clientele to be successful.
Many have found that giving up their autonomy is not the answer as this bill suggests they do in order to reap the benefits of resources like unemployment benefits and industry insurances that they could receive by being classified as an “employee” under a salon owner.
“I have been both a booth renter and salon owner in my career and I have contracted with booth renters and it is not easy for booth renters,” says Theresa Johnson, co-owner of SAKS Salon in Renton. “Many booth renters put most of their energy in generating client list and forget about the business aspect of business.”
Johnson, who says there is a learning curve that booth renters need to navigate in order to make a proper living, says that she tries to help young stylists by getting them to think beyond that day-to-day grind of being a stylist and think about what they are doing as a career that they can retire from.
“I try to educate them on the importance of filing their taxes, setting up mutual funds and savings accounts and things of that nature” says Johnson. “Sometimes to help make ends meet you may find stylist living on government assistance and because of the fear of losing benefits they may not file or declare all their earnings which could put them in peril. At the same time labelling them as employees takes away from their autonomy as business owners and that is something stylist are not ready to accept.”
Johnson, like many other stylists, believe that policy makers need to fully understand the industry and put forth resources to help the industry flourish as a whole.
One of the issues that some observers feel may have played a role in the dismissal of the bill was the fact that the bill applied only to cosmetologists and did not reference barbers, many of whom operate under the same “booth renter” business model as cosmetologists. An oversight with the bill that many claimed was unfair and sexists. Prior to removing the bill from consideration, Keiser expanded the scope of the bill to include barbers.
At a public hearing last week, stylists from across the state chimed in on the legislation and painted a realistic picture of the plight of stylist/booth renters and how the bill could affect their ability to make a living and support their families – which later led to Keiser removing the bill from consideration.
“I heard from hundreds of hairdressers who feared Senate Bill 5326 was a threat to their chosen profession,” said Keiser. “I want to be clear that it was never my intent to cause stress and anxiety to salon workers, much less jeopardize their livelihood.
“As a legislator, it is my responsibility to listen when people tell me something is wrong and to thoughtfully make sure any legislative proposal achieves its intended goals without causing unintended consequences,” added Keiser. “Thanks to your outreach, it was made clear that this bill fell short of those requirements.”
