Ohio State Board of Cosmetology
1929 Gateway Circle • Grove City, Ohio 43123
Local: (614) 466-3834 • Statewide: 1-866-642-6723
The following information was taken from the Federal Taxation Curriculum for Cosmetology Students developed by the Internal Revenue Service. The complete text is available at www.cos.ohio.gov
The Cosmetology Industry is unique because it offers you a variety of career and employment opportunities.
The obligations and responsibilities for each worker category are different. Proper worker classification will enable you to file and pay the correct tax. The choices are: employee, salon owner, booth renter, and independent contractor.
• Employees receive Form W-2 for wages earned and are responsible for reporting their tips to their employer as well as maintaining records of their non-reimbursed employee business expenses.
• Salon owners are in business for themselves. They are responsible for recording all income and expenses; withholding employment taxes if they have employees, and paying all taxes due.
• Booth renters, who are not employees of the salon, are self-employed. They are responsible for record keeping and the timely filing of returns and payment of taxes related to their business.
• Independent contractors are always self-employed and are responsible for record keeping and timely filing of returns and payment of taxes related to their business.
The courts have considered many facts in determining whether a worker is an employee or self-employed.
These relevant facts fall into three main categories: behavioral control; financial control; and relationship or intent of the parties. In each case, it is very important to consider all the facts – no single fact provides the answer.
What is behavioral control? Behavioral control is having the authority to determine what to do, when to do it, why it needs to be done, and how it will be accomplished.
What is financial control? Financial control is having the right to direct or control the business part of the work, such as how much to charge customers, how much to spend on business expenses and equipment, and the opportunity to realize a profit or loss.
What is relationship or intent of the parties? Relationship or intent of the parties illustrates how the business owner and the worker perceive their relationship. Items to consider would be employee benefits and written contracts.
Example: Sue works at Bill’s Nail Emporium. Sue is told to be at work, Monday through Friday, 9:00 am – 5:00 pm. Bill observes the work that Sue does and has the right to provide direction. Sue reports all of her tips to Bill. Sue is Bill’s employee and will receive Form W-2 at the end of the year.
AM I AN EMPLOYEE?
An employee is an individual who performs services subject to the will and control of his or her employer, who has the authority to tell him or her what to do and how to do it. Salary, tips, and commissions are the most common forms of payment made to employees in the Cosmetology Industry.
AM I SELF-EMPLOYED?
A self-employed person works for himself or herself and is not subject to the “will and control” of another person. A self-employed person may be called a salon owner, a booth renter, or an independent contractor.
Fees, tips, and retail sales are the most common forms of income received by a self-employed person and may include the following categories:
• Salon Owner — A salon owner is an individual (not a corporation) who owns and operates a salon. Salon owners may have employees, booth renters, independent contractors, or a combination thereof working in the same establishment. Salon owners are responsible for classifying workers correctly as employees, booth renters, or independent contractors. It is important that this classification is correct so that workers can determine their personal tax responsibilities.
Example: Sharon owns “Sharon’s Massage and Day Spa”. Sharon buys all her own supplies and sets her own work hours and fees. Sharon is self-employed.
• Booth Renter — A booth renter is a person who rents or leases space in someone else’s salon. The booth renter pays the owner an agreed amount for the use of the booth space. Booth renters set their own business hours and fees for their services. They are financially responsible for profit or loss in their own business and receive all income generated from their work. Booth renters who are not subject to the direction or control of the salon owner are not employees.
Example: Carol signed a lease with a salon owner that provided booth space and use of shampoo and hair dryer stations. In return for the space, she will pay $500 on the 10th of each month to the salon owner. The contract does not specify the number of days or times Carol will use the booth. The lease does say that the salon owner would like Carol to use, whenever possible, the products the salon owner markets to customers. Carol establishes her own schedule and collects payments from her customers. Carol is a self-employed booth renter.
Note: The lease agreement by itself does not make the booth renter a self-employed person.
• Independent Contractor — Independent contractors may provide their services at several different locations. They are always in control of their hours, the fees they charge, and the products they use. They are self-employed.
Example: Cissy is a manicurist and esthetician that has a business contract with two large salons where she provides her services. In her contracts, she is provided with a workstation for which she pays $450 per month to each salon. She keeps her own appointment book and sets her own hours of operation at her convenience. She also provides her own tools, nail polish supplies, and makeup. Cissy handles her own monetary receipts from customers and is responsible for filing and paying tax on her income and tips. Cissy does not receive a Form W-2 from the salon because she is an independent contractor (self-employed).
National Crime Victims’ Rights Week is held each year to promote awareness of victims’ rights and to honor the resilience of crime victims and those who advocate on their behalf. Legislators, advocacy groups and other public officials throughout Ohio have made crime victims’ rights a priority. This year, we will honor these folks during the week of April 18-24.
Since 1973, Ohio and the rest of the country have taken great strides to protect their citizens, especially the most vulnerable. In 1976, Ohio began its Crime Victims Compensation Program, which can reimburse innocent victims of violent crime up to $50,000 to cover expenses like medical bills, lost wages and funeral expenses. In 1979, our state adopted the Domestic Violence Law, which specifies that hitting, slapping and verbal threats are considered domestic violence and must be stopped. The following year, we added a $10 fee to marriage licenses and that money is distributed to domestic violence shelters across the state.
This year, Ohio took another stride to again expand the rights of Ohioans to protect themselves from crime.
In mid-March, Governor Ted Strickland signed into law the state’s first teen violence protection legislation. Substitute House Bill 10, introduced last year by State Rep. Edna Brown of Toledo, gives juvenile courts the power to issue protection orders. It will also allow adults to request the orders on behalf of minors.
I strongly supported this new law, which will be named the Shynerra Grant Law after a Toledo-area teen who was killed in 2005 by a former boyfriend.
This law puts Ohio on the right path to protecting our youth. Teens now have recourse to find protection against violence before it is too late. Through this legislation we hope to send a strong message to our young people that violence is unacceptable and carries serious consequences.
My office’s Crime Victims Assistance and Prevention section reimburses attorneys who handle civil protection orders against adult offenders and will now expand the assistance to include cases through juvenile court.
The signing of House Bill 10 follows closely on the heels of House Bill 19, which was signed into law by the governor in December. House Bill 19 requires each Ohio school district to adopt a policy to prevent and address incidents of dating violence at school, provide staff training on dating violence prevention and include dating violence prevention education for grades 7-12 within the health education curriculum.
With both of these bills passed into law, Ohio teens who have been victimized will have recourse before it is too late, and Ohio teens in general will be better informed about abusive relationships.
We realize that by giving people in all walks of life the tools to recognize abuse and tips on what they can do to help, we can all make Ohio a safer place for all of us. We continue to offer the Cut It Out trainings to any and all interested parties, so please contact Carolyn Bevins in our office at (614) 466-5610 or Carolyn.Bevins@ohioattorneygeneral.gov to schedule yours today.
Ohio State Board of Cosmetology
1929 Gateway Circle
Grove City, Ohio 43123
Local: (614) 466-3834
Fax: (614) 644-6880
Steve Thompson, Chairman, Independent Contractor
Daisy Rickman, Cosmetologist & Salon Owner
NeCole Cumberlander, School Owner
Kimberly Thomas, Salon Owner
Dr. Marilyn Huheey, Medical Doctor
Bernadine Neal, Cosmetology Instructor
Delores Gillis, Cosmetologist
Dr. Milroy Samuel, General Public