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Hello everyone, I have just started at a brand new nail salon, I've been a licensed nail tech since 2009 and since then I've always been self employed. Now i have an issue with booth rental or commission, Ive been at this new salon since they opened and I've been working a 60/40 commission with the 40 being my part. Ive been doing a lot of research and have found that usually if you are on commission you fill out a regular W-2 form, well my salon owner had me fill out a different form basically saying that I'm an independent contractor and from my understanding that would usually be used for a booth renter. I've been using my own product because she doesn't have any gel which is what I work with but she has replaced it when I ran out. I'm very confused about the whole situation. Ideally I would like to rent a booth but I'm not sure about the fine lines such as equipment (mani bowels, towels, disinfecting equipment, ect.) Another thing is my salon owner is a new business owner who is still taking business classes so I'm not exactly sure she knows her stuff. Please HELP!!!! I need some advice from techs experienced in the salon business !!!!

(btw despite all of this i really like this salon and the owner is really nice and understanding and has made a great environment, I do love being there)
I've had almost every situation possible, from salon owner, commission to booth rental so I hope I can help clear this up but I can't say that some of the places I've worked have done things legally. When I was making "commission" I was an independent contractor and would get paychecks from the salon owner who would take 40% of what I made in services. This 40% was my "booth rent" essentially. so, at tax time I was told to deduct that amount as my booth rent and the rest was my income. As far as I know, this is illegal but I cannot say for sure so don't take my word for it. I did supply most of my product, she supplied the pedicure supplies but that's it. Oh, and I was 1099, not w-2. If you have a w-2 you would have taxes taken out of your check and you'd be considered an employee.

I find it robbery that she's only giving you 40% and keeping the 60% for herself, the average is the other way around. I would ask if you can booth rent instead of doing commission. You'll make so much more money! Especially if you are already providing your own supplies for the most part. Booth renters generally provide all equipment, supplies and product however some salons are different. My salon provides me with a table, chairs, pedicure chair, towels and cleaning supplies.

I hope this helps you!

I agree with Jill. Sad to say, but if you are paying your own taxes and products, 40% is way too low! It would be fine if you were on W2 status, AND she were providing products. You seriously need to have a quiet sit down talk with her.
Oh my hun, you are getting the shaft, big time. It is illegal for her to pay you a commission and then say you are an independent contractor. She can check the irs website. If you are paid commission you are regarded as an employee and she should be giving you a W-2 form at the end of the year. It is just like someone working for sales commission, they are an employee and the company has to pay payroll taxes on the commission.

Booth rent should pay for and include a room rent, utilities, and essentials to run the salon business. The rest falls on you. You have your own hours, a key to the establishment, responsible for your own products/equipment and pay your own taxes.

As far as furniture and pedi equipment that differs from place to place. You would need to work that out beforehand. If those things are included then you can expect to pay a little more in rent.

I feel what she is paying in commission is low. Sure hope it works out for ya hun and the owner gets educated before she gets into trouble. Good Luck!
Thank you ladies soooo much for all your info!!!! I did some more research and even found an article in nailsmag saying it is illegal for someone to pay you commission and say you are an independent contractor. I forwarded the link to my salon owner and will definitely talk to her about booth rental. What do you think is a fair price for booth rent? when i was initially hired I asked and she said $500/mth. Is it ok for me to ask if i can pay weekly? again thank you so much I'm so happy I found this site!!!
All the others have given you some correct advice. I'd say $500 is a bit high, and it really depends on the area around the salon. If you can make upwards over $200 a day, that amount might not be hard for you to pay but if it's slow there, and you have to pay for your own supplies, it can be a bit steep. And you SHOULD be able to pay weekly. Most salons want that in case there's 5 weekends in a month, plus it's just easier on you.

Also, be prepared for the owner to tell you to go on down the road if she thinks you're going to drop a nickel on her to the IRS.
Ok so my salon owner read the stuff I sent her she wasn't mad or anything but she did tell me she consulted with a CPA before opening. She said we set our own availability (although she does make the schedule but we let her know when we can wrk) she does provide supplies, location, and marketing and that everyone is classified as a 1099 for the first 6 mths. She was cool with me wanting to rent a booth and we'll talk about the details tomorrow. I'm still a little iffy with everyone being 1099 tho especially after what I read from the IRS website. She does have proffesional business advisors that come in and meet with her, but I read in another article that sometimes CPA's will tell business owners to do the 1099 thing to cut taxes without the owner knowing that it's wrong because the so called benefits outweigh the risk. What do you guys think? Any salon owners out there that have consulted with tax experts???
You need to talk with a tax person yourself. I've been told that B.R.'s DO get a 1099 but I don't and it's because the owner is incorporated. Not sure what that has to do with it, but I've checked and it's true.

IMO, if she's telling you when to work, that makes you an employee. If you're a true booth renter, you handle ALL of your business dealings, supplies, advertising, etc., not her.
I found this:


Self-Employed

A self-employed person is someone who does not work as an employee for someone else. The Internal Revenue Service states that a self-employed person is anyone who carries on a business as either a sole proprietorship or as an independent contractor, is a member of a partnership that conducts business, or someone who is otherwise in business for himself. A self-employed person, for example, can be anyone from a doctor who provides medical services to others to a sculptor who sells her art to the public.


Contractor

A contractor, also known as an independent contractor, is a person or company that performs a task for someone else on a contractual basis and not as an employee. If, for example, you are a handyman and a family hires you to perform a specific repair on a home, you are not considered the family's employee, but rather an independent contractor. The family is not your employer, and you only perform the work for which you are contracted. An independent contractor, then, is a kind of self-employed person who provides services to others. A person who makes products and sells them to the general public, even though self-employed, is not generally an independent contractor.
Impact

Anyone who is self-employed, including independent contractors, is subject to special income tax rules. The Internal Revenue Service reports that self-employed workers have to pay a self-employment tax equal to 15.2 percent of the annual income the worker gets from the business. This take rate is subject to change, but it is in addition to the income tax you have to pay on your wages.

I attended a tax class at Premier Orlando a while back. The guy's last name was Cassidy, can't remember the first (he has since passed, was sorry to hear that). He was an expert on this and in that class he said commission is an employee and should be treated as such, booth rent is independent contractor. The IRS doesn't see it any other way, there is no gray, just black and white. He also said rent should be paid monthly, but most salon owner's and renter's won't do that, especially when starting out, but I don't think there is any law stipulating that. The only issue with what she is doing is that it affects you if she is doing it wrong. What if you consulted with someone you trust on this issue and have the two experts consult with each other?

Betcha glad she is understanding and willing to work with you on this? That is awesome!
Yea one of the articles I was reading in nailsmag was by the same guy you mentioned. I talked to her and I'm going to be renting a booth starting next week. She told me everyone is 1099 for the first 6mths then after that will be w-2. But I still want to make sure I'm doing things right on my part, I do own my own business but I've never had to deal with this because it's just me. She's going to type up a contract for the booth rental before next week, is there anything that should or shouldn't be in the contract??? Once again thank you ladies for all the help!!!
If you're going to be boothrenting, you should only get a 1099, imo. Why is she saying she's going to give you a W-2? That's for employee reporting, (I thought). If you're booth renting, you're NOT an employee. I'd sure have her explain that one in front of a tax professional.

In the contract, you need to have it clear who provides what, what hrs. can you work, will you have your own key, what does she provide and what is your responsibility. As a b.r., you set your own hrs., she has no say in that. Make sure she understands that.

As a b.r., it's on you to provide ALL the things you need to work with. Lots of places will provide a nail table tho, just so it goes with decor. Does she provide a pedi set up, and if not, are you able to put one in? If she already has the pedi set up, is she going to charge per use? Are you going to share anything such as a throne or pedi chair, and if so, how's the sanitation and disinfection going to be handled? Sometimes other workers aren't on the same page as you with this kinda stuff and might not be doing it right, costing you time and money to redo.
Donna, I think she's saying that anyone who is on commission gets it that way, but she will be paying rent instead. Smile

Denise
totally not making sense to me........
There no reason a booth renter should receive a 1099 from an owner. 1099's are for service providers, land lords or any professional who does $ 600 or more I services annually. If anything the renter should be providing a 1099 to the owner for space renter.

This is the problem. Salon owners do not see themselves as land lords as they should.

20+ years in bookkeeping and processing 1099's did prepare me simewhat.


(06-12-2012, 11:30 PM)Nail Raising Wrote: [ -> ]There no reason a booth renter should receive a 1099 from an owner. 1099's are for service providers, land lords or any professional who does $ 600 or more in services annually. If anything the renter should be providing a 1099 to the owner for space rented.

This is the problem. Salon owners do not see themselves as land lords as they should.

20+ years in bookkeeping and processing 1099's did prepare me simewhat.

Hey, that is great that she is going to put you on as a booth renter. She would still need to give you a W-2 for the time that you were on commission for the year. You may need to put aside a little money for taxes you will owe depending on how much you earned during that period.

As a booth renter you should have a key to the building with no stipulations as to when you can and can't have access to the shop. Also as a booth renter you should have the salon name on your business card, i.e. "located at xxxx salon".

There are typical things in a contract that should be included; rent (what your rent includes and doesn't include) and when it is due, you provide what and what the owner provides, you handle all business transactions, how new calls and/or new business is handled (who gets what, in what order), can you sell retail (although IMO as a booth renter, the salon owner shouldn't be able to dictate that, but some try), how are phones calls answered/handled, notice to terminate contract, what attire is acceptable or not, can you sublease, etc.

I am sure there is much more, but it's late and I'm brain fried.

You would be wise to not let her include a no-compete clause. This will hamper you from opening your own place or moving to another salon close by and could lose your livelihood.

Sounds like your salon owner is trying to do the right thing and it will all work out. But remember when it comes to legal matters you have to protect yourself.
I rented a booth for a short time and the owner supplied the table, chairs, towels, disinfectant, pedi chairs. I supplied everything else. As a renter, you shouldn't be getting a 1099 or a W-2. The only way I got a check from the owner was if I did a service and the customer paid with a credit card. They issued me a check less the 4% fee she charged for using their credit card. The other renter people eventually got Square for their smartphones and their clients starting running their credit cards on their individual phones. They only charged 2.75%. I am a commissioned employee now, and because I am just starting out I work at 45% until I reach a certain amount, then it graduates to higher commission.
My salon supplies everything.