Shared with permission from Beauty Industry Report (bironline.com), July 2025.
The Professional Beauty, Barber and Spa industry achieved a major victory on July 4, 2025, when the H.R. 1 Budget Reconciliation Bill was signed into law. It includes two groundbreaking provisions for our industry:
1. The expansion of the 45(b) Employer FICA Tip Credit to salons, spas and barbershops
2. No Tax on Tips for licensed pros
This is one of the most significant federal policy wins in the beauty industry’s history—impacting thousands of small businesses and more than 1.3 million professionals.
The extension of the 45(b) Employer FICA Tip Credit is an historic moment—one that the International Salon Spa Business Network, the Professional Beauty Association and many other industry leaders have been lobbying for and invested hundreds of thousands of dollars to achieve over several decades. As a result, the U.S. Tax Code has now been amended to reflect the unique needs of our industry.
What does it really mean?
The expansion of the 45(b) Employer FICA Tip Credit will mean hundreds of millions of dollars returned to employment-based salons, spas and barbershops EVERY single year to invest in hiring more employees, opening new locations, remodeling, education, new services and many more benefits to all valued employees and clients. It also encourages accurate and transparent tip income reporting. This is a PERMANENT change to the IRS Tax Code.
“With approximately 110,000 employment-based salons, barbershops and spas nationwide, the tip-related provisions of the recently passed federal bill have important financial implications for the economics of the beauty industry,” says Frank Zona, chair of the ISBN Government Affairs Committee and president of Zona Professional Salons. “Based on average annual services revenue of $300,000 and an average 20% tip rate, it’s reasonable to estimate that the industry generates about $6.6 billion in tipped income each year. As a result, the expansion of Section 45(b) immediately unlocks more than $500 million annually in tax credits for employers by covering the employer-paid FICA in reported tips.”
ISBN Government Affairs Committee Frank Zona, Rhoda Olsen and Gordon Logan.
“This isn’t just a tax credit—it’s a definitive statement,” adds Leslie Perry, PBA’s executive director. “It says our industry matters. Beauty pros are job creators, community builders and economic drivers. Finally, the professional beauty industry has achieved tax fairness in our U.S. tax code.
“This is more than a financial win. As a united industry, we’ve proven what’s possible when we all show up together. There are so many more important causes that will benefit our businesses, our people and our customers when we work together,” Perry continues.
In regard to No Tax on Tips, licensed beauty pros will eventually see an increase in their take-home pay, making a career in beauty even more attractive, thanks to this DEDUCTION on the federal income tax return, which reduces taxable income.
Zona explains, “For employees, up to $25,000 of tipped income per year will be exempt from federal income tax, providing hundreds, and in some cases, thousands of dollars in annual tax relief to many pros. Until guidelines are issued by the IRS, salons must continue to deduct federal income taxes on tips, as well as FICA and state and local taxes.
“Together, those provisions—if fully implemented—offer measurable financial benefits that strengthen W-2 employment, support formal earnings and improve overall economic security for both business owners and professionals.”
Adds Kati Rapoza, PBA’s manager of government affairs and advocacy, “Throughout this journey, we’ve listened to the voices of hundreds of business owners who shared how impactful this change could be. The funds preserved by this credit will directly support essential needs like retirement accounts, maternity leave, health insurance and advanced career training. We’re excited to see these meaningful changes take root and uplift the lives of so many in the industry.”
Working together = big payoff
Those successes are the result of tireless advocacy, deep collaboration, bold leadership and, most importantly, our industry’s united voice. Many, many salon owners, stylists, barbers, franchisors and franchisees, distributors and product company executives traveled to Capitol Hill hundreds of times over the past two decades to educate our legislative representatives about our industry’s critical need for this tax credit—one that restaurant owners have enjoyed for decades—and the important role beauty professionals play in every community across the United States.
Gordon Logan, a member of the ISBN Government Affairs Committee, former ISBN president and founder of Sport Clips, has been championing the 45(b) Employer FICA Tax Credit for two decades. He also leads the government affairs function of Sport Clips.
He says, “Some years PBA took the lead, and over the past three years, ISBN took the lead to push this legislation through, with support from many in our industry. The ISBN Government Relations Committee on which I serve with Frank Zona, Rhoda Olsen, Myra Reddy and Kati Rapoza (Myra and Kati also manage Government Affairs for PBA) put in countless hours to make this a reality. The impact for employment-based salons will be felt for decades to come, providing much needed relief to our industry, which is still recovering from the COVID-19 disaster.
“The ISBN Board of Trustees, including Fantastic Sams’ Scott Brown, as well as key players in Washington, DC—Robert Cresanti, former CEO of the IFA and Sport Clips Board Member, and our highly effective lobbyists Scott Ripplinger and the CGCN Team, were integral to making this happen.”
Adds Rhoda Olsen, Great Clips, “Working together, the industry demonstrated their commitment to salon owners and stylists by moving this legislation through. Although it took decades, every action that had been taken before contributed to the final push.”
Olsen continues, “There are about 110,000 employment-based salons in the United States. Only about 15,000 of those are larger brands. As the larger multi-unit brands, we advocated tirelessly for the industry, because we can afford to do that. It’s our responsibility to also fight for the 1- and 2-unit salon groups, independents and stylists who can’t, because they are behind the chair working hard serving their clients every day. Those salon owners are mostly women and minorities. They need this to build stability for their businesses.”
Working together: ISBN’s Edward Logan and PBA’s Leslie Perry
Legislative affairs specialists Myra Reddy and Kati Rapoza
Comments Myra Reddy, PBA government affairs director, “We believe this is a matter of tax fairness and principle. The former inequity went against what the tax code is meant to do for small businesses. We couldn’t let that stand. Every advocate who stood with us deserves immense gratitude—we did this together.”
Concludes ISBN President Edward Logan of Sport Clips, “We encourage Beauty Industry Report’s readers to share this exciting news across your organizations. For brands and distributors, we also encourage you to share this important news with your customers, to ensure our entire industry is aware of these big wins.”
More guidance on how to implement these changes will be shared soon. To get involved and advocate for the industry, visit www.salonspanetwork.org and www.probeauty.org.
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