Sales Tax Rules for Hair Salons, Nail Salons, Barber Shops, and Beauty Salons in Florida

Recently, the Florida Department of Revenue issued TIP 24A01-16 addressing the sales tax rules for hair salons, nail salons, barber shops, and other beauty salons operating in Florida. A DOR TIP is a “Taxpayer Information Publication.” These publications are periodically issued by the Department of Revenue and occasionally include their opinion on the taxability of transactions in certain industries. The “R” in TIP 24A01-16R refers to the “Revised.” TIP 24A01-16R was revised to remove all traces of credit for “licenses” to use real property. The implications of this change are widespread, as the change is not supported by rule or state and is, in fact, contrary to them. If this is the Department of Revenue’s new position, the beauty industry is in trouble. 

The Florida Administrative Code provides specific rules under Rule 12A-1.010 and Rule 12A-1.070, which clarify the tax obligations for services, product sales, and rental arrangements. This comprehensive guide delves into these regulations to help owners and operators understand their tax responsibilities.

1. Sales Tax on Services and Products

Services Are Exempt from Sales Tax

In Florida, services provided by barbershops, beauty salons, and nail salons are not subject to sales tax. This exemption covers services such as haircuts, hairstyling, manicures, pedicures, and massages. As service providers, these businesses are considered consumers of the materials and supplies they use to perform their services.

Sales Tax on Tangible Personal Property

While services are exempt, any tangible personal property sold to customers is taxable. Examples of taxable items include:

• Cosmetics

• Hair products (shampoos, conditioners, styling gels)

• Nail kits and ornamental nails

• Nail polishes and removers

For these sales, owners and operators must:

• Register as a Sales Tax Dealer: Businesses selling taxable items must register with the Florida Department of Revenue.

• Collect and Remit Sales Tax: Sales tax must be charged on all items sold, including any applicable local discretionary surtax.

Resale Certificates and Use Tax

Salon owners may purchase products tax-free for resale by providing their supplier with an Annual Resale Certificate. However, if these items are consumed in the course of providing services rather than sold to customers, the owner or operator must pay use tax on those items.

If a business has paid tax on materials or supplies that are later resold, it may:

• Claim a credit for the tax paid.

• Request a refund as provided under Rule 12A-1.014.

2. Licenses, Rentals, and Sales Tax

Many barbershops and salons rent or license booth or floor space to independent contractors, such as barbers, nail technicians, or cosmetologists. Under Florida law, these arrangements constitute a license to use real property, which is taxable.

What Constitutes a License to Use Real Property?

A license to use real property occurs when the owner or lessee of a property permits another individual to occupy a specific space for a fee. Examples include:

• Booth rentals in a salon

• Floor space for independent cosmetologists or nail technicians

The total amount charged for such arrangements is subject to Florida’s sales tax on commercial real property rentals.

Sales Tax on Rental and License Fees

Under Section 212.031, Florida Statutes, the state imposes a 2% sales tax on the total rental or license fee. This tax also includes any local discretionary surtax imposed by the county where the property is located. The total license fee subject to tax includes:

• Monthly rental or license charges

• Any additional fees or considerations paid by the licensee for the right to use the property

Example of Tax Calculation

Let’s examine a scenario to illustrate how sales tax applies to space rentals:

• A beauty salon leases 1,600 square feet from a landlord at $2 per square foot, totaling $3,200 per month. The landlord charges 2% sales tax, resulting in $64 in tax paid by the salon owner.

• The salon subleases 100 square feet to a cosmetologist at $3 per square foot, totaling $300 per month.

Tax on Sublease:

• The salon collects 2% sales tax on the sublease: $300 x 2% = $6

Credit for Tax Paid:

• The salon can take a credit for the portion of tax paid to the landlord on the subleased space: $2 per square foot x 100 square feet x 2% = $4

Amount to Remit:

• The salon remits the difference between the tax collected and the credit: $6 (tax collected) – $4 (credit) = $2

3. Registration and Compliance

Who Must Register?

Owners and operators must register with the Florida Department of Revenue if they:

• Sell tangible personal property

• Rent, lease, or license space to independent contractors

Registration can be completed online using the Florida Business Tax Application (Form DR-1) at the Department’s website. Once registered, businesses must file regular sales and use tax returns.

Recordkeeping Requirements

To remain compliant, businesses engaged in taxable activities must maintain detailed records, including:

• Sales invoices and receipts

• Purchase records for materials and supplies

• Rental or license agreements

These records must be retained for at least three years and made available for review upon request by the Department of Revenue.

4. Voluntary Disclosure for Unpaid Taxes

If a business discovers unpaid sales or use tax liabilities, it can participate in the Florida Department of Revenue’s Voluntary Disclosure Program. This program allows businesses to report and pay overdue taxes, often with penalties waived. Taking advantage of this program can help businesses avoid audits and additional penalties.

5. Key Takeaways for Salon Owners and Operators

• Services Are Tax-Exempt: Receipts from services such as haircuts, styling, and manicures are not subject to sales tax.

• Product Sales Are Taxable: Tangible items sold to customers, such as cosmetics or hair products, require sales tax collection.

• Space Rentals Are Taxable: Fees charged for booth or floor space rentals must include state and local sales tax.

• Maintain Records: Accurate recordkeeping is essential for compliance and audit readiness.

• Use Tax Applies: Use tax is owed on materials consumed in services if they were purchased tax-free.

By understanding and adhering to these rules, owners and operators can ensure compliance with Florida’s sales tax laws while avoiding penalties and audits. For additional guidance, consult the Florida Administrative Code or seek advice from a qualified tax professional.

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