II

106TH CONGRESS

2D SESSION S. 3225

To amend the Internal Revenue Code of 1986 to expand the tip tax credit

to employers of cosmetologists and to promote tax compliance in the

cosmetology sector.

IN THE SENATE OF THE UNITED STATES

OCTOBER 19 (legislative day, SEPTEMBER 22), 2000

Mr. SANTORUM introduced the following bill; which was read twice and

referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to expand

the tip tax credit to employers of cosmetologists and

to promote tax compliance in the cosmetology sector.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Cosmetology Tax Fair5 ness and Compliance Act of 2000’’.
2

•S 3225 IS

1 SEC. 2. EXPANSION OF CREDIT FOR PORTION OF SOCIAL

2 SECURITY TAXES PAID WITH RESPECT TO

3 EMPLOYEE TIPS.

4 (a) EXPANSION OF CREDIT TO OTHER LINES OF

5 BUSINESS.—Paragraph (2) of section 45B(b) of the Inter6 nal Revenue Code of 1986 is amended to read as follows:

7 ‘‘(2) APPLICATION ONLY TO CERTAIN LINES OF

8 BUSINESS.—In applying paragraph (1), there shall

9 be taken into account only tips received from cus10 tomers or clients in connection with—

11 ‘‘(A) the providing, delivering, or serving

12 of food or beverages for consumption if the tip13 ping of employees delivering or serving food or

14 beverages by customers is customary, or

15 ‘‘(B) the providing of any cosmetology

16 service for customers or clients at a facility li17 censed to provide such service if the tipping of

18 employees providing such service is cus19 tomary.’’.

20 (b) DEFINITION OF COSMETOLOGY SERVICES.—Sec21 tion 45B of such Code is amended by redesignating sub22 sections (c) and (d) as subsections (d) and (e), respec23 tively, and by inserting after subsection (b) the following

24 new subsection:

25 ‘‘(c) COSMETOLOGY SERVICE.—For purposes of this

26 section, the term ‘cosmetology service’ means—
3

•S 3225 IS

1 ‘‘(1) hairdressing,

2 ‘‘(2) haircutting,

3 ‘‘(3) manicures and pedicures,

4 ‘‘(4) body waxing, facials, mud packs, wraps

5 and other similar skin treatments, and

6 ‘‘(5) any other beauty related service provided

7 at a facility at which a majority of the services pro8 vided (as determined on the basis of gross revenue)

9 are described in paragraphs (1) through (4).’’

10 (c) EFFECTIVE DATE.—The amendments made by

11 this section shall apply with respect to taxes paid after

12 December 31, 2000.

13 SEC. 3. INFORMATION REPORTING BY PROVIDERS OF COS14 METOLOGY SERVICES.

15 (a) IN GENERAL.—Chapter 61 of the Internal Rev16 enue Code of 1986 is amended by inserting after section

17 6050S the following new section:

18 ‘‘SEC. 6050T. RETURNS RELATING TO COSMETOLOGY SERV19 ICES AND INFORMATION TO BE PROVIDED TO

20 COSMETOLOGISTS.

21 ‘‘(a) IN GENERAL.—Every person who leases space

22 to any individual for use by the individual in providing

23 cosmetology services (as defined in section 45B(c)) on

24 more than 5 calendar days during a calendar year shall

25 make a return, according to the forms or regulations pre-
4

•S 3225 IS

1 scribed by the Secretary, setting forth the name, address,

2 and TIN of each such lessee.

3 ‘‘(b) STATEMENT TO BE FURNISHED TO INDIVID4 UALS WITH RESPECT TO WHOM INFORMATION IS FUR5 NISHED.—Every person required to make a return under

6 subsection (a) shall furnish to each individual whose name

7 is required to be set forth on such return a written state8 ment showing—

9 ‘‘(1) the name, address, and phone number of

10 the information contact of the person required to

11 make such return, and

12 ‘‘(2) a statement informing the recipient that

13 (as required by this section), the provider of the no14 tice has advised the Internal Revenue Service that

15 the recipient provided cosmetology services during

16 the calendar year to which the statement relates.

17 ‘‘(c) ADDITIONAL INFORMATION TO BE PROVIDED

18 TO SERVICE PROVIDER.—A person who provides a state19 ment pursuant to subsection (b) to an individual who pro20 vides cosmetology services shall include with the statement

21 a publication of the Secretary, as designated by the Sec22 retary, describing the tax obligations of independent con23 tractors unless the publication was previously provided to

24 the individual by the statement provider.
5

•S 3225 IS

1 ‘‘(d) METHOD AND TIME FOR PROVIDING STATE2 MENT AND ADDITIONAL INFORMATION.—The written

3 statement required by subsection (b) and the additional

4 information, if any, required to be furnished under sub5 section (c) shall be furnished (either in person or in a

6 statement mailed by first-class mail which includes ade7 quate notice that the statement is enclosed) to the person

8 on or before January 31 of the year following the calendar

9 year for which the return under subsection (a) is to be

10 made. Such statement shall be in such form as the Sec11 retary may prescribe by regulations.

12 ‘‘(e) LEASE.—For purposes of this section, the term

13 ‘lease’ include booth rentals and any other arrangements

14 pursuant to which an individual provides cosmetology

15 services, other than as an employee, on premises not

16 owned by the service provider.

17 ‘‘(f) EXCEPTION FOR SERVICES PROVIDED BY PRO18 PRIETORSHIPS WITH EMPLOYEES.—This section shall not

19 apply to leases of premises with at least 3 work stations

20 for providing cosmetology services.’’.

21 (b) CONFORMING AMENDMENTS.—

22 (1) Section 6724(d)(1)(B) of such Code (relat23 ing to the definition of information returns) is

24 amended—
6

•S 3225 IS

1 (A) by striking ‘‘or’’ at the end of clause

2 (xiv),

3 (B) by adding a comma at the end of

4 clause (xv),

5 (C) by striking ‘‘; or’’ at the end of clause

6 (xvi) and inserting a comma,

7 (D) by striking the period at the end of

8 clause (xvii) and inserting ‘‘, or’’, and

9 (E) by inserting after clause (xvii) the fol10 lowing new clause:

11 ‘‘(xviii) section 6050T (relating to re12 turns by cosmetology service providers).’’.

13 (2) Section 6724(d)(2) of the Internal Revenue

14 Code of 1986 is amended—

15 (A) by striking ‘‘or’’ at the end of subpara16 graph (Z) and inserting a comma,

17 (B) by striking the period at the end of

18 subparagraph (AA) and inserting ‘‘, or’’, and

19 (C) by inserting after subparagraph (AA)

20 the following new subparagraph:

21 ‘‘(BB) section 6050T(c) (relating to state22 ments from cosmetology service providers) even

23 if the recipient is not a payee.’’.
7

•S 3225 IS

1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to calendar years after 2000.

Æ