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Management Practices

Predicting the New Washington’s Impact On Salon Business

Web Editor | July 10, 2011 | 1:36 PM
Regardless of how you cast your ballot last November, the Obama administration and a Democratic Congress will impact the professional salon industry and your business. Sam Leyvas, director of government affairs, Professional Beauty Association, analyzes the issues and predicts the impact of this month’s incoming government:

NEGATIVE IMPACTS


“Card Check” Law (Employee Free Choice Act)
This bill died in the Senate in 2008, but will mostly likely resurface in early 2009. Card Check would make it cost effective for unions to go after Main Street businesses, such as beauty/nail salons and spas, which have never experienced unionization before. The law would do away with the secret ballot process currently used for unionization in the workplace and replace it with a Card Check system. Once a union persuades more than half of the workers to sign membership cards, the union would automatically be certified. Without the secret ballot process, employees would be exposed to intimidation and bullying tactics from union organizers. “With Democrats traditionally supporting organized labor and unions aiming to fold more employees into membership, this law could completely change the economics of union organizing,” says Leyvas.

Elimination of LIFO Accounting Method
Although the proposed repeal of the “Last-In, First-Out” inventory accounting system was recently defeated in Congress, with a new Congress controlled by one party and the increased pressure to close the federal “tax gap,” it is likely to resurface. Manufacturers and distributors would be affected, and hundreds of thousands of American businesses would incur massive tax increases. “The restricted use or outright repeal of LIFO would have far-reaching and potentially damaging effects on companies, principally manufacturers and distributors, who rely on effective inventory management to remain profitable,” says Leyvas.

POSITIVE IMPACTS


FICA Tax Credit for Salons and Spas
With a flurry of tax legislation activity predicted in Congress, there will be new opportunities to advocate for a FICA tax credit, which would give salon and spa owners a dollar-for-dollar tax credit on FICA taxes paid on employee’s tip-income. “The legislation would significantly help small and large salons and spas to lower tax liability and allow further investment in business,” says Leyvas.

Credit Card “Interchange Fees”
Interchange fees are the hidden costs of processing credit and debit card transactions.  The new Democratic Congress will most likely resurrect the “Credit Card Fair Fee Act”—federal legislation that would require credit card companies with “substantial market power” to negotiate with merchants and retailers on terms of fees paid when processing card transactions.


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