Salons, barbershops and spas
Accounting for Chicago Salons and Barbershops
Booth renters, tips, retail product sales
What this business files
Form numbers and dates. A deadline landing on a weekend moves to the following Monday.
- Form ST-1Sales tax on retail products, since services are not taxed in IllinoisMonthly or quarterly, by the 20th
- Form 1099-NECIssued to booth renters and contractors paid $600 or moreJanuary 31
- Form 941 and IL-941Payroll tax on stylists who are employees, including reported tipsQuarterly
- Schedule C or Form 1120-SThe business return for the shopApril 15, or March 15 for an S corporation
Where owners lose money
We watch for these on every file in this trade.
- A booth renter who uses your products, keeps your hours and books through your system is an employee in practice, and a reclassification reaches back through every open quarter.
- Illinois taxes retail product sales and does not tax the service, so a shop selling shampoo at the counter needs a sales tax account even when most revenue is service.
- Card tips paid out in cash at the end of the night still run through payroll, and skipping the step understates wages on the W-2.
- Chair rent is rental income with its own treatment, separate from service revenue.
Services this trade uses
One fixed monthly fee, agreed before the first month. Catch-up on prior periods is quoted once.
Salon or barbershop
Common questions
Is a booth renter an employee or a contractor?
A genuine renter sets their own hours, keeps their own client list, buys their own product and pays you rent on a written agreement. Once you set the schedule, supply the product and take the payment, the worker is an employee no matter what the agreement says.
Do I charge sales tax on a haircut?
No. Illinois does not tax personal services. Retail products sold at the counter are taxed at the general merchandise rate, so a shop with a retail shelf still files a sales tax return.
How do tips get handled at year end?
Tips reported by employees are wages. They are withheld on, carried through the quarterly returns and reported on the W-2. Tips paid directly to a booth renter are the renter own income and do not touch your payroll.
I run everything through one bank account. Is it a problem?
Yes, and it is the most common thing we fix in this trade. Personal spending in a business account weakens the liability protection of the LLC and turns every deduction into an argument. We open the separation and rebuild the year behind it.
Get your price this week
The first conversation is free. We read three months of statements, quote a flat figure and hold it. We reply the same working day.