Dear Larry,
I look forward to reading your blog every week- thanks for all the great information. I am in the process of converting my commission based salon to a booth rental salon; however, I am unsure on how to handle retail sales. Of course as a commission based salon most of our retail is run through the salon’s credit card machine. Can I still do this? Am I then treating the booth renters as employees? Please help me out.
Thanks,
Rachelle
Rachelle, good luck on your conversion to a booth rental operation. In regard to your question of paying the booth renters a stipend for sale of retail, I do not think that this alone would convert the individuals to an employee. As long as you are meeting all of the other tests and as long as you do not exert too much control, just because you are paying the individuals a commission on retail sales, does not turn them into an employee. Remember if you pay them over $600 in commission you will be required to give them a 1099.
You also asked about running the retail sales through your credit card machine. Certainly this is a possibility for the retail credit card sales. Regarding running the entire (including services) sales through the credit card machine, this is one strike against you as far as those individuals being an employee. It is possible to run through your credit card machine and withhold a percentage to reimburse you for your credit card costs, but this does make it more confusing and harder to explain should there be an IRS audit.
What I normally recommend is that each of the individuals has their own credit card machine, or one of the booth renters has a credit card machine and they work it out among themselves. Quite possibly, it might be in your best interest to simply sell your credit card machine to one of the booth renters and let them handle it.
I hope this has been some help.
It’s a pleasure serving you.
Larry Kopsa, CPA
