Larry, how do you suggest we process gift cards and series purchases in regards to paying our stylists and therapists once the service is redeemed.
Wendy
Wendy, if you are selling the gift cards and therefore keeping the money as opposed to the individual stylists, then the sale of the gift cards would be income to you at the time of the sale. Then when the person redeems the gift card, you would pay the technician for the service. Normally there is a service charge of 5% to 10% that the owner requires to compensate for the bookwork etc.
I hope this helps.
Larry Kopsa CPA
Larry, that’s what we were planning on doing. I guess I was confused about when and how to actually pay them, once a week, monthly etc. And they would not be considered employees right? We can still pay them for the services and any retail commission as a booth renter?
Wendy, actually you are not paying them for the services, you are just reimbursing them for the gift card. Think of gift cards sold at a shopping mall. As far as retail sales are concerned, our opinion is that you can give them a 10% commission without making them an employee. Remember, if their commission is over $600 you must give a 1099 to them. As far as when to pay them, you just need to set a policy that everybody understands. I would suggest paying for gift certificates redeemed every two weeks.
Larry Kopsa CPA
