QUESTION ON BOOTH RENTAL CONTRACT

Q.Good Morning, I have a question and was not sure where to post it. I live in the state of Texas. The owner of the salon in which I work has given us contracts to read and sign if we agree to the terms.

These are Booth Rental Contracts. In the contract it states that at the end of the year the booth renter shall provide a form 1099 to the salon owner showing the untaxed income you provide to the salon.

I am not sure I understand why we have to give her a 1099 when we are solely responsible for our own taxes as an independent business. Can you give me any information about this subject.
Thank you!! ~Lisa

A.Lisa, I have not seen the contract so I am not sure what the contract actually says. As a renter you are required to give a 1099 to your landlord if you paid over $600. If the landlord is a corporation, you do not need to send a 1099. Maybe this is what the lease is getting at.


It is a pleasure serving you.

BOOTH RENTAL AND CREDIT CARD MACHINES

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

QUESTION ON W-9 FROM BOOTH RENTER

Larry, I saw your blog and was very appreciative of the information given, but I have an additional question.

I am a booth renter at a salon and want to know about the w-9 form. The salon owner is asking us to complete one and I don’t think I should have to. I strictly booth rent, I purchase my own products, come and go as I please, and set my own schedule.

I will time to time receive a check from the salon as payment, but the payment is not for a service. It's that my client wanted to use a credit card to pay me and it was run through the salon's credit card machine. So the check that I receive from the salon is my money that they processed for me.

My questions are:

· can the salon charge me more than the credit card fee set by the merchant?

· Do I have to complete the w-9 since I am not receiving payment from the salon for this service per say, they are only processing the payment?

· should I file a w-9 for the booth rent that I pay to them?

· If I do have to complete the w-9 it is only for $600 or more, correct? So if they process more than $600 in payments for me.

· Can the salon take the credit card processing fee from my tips?

· Independent contractor vs. independent business owner as a booth renter. I believe I am an independent business owner so the w-9 doesn’t apply.

Thank you so much for your time.

Franki

Franki, thank you for your kind comments. In response to your questions:

Since you are a booth renter it is acceptable for the owner to charge you more than the credit card cost. Remember that the owner has other costs involved with the credit card machine, such as the purchase or rental of the machine, and there is also additional bookkeeping involved with the handling of the credit card. My answer would be different if you were an employee.

I am not sure why the owner is asking for a W-9. At the same time, there is no reason not to complete one for them. The W-9 just stays in their file. If it were me, I would not make a big deal about it.

You should have a W-9 on file from the owner. In addition, unless the owner is a corporation, you should file a 1099 form showing the gross amount of rent paid. I am assuming that you have paid over $600. See my blog posting on the necessity of doing 1099s.

It sounds like you are somewhat confused. The W-9 is the form that tells you the owner's name and ID number. The 1099 is the form that you give to the owner with a copy going to the IRS showing the amount of rent paid. 1099’s are only required if you pay over $600 for business purposes during the year. You do not have to give a 1099 if the owner is a corporation.

Regarding the owner taking a service charge out of your credit card tips, since you are a booth renter, that is allowable. If you were an employee, it would not be allowable.

Finally, since you are a booth renter, you would not think that the W-9 would apply, but it is not really a big deal. I would not be opposed to giving them a W-9.

Don’t forget to do your 1099. The penalty is usually $100 for every 1099 not issued.

Let me know if I can do anything else to help.

Larry Kospa CPA

CREDIT CARD INFORMATION FOR BOOTH RENTAL SALONS

I just spoke with a new client who is opening up a booth rental salon. Because she will have a booth rental salon she will not collecting any money for the booth renters. Instead, the salon will have one credit card terminal and each stylist will be assigned a number.

If the renter needs to run a credit card through the machine for services, they will type in their number and the money will be deposited into the renter's account and the fees will come out accordingly. None of the money will run through the owner's account.

This might be good information for booth rental salons who run renter's income through their account, and then have to reimburse the renters less the fee. Maybe there are some other industries this would work great for as well.

Larry Kopsa CPA

QUESTION ON BOOTH RENTAL AGREEMENT

Dear Mr. Kopsa, I truely enjoyed your class back in November in Lake Geneva, WI. Also I'd like to thank you for the e-mails you have sent. I have one question for you, I am a salon owner and have contracts for my booth renters but it very general and vague. Do you have a copy of a booth rental agreement form that I could use as a base to write a new one? I would appreciate any info you could give me on this. Thank you, Mary

Mary, it is nice to hear from you. I hope everything is going well. Thank you for your kind comments. I think I will be back in Chicago and Lake Geneva this next year. Please stop by and say hi.

In your email you asked me about a contract for booth renters. Since this is a legal matter and I am an accountant, not an attorney, I do not have anything I can send to you. I would recommend that you consider going out to the following website: http://kassidys.com/productlist.asp. This website has leases and different contract information. Ken Cassidy educates salons and spas extensively on booth rental and many other topics.

Since this is a legal matter and since most attorneys are not familiar with the salon industry, my recommendation is to purchase Ken Cassidy’s lease and the run it by your attorney.

Please let me know if you have any other questions. It is a pleasure serving you.

Larry Kopsa CPA