Knowledge is Power! New Law in California. Stay informed!

TSPA Student Life

Things to come……..Knowledge is power!

New Booth Rental Law in
California. Are you compliant?
In California, the ability to have booth renters in your spa or salon is getting more difficult. With the implementation of Assembly Bill 5 (AB5), the definition of “Booth Renter” has become much more specific. AB 5 applies to all businesses in all industries; however, it contains specific elements that relate only to salons. If booth renters do not meet the required criteria, spa and salon owners are at risk of steep fines for employee misclassification these workers.
Although AB 5 is in California, there is a good chance that other states will adopt these standards. Independent Contractors (IC) fall under this as well. Many of these are like the IRS’s definition of an IC . Here is a link to the IRS definition; What are some of the rules for being an IC?
IC’s must obtain their own, separate local and state business license
An IC must have their own professional licenses and permits required of their specific practice or profession.
IC’s must have “the ability to set or negotiate their own rates for the services performed”
They must be able to set their own work hours.
IC’s can perform the “same type of work” and contract with other businesses.
But, in addition to the definition of and IC, AB5 goes further and more clearly defines what a valid “Booth Renter” is.
The Booth Renter must set their own rates.
Booth Renters must be paid directly by clients.
They must process their own payments
Booth Renters must set their own hours of work.
They have sole discretion to decide the number of clients they will see.
They have sole discretion over which clients they will perform services for.
Booth Renters must schedule their own appointments.
Booth Renters provide the spa or salon owner a Form 1099
So, be diligent. In order to maintain IC’s and booth renters in your business, make sure that you (and they) follow the rules and meet the criteria. If not, you be fined. The IRS will be eager to come after you as well. Employee misclassification is a big deal. The IRS will look to assess penalties and interest on what they consider delinquent payroll if it is deemed that your IC’s and Booth Renters should have been classified as employees.
As always, we’re around to help. The first call is always free.
Be well,
Monte Zwang
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