Salons and spas mix several kinds of income and several kinds of workers under one roof. That mix is why generic bookkeeping often fails them. For the broader accounting picture, see our salon and retail shop accounting guide. This article focuses on what a bookkeeping service should do.
Booth renters, commission, or employees
A genuine booth renter runs an independent business, sets their own prices and hours, keeps their own clients, and pays rent regardless of income. A worker you schedule, price for, and control is generally an employee, whatever the agreement says. Misclassification creates payroll tax exposure, so classification should be reviewed, not assumed.
- Booth rent is income to the salon, recorded separately from service sales.
- Commission and employee pay run through payroll with withholding.
- Renters' own sales are not the salon's revenue.
- Written agreements should match how the relationship actually works.
Tips
Card tips are owed to the workers and should be tracked as liabilities until paid out. For employees, reported tips are wages for payroll tax purposes. The employer FICA credit on tips is limited to food and beverage establishments, so salons generally cannot claim it. See our payroll service.
Retail products vs. back-bar supplies
- Retail product for resale should be tracked as inventory.
- Professional-use supplies are expenses.
- Mixing the two distorts your margins and can create sales tax errors.
- A monthly count of retail stock keeps cost of goods sold accurate.
Sales tax
In many states retail products are taxable while services are not, but some states tax certain services. Your point-of-sale system must separate the two at the item level. Confirm your state's rules rather than assuming. See sales tax filing services for when professional help makes sense.
Monthly reporting a salon owner needs
- 1Revenue by service, retail, and booth rent.
- 2Payroll cost as a percentage of service revenue.
- 3Retail margin and inventory on hand.
- 4Tips payable and sales tax payable balances.
- 5A reconciled profit and loss and balance sheet.
Our bookkeeping service can be tailored to salons and spas. To discuss your bookkeeping needs, share how your stylists are paid and which POS you use.
