Know which arrangement each stylist has
An employee is paid wages through payroll with withholding. A commission worker may still be an employee depending on how much control you exercise. A booth renter pays you rent, keeps their own client revenue and generally handles their own taxes. The label in your contract is not enough, since agencies look at the real relationship, so ask an attorney or CPA if you are unsure. Record booth rent as rental income, not as sales.
Services, products and the processor
Track service revenue and retail product revenue separately because product sales have cost of goods and may be subject to sales tax when services are not, depending on the state. Use your booking and payment system's daily or monthly reports. Card processing fees come out of deposits, so book them as expenses rather than netting them against sales.
Tips and gift cards
Tips paid on a card belong to the service provider. If you hold them until payday, they sit in a liability account. Gift cards are also a liability until redeemed. When a client uses a card, move the amount from liability to income. Expiration and unclaimed property rules vary by state, so check before you assume leftover balances can be treated as income.
Back bar supplies and retail inventory
Color, developer and shampoo used on clients are supplies or cost of services. Items for resale are inventory. Count retail stock at least yearly, and note shrinkage. Some salons track color usage per service to catch waste, since product cost is among the most controllable expenses.
Monthly view
Build a simple page showing service revenue per chair, product sales, payroll, rent, supplies and processing fees. Rebooking rates and revenue per chair hour live in your booking software, but your books give the profit side. If you rent booths, watch late rent as carefully as late invoices. Keep equipment such as chairs, dryers and washing stations on a list with purchase dates for depreciation, and ask your CPA how to treat larger purchases.
Cash, equipment and the owner's own chair
Even in a card-heavy shop, some cash arrives. Log it daily with the register or booking record, and deposit it on a schedule instead of using it for supplies or tips without a record. The owner's own services should be recorded as revenue and handled the way you plan to pay yourself, which is something to review with a CPA.
Keep a list of equipment with purchase date and cost, plus the invoice. Capital purchases such as chairs and shampoo bowls may be depreciated, while small tools are often expensed. Also keep your license renewals, inspection dates and insurance policies in a calendar so a lapse does not interrupt business.
Track average ticket, rebooking and revenue per chair each quarter. A rise in supplies cost without a rise in sales often means color waste or discounting. Review commission rates annually so the numbers still work.
Worked example with numbers
A booth renter pays $250 a week, or $13,000 over 52 weeks. That is rent income to the salon with no payroll. A commission stylist on a 50% split who produces $1,200 of services in a week costs the salon $600 plus employer payroll taxes. The booth renter produces predictable income, the commission stylist produces service revenue and labor cost.
Check each stylist's status with your preparer, because the label matters less than the facts.
Mistakes that cost money
Treating renters as employees or the reverse without checking. Mixing tips with sales. Ignoring gift card liability. No retail inventory count.
Check your work
Tie the point-of-sale report by stylist to payroll and to bank deposits monthly.
Common questions
How do I record booth rent from a stylist?
As rental income, with the renter set up as a customer. Keep a signed rental agreement on file.
Are tips part of my revenue?
Not when they belong to your staff. They pass through you, but must still be reported properly for payroll purposes.
This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation.