My client owns a hair salon. He doesn't work in it. On occasion the salon gives out promotional gift cards. When the customer comes in for a haircut, the stylist gets 50% commission. Can client take a write off when the card is redeemed? If so, would it be the 50% paid to the stylist or the full face value of the card? Or no write off at all?
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Is the stylist getting a 1099-Misc box 3 income, just like SPIFFs?
If yes salon owner can take a business deduction for the box 3 payment. No deduction for the other half except for usage of supplies and cost of labor to cut the hair which would be the stylist's salary.Taxes after all are the dues that we pay for the privileges of membership in an organized society. - FDR -
The salon owner can deduct ... "get a write-off" as you call it ... whatever amount he pays the stylist, as long as it's reasonable.Roland Slugg
"I do what I can."Comment
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"Write off" came from my client, and the stylist gets W2 from the salon.Comment
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After thinking about this it's really a wash as the offset to this adjusting entry has to be income. I'm getting pressured from my client but I think I'll just tell him it's a no go. Thanks for the responses. I appreciate it.Comment
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Basis of Accounting
Jeanie is this a cash basis or accrual basis taxpayer?Comment
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He's cash basis.Comment
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No Effect of Gift Certificates
If cash basis, then there is no revenue OR deduction for Gift Certificates. The amount of cash received for goods is reported in the year received. The "deduction" does not exist, but if the gift certificates entitle the holder to receive a discount, then the taxation effect is realized when less money is received than its carrying value.Comment
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