How to Calculate Sales Tax on Makeup and Beauty Supplies
- Dec 23, 2016 | Stephanie Faris
When customers buy makeup and beauty supplies, they know they’ll be paying sales tax. However, there are instances where buyers don’t pay sales tax on the beauty products. This is especially true in a situation where a customer is purchasing a product to resell in a salon or other business setting.
Here are a few specifics on sales tax and beauty supplies.
In-state sales of cosmetics to customers are taxable under current local tax rates, assuming a business is located in a state that has a sales tax. In the few states without sales tax, none applies. Not every business needs to collect sales tax in every state, though. For sellers who cross state lines, sales tax only applies if they have a physical presence in the buyer's state, also known as "nexus." As described here, nexus can be established when a business has a traveling sales rep, attends a trade show, or provides a click-through referral from a website.
Nexus is especially relevant to beauty suppliers, since they’ll often have representatives in multiple states working with salon professionals. In that case, they likely have nexus in those states based on local laws. If retailers or direct sales reps plan to use the cosmetics they purchase for makeovers, they’ll need to pay sales tax when they purchase the items from the distributor.
Hairstylists and other salon professionals usually buy their products from beauty supply stores. These shops collect tax on items like scissors, mirrors, and even the furniture in a beauty salon at the time of purchase. But there can be confusion surrounding the products salon professionals purchase for resale. Since they will collect sales tax when they sell these to the customer, industry workers shouldn’t pay taxes at the time they buy the items. To sell items tax-free to customers, suppliers should ask for a completed resale certificate as required by local laws.
In many states, services such as haircuts and coloring are tax-exempt from sales tax. However, tax rules can also vary by city. In New York, for example, salon services are tax-exempt everywhere but New York City. South Dakota is one of four states that tax most services, with salon services included in that. In most other states, though, you'll be able to provide salon services tax-free.
But many salons and spas bring in extra money through the sale of products from styling gel to aromatherapy candles. As in any retail shop, products are subject to state and local sales tax, which means a salon will need to apply for a business permit to collect and remit sales tax on purchases. Since many salons purchase items both for resale and for use in servicing customers, it’s important to distinguish between the two and pay sales tax on the items stylists and other employees will be using.
Professional makeup artists for film, TV, or theater production may be able to purchase the cosmetics and applicators they use tax-free. This is true in New York, but in California and Utah, only the service of applying makeup is tax-exempt. In those states, the makeup artist pays sales tax on the cosmetics at the time of purchase. These states see the makeup artist, rather than the production company, as the consumer of the product, so they don’t extend the tax-exemptions to include makeup and other products.
Whether or not to charge sales tax on makeup and beauty supplies depends on the end user of the product. When a professional uses an item to perform a service, that person is expected to pay sales or use tax, unless a specific exemption applies, such as theatrical makeup. However, when a product is purchased for the purpose of reselling, the customer will ultimately pay tax, which means the professional should present reseller documentation. Professionals and beauty suppliers should check with their local tax laws for specifics.