Short answer. A booth renter runs a small business: you collect from clients, pay rent and supplies, and report profit on Schedule C. A commission stylist is paid a share of service sales by the salon and may be an employee or a contractor depending on the facts. Either way, log services, product sales, sales tax and tips every week. Barbers, hairstylists, cosmetologists, manicurists, lash and brow technicians, makeup artists, skincare specialists and shampooers are on the IRS tipped occupations list.
What changes between booth rent and commission
| Booth or suite renter | Commission stylist | |
|---|---|---|
| Who collects from clients | Usually you, with your own card reader or booking app | Usually the salon |
| What you pay the salon | A fixed weekly or monthly rent, due whether the book is full or not | Nothing fixed; the salon keeps its share of each service |
| Color, products, tools | Usually yours to buy | Usually the salon's |
| Forms in January | Possibly a Form 1099-K from a card processor or app | A W-2 if you're an employee, or a 1099-NEC if paid as a contractor |
The renter's risk is the fixed rent: a slow month still costs the full amount. The commission stylist gives up a larger share of each ticket but carries less of the overhead. The worksheet below shows where the two cross for your own numbers. Real deals vary. Some salons charge renters for product or booking, and some commission splits deduct a product fee, so enter what your agreement says.
A label in the agreement doesn't settle whether a commission stylist is an employee. New Jersey applies the ABC test for many state purposes, and the IRS looks at control, financial and relationship factors. If you aren't sure how you're being paid, ask the salon how it reports your pay and see the NJ ABC test guide.
Tips: what the IRS list says about beauty work
The federal deduction for qualified tips runs from tax year 2025 through 2028. The IRS says the maximum is $25,000 a year, it phases out for modified AGI over $150,000 ($300,000 for joint filers), and a Social Security number is required. For self-employed people the deduction can't exceed the net income of the business where the tips were earned, and someone self-employed in a specified service trade or business doesn't qualify (IRS provisions page).
Only tips received in an occupation on the IRS list count. Under "Personal appearance and wellness" the IRS list includes:
- 601 Skincare specialists
- 603 Barbers, hairdressers, hairstylists, and cosmetologists
- 604 Shampooers
- 605 Manicurists and pedicurists
- 606 Eyebrow and eyelash technicians
- 607 Makeup artists
Massage therapists (602) and tattoo artists and piercers (609) are in the same group. Your preparer decides whether the deduction applies to you; the job of your records is to show each tip with a date and an amount. A weekly line works; a daily line is better. See how to keep a daily tip log and how to check your job on the list, and estimate the deduction with the tips deduction calculator.
Card tips are the easiest to lose track of. A renter's processor deposits them with service sales, so split them out from the payout report each week. A commission stylist should check that card tips on the salon's report match what was paid out.
Product sales and New Jersey sales tax
The Division of Taxation's salon publication, ANJ-19, says most personal services in a salon are exempt from sales tax. Its exempt list includes cutting, coloring, braiding, extensions, perms and styling; manicures, pedicures, fills and full sets; makeup application and eyelash extension services; facials; waxing and threading. Massage, tanning and permanent cosmetic makeup are listed as taxable.
Retail is different. When you sell taxable items such as shampoo or nail polish, you collect sales tax at the statewide rate of 6.625%. Supplies you use on clients are taxed when you buy them; products you buy only to resell can be bought with a resale certificate, Form ST-3. If you can't separate resale stock from back-bar stock, ANJ-19 says tax is owed on the whole purchase. A business registers with the State (Form NJ-REG) before making sales; the S&U-4 guide says at least 15 business days before starting. Keep the tax you collect apart from your income: it belongs to the State. The sales tax calculator splits a tax-included total if your reader only shows one number.
Expenses a booth renter tracks
On the 2026 Schedule C, booth or suite rent goes on line 20b (rent or lease of other business property), color and other supplies used on clients on line 22, card and app fees on line 10, liability insurance on line 15, license fees on line 23 and advertising on line 8. Products you resell belong in cost of goods sold (Part III). Shears, dryers and chairs may be depreciated or expensed; that's a question for your preparer. Mileage for supply runs and house calls is figured with the mileage deduction calculator.
License renewal
New Jersey beauty licenses come from the State Board of Cosmetology and Hairstyling in the Division of Consumer Affairs. This guide doesn't list renewal dates or fees; read them on the Board's site (njconsumeraffairs.gov/cos) or your renewal notice, and put the date on your calendar with a reminder well ahead.
A weekly routine
- Pull the week's payout report or commission statement.
- Write services, product sales, the sales tax on them, cash tips and card tips on separate lines.
- File receipts for rent, supplies and fees under their Schedule C category.
- Once a month, set money aside for income tax and, if you sell products, for the sales tax return.
For the salon owner's side (payroll, renters as customers, gift cards), see salon and barber bookkeeping. Paying or getting paid as a contractor? The 1099 threshold rose to $2,000 for 2026 payments: see what changed in the 1099 rules.
Compare booth rent with commission
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Official sources
- IRS: Occupations that customarily and regularly received tips on or before Dec. 31, 2024 (updated June 28, 2026)
- IRS: Provisions for individuals and workers, including no tax on tips (updated Aug. 27, 2026)
- NJ Division of Taxation: ANJ-19, Barber Shops, Hair Salons & Spas (Rev. 5/23)
- NJ Division of Taxation: Sales tax rate, 6.625% (updated April 30, 2025)
- NJ Division of Taxation: S&U-4, New Jersey Sales Tax Guide (Rev. 07/22)
- IRS: Schedule C (Form 1040), Profit or Loss From Business, 2026
Checked November 2026 on the official pages above.
Common questions
Do I charge sales tax on haircuts in New Jersey?
ANJ-19 lists haircuts, color, styling and most other salon services as exempt. Sales tax is collected on taxable retail items you sell, such as shampoo or nail polish. Massage, tanning and permanent cosmetic makeup are listed as taxable services.
Are nail and lash technicians on the IRS tipped occupations list?
Yes. The list includes manicurists and pedicurists (code 605) and eyebrow and eyelash technicians (606), along with barbers, hairstylists and cosmetologists (603), shampooers (604), makeup artists (607) and skincare specialists (601).
I rent a booth. Can my tips count for the deduction?
The IRS says self-employed people can claim it, limited to the net income of the business where the tips were earned, and not if the business is a specified service trade or business. Your preparer decides how it applies; your log should show each tip's date and amount.
Where does booth rent go on Schedule C?
On the 2026 form it is line 20b, rent or lease of other business property. Supplies used on clients go on line 22 and card fees on line 10.
When does my New Jersey cosmetology license renew?
Check the State Board of Cosmetology and Hairstyling's site or your renewal notice. This guide doesn't list dates or fees because we couldn't confirm them on the Board's page.
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