Why the 45B Tax Credit Must Be Reinstated

Posted June 18, 2025
By Professional Beauty Employment Coalition (PBEC)

The Senate’s decision to drop the 45B FICA tip tax credit from the No Tax on Tips (NTOT) legislation is an employment mistake.  It puts Main Street beauty employers at risk—and undermines the intention of the President's promise to keep more money in employee's paychecks. While the House version included both NTOT and an expansion of the 45B credit to salons, spas, and barbershops, the Senate bill removes the credit.  Without 45B, NTOT is not a benefit—it’s a tax increase on beauty industry employers.

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Why It Matters
The NTOT provision makes sense. It puts more money in the hands of tip earners—something we all support. But making that policy work requires one thing above all else: tips must be reported.  And that only happens when employers are aligned with their employees. Without 45B, beauty industry employers who report tips face a sudden increase in payroll tax liability—with no offsetting credit like restaurants receive. The result?  Many will stop hiring W-2 workers altogether.  Some will close.  And the shift to independent contractor classification will accelerate.

‍Credible Advocacy
The entire industry has pushed for inclusion in 45B for years.  We’ve testified to Congress about the challenges around tip reporting in the beauty industry.  Today more than ever, employer participation is the key that ulocks the President’s campaign promise. Congress needs small business employers on board if NTOT is going to work. The 45B credit is the mechanism that makes it possible. Without this fix, NTOT will:
• Hurt the very Main Street employers who support working families
• Undermine job stability and benefits for tipped professionals
• Increase risk of audits and unmanageable payroll tax burdens
• Accelerate misclassification and reduce W-2 employment

‍Our Message to Senate Leadership
‍We urge Chairman Crapo, Leader Thune, and the Senate to correct this oversight and reinstate the 45B tax credit. It’s revenue-neutral.  It has a history of bipartisan support.  And it is essential to ensure NTOT delivers on its promise—to workers and their employers.