June 7, 2022

Cosmetic and Beauty Industry: Cash Relief Still Available from the Employee Retention Credit

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The cosmetic and beauty industry was significantly impacted during the pandemic. Employer-based salons, barbershops, spas, cosmetology schools and more, experienced full and partial shutdowns due to governmental orders, only to reopen subject to capacity restrictions and sanitation procedures—or other modifications. But the entire industry still has the opportunity to access significant cash relief in a refundable employee payroll tax credit—the Employee Retention Credit (ERC). With credits often exceeding the initial payroll tax liabilities themselves, the ERC has already refunded millions of dollars to a broad spectrum of employers, including those in the cosmetic and beauty industry. And unlike the Paycheck Protection Program (PPP) loans, the ERC was never limited by available federal funds, so any business that qualifies and claims can still find ERC relief! 

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Launched in March 2020, the ERC remains one of the biggest relief opportunities—up to $26,000 per employee during 2020 and 2021—available to businesses that have been negatively impacted by the COVID-19 pandemic. And even for those businesses already beginning to recover, employers can retroactively claim the ERC based on hardships experienced during 2020 and the first three quarters of 2021.

Employers should also remember: (1) that the ERC is available even if they already received Paycheck Protection Program (PPP) loans, and (2) businesses that started up after February 2020 may qualify under specific ERC provisions that can provide up to $100,000 in refundable credits in 2021.

ERC Eligibility

Employers in the cosmetic and beauty industry are potentially eligible because government orders restricted their operations. 

Commons examples include, but are not limited to:

  • Reduced occupancy
  • Spacing limitations 
  • Hour reductions necessary to comply with hygiene/sanitation procedures
  • Closure of storefronts, leaving only online sales operations intact

*Note that orders creating qualifying partial suspensions were more common than many employers and tax practitioners realize.

Another way for employers in the industry to be eligible is by showing that the business suffered a reduction in gross receipts. 

  1. Tax Year 2021 (Quarters 1, 2, and 3):
Employer is eligible if business’s gross receipts are more than 20% down from the gross receipts in the same calendar quarter of 2019.
  1. Tax Year 2020 (Quarters 1 through 4):
Employer is eligible if business’s gross receipts are more than 50% down from the gross receipts in the same calendar quarter of 2019.

Conclusion

Remember, although many other forms of government pandemic relief are depleted, the ERC remains available now. Numerous government orders restricted a myriad of ordinary business operations in the industry—and you may be one of many employers entitled to substantial cash benefits. If you operate a business in the cosmetic and beauty industry, don’t wait to find out if you qualify! Contact our team at (410) 497-5947 or schedule your free evaluation with our team here.

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