Chair/Room Renter - when is a Salon Permit required?
Approved by members at the AGM on September 22, 2019 (Permit Fee $70.00)
If you work from your own home or own your own salon/spa, you are definitely a self-employed business owner and are therefore required to obtain a salon permit from the Association.
There are cases where self-employed Chair/Room Renters are also required to obtain a salon permit. To find out if you fall under this category, please read the following information carefully.
Determining if you are a Self-Employed Chair/Room Renter
The Canada Revenue Agency (CRA) has specific rules on the classification of an employee versus a self-employed chair/room renter. If you file your taxes as self-employed, you need to have control over the work that you do and when you do it. You typically own your own tools and carry your own risk of profit or loss.According to CANADA REVENUE AGENCY, a chair/room renter is self-employed if:
1. Your business is known and registered under another business name (or your own personal name) for tax purposes.
2. You advertise (on Social Media, traditional Media, business cards, pamphlets, flyers, etc.) under a different name other than the salon or spa name.
2. You schedule your own client appointments in a separate appointment book from that of the salon or spa.
4. You handle all monetary transactions directly (no money flows through the salon or spa).
5. You purchase all your own supplies for services provided.
6. You schedule your own hours and come and go as you wish.
This leads to the next important piece of information for Chair/Room Renters: Taxes.
This leads to the next important piece of information for Chair/Room Renters: Taxes.
Canda Pension Plan (CPP) for Chair/Room Renters
If you are a self-employed chair/room renter, you are responsible for paying CPP contributions to the CRA and you must pay both your portion and the employer portion. (As an employee, you pay half that amount and the employer pays the other half.)Employment Insurance (EI) for Chair/Room Renters
As s self-employed individual, you generally get to choose whether or not you want access to the EI program. However self-employed chair/room renters get special consideration from the CRA. In this case, the salon owner must pay the employees portion of EI premiums to the CRA. (if the landlord or salon owner pays your EI premiums, you do not require a salon permit - you are covered under the salon permit that you are renting space from)If the salon/spa owner does not know that the renter's income is, Employment Insurance is adjusted. The amount of insurable earnings is the lesser of:
- the number of days worked in the week multiplied by 1/390 of the maximum of the annual insurable earnings
- 1/78 of the maximum of the annual insurable earnings
Understanding Chair/Room Rental Permit
There are currently independent chair/room renters and salon/spa owners who are not conducting business under the guidelines established by CRA and described above. If you are not following CRA guidelines as described above, you may be subjected to audits and reviews by CRA resulting in penalties and fines. The Association is providing this information to help cosmetologists understand their tax requirements. The information provided above determines which chair/room renters are required to obtain a salon permit.
If you are a chair/room renter and the salon owner is paying EI benefits to CRA, you ARE NOT required to obtain a salon permit. You are operating as an employee of the salon/spa.
If you are a chair/room renter and the salon owner is NOT paying EI benefits to CRA, you ARE required to obtain a salon permit. In this case, you are a business owner and should comply (as other salon owners comply) with section 31 (1) of the Cosmetology Act.