text: SECTION 1. SHORT TITLE.
  
      This Act may be cited as the ``Cosmetology Tax Fairness and 
  Compliance Act of 2003''.
  
  SEC. 2. EXPANSION OF CREDIT FOR PORTION OF SOCIAL SECURITY TAXES PAID 
                WITH RESPECT TO EMPLOYEE TIPS.
  
      (a) Expansion of Credit to Other Lines of Business.--Paragraph (2) 
  of section 45B(b) of the Internal Revenue Code of 1986 is amended to 
  read as follows:
              ``(2) Application only to certain lines of business.--In 
          applying paragraph (1), there shall be taken into account only 
          tips received from customers or clients in connection with--
                      ``(A) the providing, delivering, or serving of food 
                  or beverages for consumption if the tipping of 
                  employees delivering or serving food or beverages by 
                  customers is customary, or
                      ``(B) the providing of any cosmetology service for 
                  customers or clients at a facility licensed to provide 
                  such service if the tipping of employees providing such 
                  service is customary.''
      (b) Definition of Cosmetology Service.--Section 45B of such Code is 
  amended by redesignating subsections (c) and (d) as subsections (d) and 
  (e), respectively, and by inserting after subsection (b) the following 
  new subsection:
      ``(c) Cosmetology Service.--For purposes of this section, the term 
  `cosmetology service' means--
              ``(1) hairdressing,
              ``(2) haircutting,
              ``(3) manicures and pedicures,
              ``(4) body waxing, facials, mud packs, wraps, and other 
          similar skin treatments, and
              ``(5) any other beauty related service provided at a 
          facility at which a majority of the services provided (as 
          determined on the basis of gross revenue) are described in 
          paragraphs (1) through (4).''
      (c) Effective Date.--The amendments made by this section shall 
  apply to tips received for services performed after December 31, 2003.
  
  SEC. 3. INFORMATION REPORTING AND TAXPAYER EDUCATION FOR PROVIDERS OF 
                COSMETOLOGY SERVICES.
  
      (a) In General.--Subpart B of part III of subchapter A of chapter 
  61 of the Internal Revenue Code of 1986 is amended by inserting after 
  section 6050T the following new section:
  
  ``SEC. 6050U. RETURNS RELATING TO COSMETOLOGY SERVICES AND INFORMATION 
                TO BE PROVIDED TO COSMETOLOGISTS.
  
      ``(a) In General.--Every person (referred to in this section as a 
  `reporting person') who--
              ``(1) employs 1 or more cosmetologists to provide any 
          cosmetology service,
              ``(2) rents a chair to 1 or more cosmetologists to provide 
          any cosmetology service on at least 5 calendar days during a 
          calendar year, or
              ``(3) in connection with its trade or business or rental 
          activity, otherwise receives compensation from, or pays 
          compensation to, 1 or more cosmetologists for the right to 
          provide cosmetology services to, or for cosmetology services 
          provided to, third-party patrons,
  shall comply with the return requirements of subsection (b) and the 
  taxpayer education requirements of subsection (c).
      ``(b) Return Requirements.--The return requirements of this 
  subsection are met by a reporting person if the requirements of each of 
  the following paragraphs applicable to such person are met.
              ``(1) Employees.--In the case of a reporting person who 
          employs 1 or more cosmetologists to provide cosmetology 
          services, the requirements of this paragraph are met if such 
          person meets the requirements of sections 6051 (relating to 
          receipts for employees) and 6053(b) (relating to tip reporting) 
          with respect to each such employee.
              ``(2) Independent contractors.--In the case of a reporting 
          person who pays compensation to 1 or more cosmetologists (other 
  than as employees) for cosmetology services provided to third-party 
  patrons, the requirements of this paragraph are met if such person 
  meets the applicable requirements of section 6041 (relating to returns 
  filed by persons making payments of $600 or more in the course of a 
  trade or business), section 6041A (relating to returns to be filed by 
  service-recipients who pay more than $600 in a calendar year for 
  services from a service provider), and each other provision of this 
  subpart that may be applicable to such compensation.
              ``(3) Chair renters.--
                      ``(A) In general.--In the case of a reporting 
                  person who receives rent or other fees or compensation 
                  from 1 or more cosmetologists for use of a chair or for 
                  rights to provide any cosmetology service at a salon or 
                  other similar facility for more than 5 days in a 
                  calendar year, the requirements of this paragraph are 
                  met if such person--
                              ``(i) makes a return, according to the 
                          forms or regulations prescribed by the 
                          Secretary, setting forth the name, address, and 
                          TIN of each such cosmetologist and the amount 
  received from each such cosmetologist, and
                              ``(ii) furnishes to each cosmetologist 
                          whose name is required to be set forth on such 
                          return a written statement showing--
                                      ``(I) the name, address, and phone 
                                  number of the information contact of 
                                  the reporting person,
                                      ``(II) the amount received from 
                                  such cosmetologist, and
                                      ``(III) a statement informing such 
                                  cosmetologist that (as required by this 
                                  section), the reporting person has 
                                  advised the Internal Revenue Service 
                                  that the cosmetologist provided 
                                  cosmetology services during the 
                                  calendar year to which the statement 
                                  relates.
                      ``(B) Method and time for providing statement.--The 
                  written statement required by clause (ii) of 
                  subparagraph (A) shall be furnished (either in person 
                  or by first-class mail which includes adequate notice 
                  that the statement or information is enclosed) to the 
                  person on or before January 31 of the year following 
                  the calendar year for which the return under clause (i) 
                  of subparagraph (A) is to be made.
      ``(c) Taxpayer Education Requirements.--In the case of a reporting 
  person who is required to provide a statement pursuant to subsection 
  (b), the requirements of this subsection are met if such person 
  provides to each such cosmetologist annually a publication, as 
  designated by the Secretary, describing--
              ``(1) in the case of an employee, the tax and tip reporting 
          obligations of employees, and
              ``(2) in the case of a cosmetologist who is not an employee 
          of the reporting person, the tax obligations of independent 
          contractors or proprietorships.
  The publications shall be furnished either in person or by first-class 
  mail which includes adequate notice that the publication is enclosed.
      ``(d) Definitions.--For purposes of this section--
              ``(1) Cosmetologist.--
                      ``(A) In general.--The term `cosmetologist' means 
                  an individual who provides any cosmetology service.
                      ``(B) Anti-avoidance rule.--The Secretary may by 
                  regulation or ruling expand the term `cosmetologist' to 
                  include any entity or arrangement if the Secretary 
                  determines that entities are being formed to circumvent 
                  the reporting requirements of this section.
              ``(2) Cosmetology service.--The term `cosmetology service' 
          has the meaning given to such term by section 45B(c).
              ``(3) Chair.--The term `chair' includes a chair, booth, or 
          other furniture or equipment from which an individual provides 
          a cosmetology service (determined without regard to whether the 
          cosmetologist is entitled to use a specific chair, booth, or 
          other similar furniture or equipment or has an exclusive right 
          to use any such chair, booth, or other similar furniture or 
          equipment).
      ``(e) Exceptions for Certain Employees.--Subsection (c) shall not 
  apply to a reporting person with respect to an employee who is employed 
  in a capacity for which tipping (or sharing tips) is not customary.''
      (b) Conforming Amendments.--
              (1) Section 6724(d)(1)(B) of such Code (relating to the 
          definition of information returns) is amended by redesignating 
          clauses (xii) through (xviii) as clauses (xiii) through (xix), 
          respectively and by inserting after clause (xi) the following 
          new clause:
                              ``(xii) section 6050U(a) (relating to 
                          returns by cosmetology service providers).''
              (2) Section 6724(d)(2) of such Code is amended by striking 
          ``or'' at the end of subparagraph (AA), by striking the period 
          at the end of subparagraph (BB) and inserting ``, or'', and by 
          inserting after subparagraph (BB) the following new 
          subparagraph:
                      ``(CC) subsections (b)(3)(A)(ii) and (c) of section 
                  6050U (relating to cosmetology service providers) even 
                  if the recipient is not a payee.''
              (3) The table of sections for subpart B of part III of 
          subchapter A of chapter 61 of the Internal Revenue Code of 1986 
          is amended by adding after section 6050T the following new 
          item:
  
                                ``Sec. 6050U Returns relating to 
                                          cosmetology services and 
                                          information to be provided to 
                                          cosmetologists.''
      (c) Effective Date.--The amendments made by this section shall 
  apply to calendar years after 2003.
target: Cosmetology Tax Fairness and Compliance Act of 2003 - Amends the Internal Revenue Code to extend the tax credit for social security taxes paid for employee cash tips to employers of cosmetologists. Requires employers of cosmetologists to report income and tips of their cosmetologist employees and to provide income and tip information to self-employed cosmetologists to whom they pay more than $600 in the taxable year. Imposes similar reporting requirements upon individuals who rent chairs to cosmetologists. Requires such employers to provide their cosmetologist employees and self-employed cosmetologists with information on the tax and tip reporting obligations of employees and self-employed individuals.
feat_title: To amend the Internal Revenue Code of 1986 to expand the tip tax credit to employers of cosmetologists and to promote tax compliance in the cosmetology sector.