Yes, the IRS will have the right to look at all business-related documentation and records to assist in the auditing process. (Here’s more information about what they will request and why. Since appointment books help to verify income, it falls within the range of documentation they’d be interested in looking at.) I’m actually in the process of becoming an Enrolled Agent, which will allow me to represent salon owners in proceeding with the IRS (like a tax attorney).

If your business is an LLC, all of your business income should “pass through,” meaning that it gets reported on your personal income tax return. You shouldn’t have to issue yourself a 1099, but I’m not a tax professional, so I recommend talking to someone qualified to advise you, someone who knows every detail of your specific situation. (I’d be happy to help, but I’m certainly not qualified, lol.)

If your state has sales tax on services, you would add that to the cost of the hair cut (the same way taxes are added to retail items). However, you can adjust the service price to be inclusive of sales tax so clients aren’t surprised at the register. (I prefer to do it this way. We don’t have service taxes here in Florida, but we have sales tax on products. My sticker prices are the actual price, taxes and all.)

Workers are classified one of two ways: self-employed or employed. Here’s a post that explains the difference between classification statuses. Here’s another on why the “independent contractor” status doesn’t belong in salons.

The “Know Your Rights” article is in the process of being expanded for 2017, since it’s one of the ones I re-post every year, but the information hasn’t changed. I’m simply adding more information to it. The revision will post on January 6th.

Your arrangement is legal, but puts you in a questionable position. Five of six IRS revenue rulings show that salon landlords who collect a percentage of gross sales in lieu of rent are determined to be employers. However, you’re very clearly the one who operates at a financial disadvantage in this arrangement, and you’re honoring all of the freedoms due to a self-employed person, so I think you’re in a better position to defend it if you had to. A good friend of mine (also named Sharon, coincidentally) offers the same deal to new professionals with no clientele as a courtesy to them. It’s a generous thing to do for a new stylist, and I’d be willing to make that argument to any IRS or DOL investigator if necessary.