A long standing custom in the hair salon industry is owners of salons leasing out booths to hair stylists. If not properly documented and exercised appropriately, the owner opens the door for many legal issues. Booth rental has both legal and IRS compliance issues that need to be addressed. Booth rental is legal in many states but you must adhere to several contractual compliance requirements to completely separate your salon from the renter.
An independent contractors is a form of entity that exists in some industries related to existing law and historical court cases. For tax purposes, the independent contractor is responsible to pay all associated employment taxes. It is rooted in the basic rule of self control over the timing and end result of the services provided.