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What records should a med spa keep for payroll, inventory and sales tax?

Payroll records at a med spa go beyond standard time tracking because commission-based compensation is common. Keep time records for every employee, whether hourly front desk staff or salaried managers. For providers earning commissions, document how each pay period’s commission was calculated. This means tracking which services each provider performed and the revenue generated. When pay disputes come up, you need records showing exactly how the numbers were determined.

Standard employment documentation includes W-4 forms, I-9 verification, and any Texas state withholding forms. Keep copies of all paystubs and direct deposit records. Quarterly payroll tax filings, both federal Form 941 and Texas Workforce Commission reports, should be retained for at least four years. If clients tip on services, track and report those amounts separately on employee pay records.

Inventory records require separating retail products from supplies consumed during treatments. Skincare products, serums, and sunscreens sold to clients are retail inventory. Products used during facials, peels, and other treatments are supplies or cost of goods sold. For retail inventory, track every purchase with invoices showing item, quantity, and cost. Physical counts at least quarterly help reconcile your books against what’s actually on the shelf. Many med spa products have expiration dates, so tracking lot numbers helps you move older inventory first and write off expired items properly.

For treatment supplies and injectables, keep purchase records organized by vendor. You don’t need to count every cotton pad, but major costs like injectable vials and professional-grade products should be tracked carefully.

Sales tax records in Texas require clear documentation of what was sold and what tax was collected. Texas charges sales tax on retail product sales but generally not on professional services. When a client buys a serum to take home, you collect sales tax. When they pay for a facial or injection, you don’t. Your point of sale system should apply tax correctly, but your records must support what was charged.

Keep transaction records showing taxable and non-taxable amounts for each sale. When you remit sales tax to the Texas Comptroller, your records should match those filings exactly. Auditors compare reported taxable sales to actual sales records and bank deposits. Discrepancies cause problems.

The challenge for med spas is that transactions often mix services and products. A treatment package that includes take-home skincare needs records showing the breakdown so sales tax applies correctly to the product portion. Your POS system handles this at checkout, but underlying documentation must support it.

Organized records make business tax preparation straightforward and protect you if questions arise later. Payroll documentation supports correct filings. Inventory records help you understand margins. Sales tax records keep you compliant with state requirements. Keeping everything current throughout the year beats scrambling to reconstruct records months after the fact.

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SRC Bookkeeping & Tax is a Woodlands-based bookkeeping and tax practice serving small businesses across Greater Houston. Founded by Shane Christenson with experience in banking, public accounting, and nonprofit finance. We help business owners keep their records organized and their taxes handled.

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