TN 15 (06-97)

A. BACKGROUND

Prior to January 1, 1983, the employment status for services performed was determined on an individual basis, using the common-law control test.

Income derived for services performed after December 31, 1982, will be considered self-employment.

The Small Business Job Protection Act of 1996, HR. 3448, Section 1118 expanded the definition of "direct sellers" to include persons engaged in the delivering or distribution of newspapers or shopping news for federal income tax purposes.

B. POLICY

1. Real Estate Agent

To be considered self-employed, a real estate agent must:

1. Be licensed;

2. Derive substantially all remuneration directly from sales activities, rather than the number of hours worked;

3. Perform under a written contract stipulating the individual is not an employee.

2. Direct Seller

To be considered self-employed, a direct seller must:

1. Be engaged in the trade or business of selling (or soliciting the sale of) consumer products —-

   • to any buyer on a buy-sell basis, a deposit -commission basis, or any similar basis, for resale ( by the buyer or any other person ) in the home or in other than a permanent retail establishment; or

   • in the home or in other than a permanent retail establishment; or

   • be engaged in the trade or business of the delivering or distribution of newspapers or shopping news (including any services directly related to such trade or business)

2. Derive substantially all remuneration (whether or not paid in cash) for services performed which were directly related to sales or other output, rather than the number of hours worked and

3. Perform under a written contract stipulating the individual is not an employee for federal tax purposes.

3. Common-Law Control

If all of the above conditions are not met,consider whether they are employees under the common-law control test.