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Hathaway incurred the cost of going to 22 apparel shows per
year, where he displayed TAG merchandise and solicited orders.
These apparel shows cost Hathaway between $250-$600 per show for
showroom rental fees and promoters' fees. Hathaway’s total
costs, including hiring assistants to help set up displays, may
have run to $2,000 for some shows. Hathaway also paid $75 per
year to be a member of the Bureau of Wholesale Sales
Representatives. Membership in this organization was required in
order to participate in certain apparel shows.
TAG's sales representatives also incurred the cost of hiring
people to assist them in their sales activities. During the
years in issue, Hathaway employed order writers and people to
assist him at apparel shows. TAG knew that their sales
representatives hired assistants and encouraged their sales
representatives to do so; however, TAG did not screen assistants
hired by their sales representatives.
Hathaway spent a total of $84,763 and $84,847 for these
business expenses in 1989 and 1990, respectively.
In addition to the above expenses, Hathaway bought sales
materials and equipment from TAG. TAG then deducted the costs of
those items from the commissions that TAG paid to Hathaway on a
semiannual basis, and TAG issued to Hathaway Forms 1099 in the
amounts of these costs. The following table lists the costs of
items Hathaway bought from TAG in 1989 and 1990.
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Last modified: May 25, 2011