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customer was IMC, for which petitioner hauled limestone.
Petitioner had an arrangement with a pool of drivers whom it
treated as independent contractors. These drivers generally used
their own trucks to transport a given load of goods. However,
Mr. Golden owned some trailers that he sometimes rented to the
drivers.
When petitioner’s contract customers had materials to be
transported, petitioner would assign drivers to the job, and the
drivers would transport the materials. The contracting companies
would pay petitioner for the transportation service, and
petitioner would, in turn, pay the drivers for their services.
The amount paid by petitioner to the drivers was a netted amount.
The gross amount received by petitioner with respect to the loads
transported by the drivers was netted by deductions for: (1) A
brokerage commission charged by petitioner and (2) certain
expenses for worker’s compensation, liability insurance, fuel
costs, trailer rental, and collision insurance.
Mr. Golden maintained petitioner’s books and records for the
years at issue. Mr. Golden graduated from high school but never
took any accounting or college-level courses. Amongst the
records maintained was a ledger reflecting the activity of each
truck for a particular time period. The ledger for 1993,
however, had been discarded by Mr. Golden. The ledgers for the
1994 and 1995 tax years list the number of loads each truckdriver
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