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Frank Barranco, a Form W-2. In 1992, petitioner did not issue
Forms 1099 to any of petitioner’s 21 route distributors.5
The outside sales workers were individuals who marketed
petitioner’s product. They had their own vehicles, and
petitioner did not set their hours. When an outside sales worker
sold a product, he was paid a commission. Petitioner had the
right to hire and fire the outside sales people.
In 1991, petitioner issued at least two outside sales
workers, Terre Cone and Terry McKnight, a Form W-2. In 1992, two
of petitioner’s five outside sales workers received Forms 1099.
Of the three who did not receive a Form 1099, two earned less
than $600.
On November 4, 1991, petitioner issued a memorandum from
Ewens to the staff. The memorandum stated: (1) The company had
treated certain workers as employees and others as independent
contractors; (2) beginning January 1, 1992, petitioner would
discontinue its production function and would subcontract its
entire operations to outside groups or individuals; (3)
individuals who wanted to continue their association with
petitioner would be required to sign a statement in which they
accepted responsibility for all of their own payroll taxes; (4)
individuals would be issued Forms 1099 instead of Forms W-2; and
5 Only 5 of the 21 route distributors earned less than $600.
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