Ewens and Miller, Inc. - Page 6




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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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