Salespeople As Contractors
If a salesperson does not meet the common-law rules of an employee, his or her pay may still be subject to Social Security, Medicare FUTA (Federal Unemployment) taxes. The statutory employee test was mentioned earlier, but the following eight items have been tailored specifically for salespeople. Therefore, if the salesperson meets all eight of the following tests, then that worker is a statutory employee and the associated taxes must be withheld:
- Works full time for one person or company except, possibly, for sideline sales activities on behalf of some other person, and
- Sells on behalf of, and turns his or her orders over to, the person or company for which he or she works, and
- Sells to wholesalers, retailers, contractors, or operators of hotels, restaurants, or similar establishments, and
- Sells merchandise for resale, or supplies for use in the customer’s business, and
- Agrees to do substantially all of this work personally, and
- Has no substantial investment in the facilities used to do the work, other than in facilities for transportation, and
- Maintains a continuing relationship with the person or company for which he or she works, and
- Is not an employee under common-law rules.
With eight different criteria, it leaves a lot of room for interpretation.