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Rev. Rul. 54-459 - 1954-2 C.B. 337

Caution: Superseded by Rev. Rul. 74-220

IRS Headnote:

Individuals who distribute telephone directories as spare-time work for a delivery-service corporation pursuant to certain instructions which relate to the result to be achieved rather than the manner and means by which such result is accomplished, are not employees of the corporation for Federal employment tax purposes.

Full Text - Rev. Rul. 54-459

Advice is requested whether individuals performing services during 3 or 4 days in a calendar year in the distribution of telephone directories for a delivery-service corporation are employees of the corporation for purposes of the Federal Insurance Contributions Act (subchapter A, chapter 9, Internal Revenue Code of 1939).

In the instant case the delivery-service corporation enters into contracts with various telephone companies for the distribution of new telephone directories to their subscribers. Generally, the directories are distributed only once each year and distribution is completed within 3 or 4 days. The names and addresses of the subscribers are furnished by the telephone companies on individual delivery tickets. The number of directories furnished corresponds to the number of delivery tickets. The corporation separates the tickets by areas and, where possible, by streets. It also separates the entire group of tickets into quantities which can conveniently be handled by an individual using an automobile or small truck. The corporation sends a representative to a given area to rent space to be used as an operating center, to receive the new directories from the printers, and to engage individuals to distribute the directories. The distributors are usually obtained through advertisements in the local newspapers.

The distributors agree to deliver the new directories to subscribers at the locations shown on the delivery record, attempt to pick up an old directory for each new directory delivered, return all delivery records and undelivered new directories, notify the corporation at once if delivery of the directories cannot be completed within the time specified, and tie old directories in bundles and return them to the delivery office or operating center. Each distributor furnishes his own motor vehicle and pays all expenses in connection therewith. The distributors determine the means, manner and method of making the deliveries and may hire and supervise assistants. The assistants are paid by the distributors.

The corporation furnishes form letters to the distributors suggesting means for performing the work efficiently. As a rule, the corporation has no contact with the distributors from the time they leave the operating center to begin delivery until the job is completed.

When the deliveries are completed, the corporation makes a spot check by telephone for the purpose of determining whether the deliveries reported have actually been made. A check or draft in payment for the service is mailed to each distributor after the spot check has been completed. The remuneration for the services is on a piecework basis, i.e., a certain amount for each new directory delivered and each old directory returned.

The distributors perform no other services for the corporation.

Section 408.204(c) of Regulations 128 relating to the definition of the term `employee' for Federal Insurance Contributions Act purposes provides that generally the relationship of employer and employee exists when the person for whom services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished.

Whether a person is an independent contractor or an employee is largely a question of fact to be determined upon the particular facts of each case. In the instant case it is clearly shown that the corporation neither exercises nor has the right to exercise such control over the distributors in the performance of their delivery services as is necessary under the usual common law rules to establish an employer-employee relationship for Federal employment tax purposes. In fact, the corporation is interested only in the result to be accomplished by the work of the distributors and not in the means by which that result is accomplished. Accordingly, it is held that the distributors are not employees of the corporation for Federal employment tax purposes.


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