Tax Type
BPOL Tax
Local Taxes
Description
Musician; Employee vs. independent contractor; Definite place of business
Topic
Local Power to Tax
Local Taxes Discussion
Date Issued
04-30-2001
April 30, 2001
Re: Request for Advisory Opinion
Business, Professional, & Occupational License (BPOL) Tax
Dear ****:
This advisory opinion is issued in response to your request for guidance concerning the local license taxation of **** (the "Taxpayer"). I apologize for the delay in responding to your request.
While addressing the questions raised in your letter, this response is intended to provide advisory guidance only, and does not constitute a formal or binding ruling. I have enclosed copies of cited material for your review.
You ask whether or not the Taxpayer is subject to business licensure in your locality.
FACTS
The Taxpayer is a musician who resides in your locality. She states that she does not maintain an office at her residence. She does not perform in your locality.
The Taxpayer provides musical instruction and musical performances at a college located in another locality. The college treats her as an employee for federal income tax purposes. She has an office at the college.
The Taxpayer also performs with a symphony in another locality. The symphony treats her as an employee for federal income tax purposes.
Additionally, the Taxpayer performs as part of a musical trio ("the Trio"). The other two members of the Trio are also employed by the college. The Trio is represented by a professional manager located in another state. The manager reports the Taxpayer's compensation for these performances on a federal Form 1099. The Taxpayer reports this compensation on Schedule C (Profit or Loss from Business) of her federal income tax return. The Trio has never performed in your locality.
The Taxpayer states that her office at the college is her office with regards to the Trio. The Taxpayer's business card for the Trio lists the address of her office at the college. The Taxpayer's Form 1099 is sent to her office at the college.
OPINION
Employee vs. Independent Contractor
The first issue that must be addressed is whether the Taxpayer is an employee or an independent contractor. An independent contractor may be engaging in a business, but an employee generally is not.
Section 2.12 of the 2000 BPOL Guidelines explains that:
[t]he determination as to whether a person is an employee or an independent contractor is based on common law principles and is affected by factors such as control, who furnishes materials, and other factors.
Localities are entitled to rely upon the classification of a person as an employee or independent contractor for federal payroll tax purposes unless the taxpayer demonstrates that the classification for federal payroll tax purposes is erroneous or inapplicable.
The facts presented indicate that the Taxpayer is an employee of the college and the symphony for federal income tax purposes. Unless the classification for federal income tax purposes is erroneous or inapplicable, it is my opinion that the Taxpayer is not engaged in a business with respect to her activities with the college and the symphony.
The facts presented indicate that the Taxpayer is not treated as an employee for federal income tax purposes with respect to the Trio's performances. Unless the classification for federal income tax purposes is erroneous or inapplicable, it is my opinion that she is potentially subject to business licensure regarding those activities. In order to be subject to business license taxation with respect to her activities with the Trio, the Taxpayer must be engaging in a business.
Engaging in Business
Public Document 97-165 (April 11, 1997), explains that it is the artist's purpose that distinguishes a hobby from a licensable business.
The fact that the Trio retains a professional manager is consistent with a finding that the Taxpayer is engaged in a business, rather than a hobby. However, the facts presented are not sufficient for me to make a determination regarding this issue.
Jurisdiction to Impose Tax
If the Taxpayer is engaged in a business with respect to her activities with the Trio, the final issue that must be addressed is whether or not the Taxpayer is subject to license taxation in your locality. Chapter 1 of the 2000 BPOL Guidelines provides that:
"[d]efinite place of business" means an office or a location at which occurs a regular and continuous course of dealing where one holds one's self out or avails one's self to the public for thirty consecutive days or more, exclusive of holidays and weekends. A definite place of business for a person engaged in business may include a location leased or otherwise obtained from another person on a temporary or seasonal basis and real property leased to another. A person's residence shall be deemed to be a definite place of business if there is no definite place of business maintained elsewhere and the person is not subject to licensure as a peddler or itinerant merchant.
The facts provided indicate that the Taxpayer resides in your locality. However, the Taxpayer states that she does not maintain an office in her residence. The Taxpayer asserts that she maintains an office at the college. The Taxpayer has provided evidence that this is her office with respect to her activities with the Trio. Based on this information, it is my opinion that the Taxpayer is not subject to license taxation in your locality.
I hope that the above information will be of assistance to you. Although I believe this letter conforms with the requirements of the law, it is written only for your guidance. If you have other questions, please do not hesitate to contact **** Tax Analyst, in my office of Tax Policy at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
Re: Request for Advisory Opinion
Business, Professional, & Occupational License (BPOL) Tax
Dear ****:
This advisory opinion is issued in response to your request for guidance concerning the local license taxation of **** (the "Taxpayer"). I apologize for the delay in responding to your request.
While addressing the questions raised in your letter, this response is intended to provide advisory guidance only, and does not constitute a formal or binding ruling. I have enclosed copies of cited material for your review.
You ask whether or not the Taxpayer is subject to business licensure in your locality.
FACTS
The Taxpayer is a musician who resides in your locality. She states that she does not maintain an office at her residence. She does not perform in your locality.
The Taxpayer provides musical instruction and musical performances at a college located in another locality. The college treats her as an employee for federal income tax purposes. She has an office at the college.
The Taxpayer also performs with a symphony in another locality. The symphony treats her as an employee for federal income tax purposes.
Additionally, the Taxpayer performs as part of a musical trio ("the Trio"). The other two members of the Trio are also employed by the college. The Trio is represented by a professional manager located in another state. The manager reports the Taxpayer's compensation for these performances on a federal Form 1099. The Taxpayer reports this compensation on Schedule C (Profit or Loss from Business) of her federal income tax return. The Trio has never performed in your locality.
The Taxpayer states that her office at the college is her office with regards to the Trio. The Taxpayer's business card for the Trio lists the address of her office at the college. The Taxpayer's Form 1099 is sent to her office at the college.
OPINION
Employee vs. Independent Contractor
The first issue that must be addressed is whether the Taxpayer is an employee or an independent contractor. An independent contractor may be engaging in a business, but an employee generally is not.
Section 2.12 of the 2000 BPOL Guidelines explains that:
[t]he determination as to whether a person is an employee or an independent contractor is based on common law principles and is affected by factors such as control, who furnishes materials, and other factors.
Localities are entitled to rely upon the classification of a person as an employee or independent contractor for federal payroll tax purposes unless the taxpayer demonstrates that the classification for federal payroll tax purposes is erroneous or inapplicable.
The facts presented indicate that the Taxpayer is an employee of the college and the symphony for federal income tax purposes. Unless the classification for federal income tax purposes is erroneous or inapplicable, it is my opinion that the Taxpayer is not engaged in a business with respect to her activities with the college and the symphony.
The facts presented indicate that the Taxpayer is not treated as an employee for federal income tax purposes with respect to the Trio's performances. Unless the classification for federal income tax purposes is erroneous or inapplicable, it is my opinion that she is potentially subject to business licensure regarding those activities. In order to be subject to business license taxation with respect to her activities with the Trio, the Taxpayer must be engaging in a business.
Engaging in Business
Public Document 97-165 (April 11, 1997), explains that it is the artist's purpose that distinguishes a hobby from a licensable business.
The fact that the Trio retains a professional manager is consistent with a finding that the Taxpayer is engaged in a business, rather than a hobby. However, the facts presented are not sufficient for me to make a determination regarding this issue.
Jurisdiction to Impose Tax
If the Taxpayer is engaged in a business with respect to her activities with the Trio, the final issue that must be addressed is whether or not the Taxpayer is subject to license taxation in your locality. Chapter 1 of the 2000 BPOL Guidelines provides that:
"[d]efinite place of business" means an office or a location at which occurs a regular and continuous course of dealing where one holds one's self out or avails one's self to the public for thirty consecutive days or more, exclusive of holidays and weekends. A definite place of business for a person engaged in business may include a location leased or otherwise obtained from another person on a temporary or seasonal basis and real property leased to another. A person's residence shall be deemed to be a definite place of business if there is no definite place of business maintained elsewhere and the person is not subject to licensure as a peddler or itinerant merchant.
The facts provided indicate that the Taxpayer resides in your locality. However, the Taxpayer states that she does not maintain an office in her residence. The Taxpayer asserts that she maintains an office at the college. The Taxpayer has provided evidence that this is her office with respect to her activities with the Trio. Based on this information, it is my opinion that the Taxpayer is not subject to license taxation in your locality.
I hope that the above information will be of assistance to you. Although I believe this letter conforms with the requirements of the law, it is written only for your guidance. If you have other questions, please do not hesitate to contact **** Tax Analyst, in my office of Tax Policy at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
Related Documents
Rulings of the Tax Commissioner