Seattle Rule 5-039

Employees distinguished from persons engaging in business.

(1) Introduction. The Seattle Municipal Code imposestaxes and fees upon persons engaged in business but not upon persons actingsolely in the capacity of employees pursuant to SMC 5.45.090(S). This rulestates the conditions that serve to indicate whether a person is engaging inbusiness or is an employee.

(2) Considerations. While no one factor definitelydetermines employee status, the most important consideration is the employer'sright to control the employee. The right to control is not limited tocontrolling the result of the work to be accomplished, but includes controllingthe details and means by which the work is accomplished. In cases of doubtabout employee status all the pertinent facts should be submitted to the Licenseand Tax Administration for a specific determination.

(3) Persons engaging in business. For the purpose ofdetermining whether an individual is an employee or independent contractor, theterm "engaging in business" includes commencing, conducting, or continuing in business, andalso the exercise of corporate or franchise powers, as well as liquidating abusiness when the liquidators thereof hold themselves out to the public asconducting such business. SMC 5.30.030(B)(1). Engaging in business alsoincludes the act of transferring, selling or otherwise dealing inreal or personal property, or the rendition of services, for considerationexcept as an employee. The following conditions will serve to indicate that aperson is engaging in business.

If a person is:

(a) Holding oneself out to the public as engaging inbusiness with respect to dealings in real or personal property, or in respectto the rendition of services;

(b) Entitled to receive the gross income of the businessor any part thereof;

(c) Liable for business losses or the expense ofconducting a business, even though such expenses may ultimately be reimbursedby a principal;

(d) Controlling and supervising others, and beingpersonally liable for their payroll, as a part of engaging in business;

(e) Employing others to carry out duties andresponsibilities related to engaging in business and being personally liablefor their pay;

(f) Filing a statement of business income and expenses(Schedule C) for federal income tax purposes;

(g) A party to a written contract, the intent of whichestablishes the person to be an independent contractor; or

(h) Paid a gross amount for the work without deductionsfor employment taxes (such as Federal Insurance Contributions Act, FederalUnemployment Tax Act, and similar state taxes).

(4) Employees. The following conditions indicate that aperson is an employee.

If the person:

(a) Receives compensation, which is fixed at a certainrate per day, week, month or year, or at a certain percentage of businessobtained, payable in all events;

(b) Is employed to perform services in the affairs ofanother, subject to the other's control or right to control;

(c) Has no liability for the expenses of maintaining anoffice or other place of business, or any other overhead expenses or forcompensation of employees;

(d) Has no liability for losses or indebtedness incurredin the conduct of the business;

(e) Is generally entitled to fringe benefits normallyassociated with an employer-employee relationship, e.g., paid vacation, sickleave, insurance, and pension benefits;

(f) Is treated as an employee for federal tax purposes;

(g) Is paid a net amount after deductions for employmenttaxes, such as those identified in subsection (3)(h) of this section.

(5) Full-time life insurance salespersons. SMC5.45.090(S) provides that individuals performing services as full-time lifeinsurance salespersons, as provided in section 3121 (d)(3)(B) of the InternalRevenue Code, will be considered employees. Treatment as an employee under thissubsection (5) applies only to persons engaged in the full-time sale of lifeinsurance. The status of other persons, including others listed in section3121(d) of the Internal Revenue Code, will be determined according to theprovisions of subsections (2) through (4) of this section. See Seattle Rule 5-526for the proper tax treatment of insurance agents, brokers, and solicitors.

(6) Operators of rented or owned equipment. Persons whofurnish equipment on a rental or other basis for a charge and who also furnishthe equipment operators, are engaging in business and are not employees oftheir customers. Likewise, persons who furnish materials and the labor necessaryto install or apply the materials, or produce something from the materials, arepresumed to be engaging in business and not to be employees of their customers.

(7) Casual laborers. Persons regularly performing odd jobcarpentry, painting or paperhanging, plumbing, bricklaying, electrical work,cleaning, yard work, etc., for the public generally are presumed to be engagingin business. The burden of proof is upon such persons to show otherwise.

(8) Entities. A corporation, joint venture, or any groupof individuals acting as a unit, is not an employee.

(9) Booth renters. For purposes of the business licensetax a "booth renter," as defined in RCW  82.04.360(3), is considered engaged inbusiness and not an employee.

(a) A "booth renter" is any person who:

(i) Performs cosmetology, barbering, esthetics, ormanicuring services for which a license is required pursuant to chapter 18.16RCW; and

(ii) Pays a fee for the use of salon or shop facilitiesand receives no compensation or other consideration from the owner of the salonor shop for the services performed.

(b) For the taxability of amounts received for the rentalor licensing of real estate refer to Rule 5-530. Refer to Rule 5-132 for thetaxability of amounts received for leased departments.

(10) Personal chefs. Personal chefs are engaging in abusiness as independent contractors. They prepare meals for consumption attheir clients' homes. Personal chefs typically serve multiple clients, workingwith the clients to create personalized meal plans based on the client'sspecific dietary requirements or requests. The meals may be prepared in theclient's home or in a commercial kitchen and delivered to the client's home.Personal chefs may also prepare meals for social events, such as dinnerparties, cocktail parties, engagement parties, weddings, or receptions.

DIRECTOR'S CERTIFICATION

I, Glen M. Lee, Finance Director of the City ofSeattle, do hereby certify

under penalty of perjury of law, that the within andforegoing is a true and

correct copy as adopted by the City of Seattle,Department of Finance and

Administrative Services.

     DATED this ______ day of July 2016.

                              CITY OF SEATTLE,

                              a Washingtonmunicipality

                         By:     ____________________________________

                                Glen M. Lee,Finance Director

                                Department ofFinance and Administrative Services

Effectivedate: July 14, 2016