Weekly Round-Up: An Analysis of the Ninth Circuit's FedEx Case and Its Lessons for Tax Practitioners

Abraham Lincoln reportedly asked, “If you call a dog's tail a leg, how many legs does a dog have?” His answer was, “Four. Calling a dog's tail a leg does not make it a leg.”  This is the example that the Ninth Circuit used in its decision in Alexander et al. v. FedEx Ground Package System, Inc,to question the sufficiency of labels.

The decision, as well as the increase in worker classification audits, highlights the importance of properly classifying workers and the potential exposure a business may have if it has misclassified workers—innocently or not, Bruce P. Ely and J. Sims Rhyne III, both with Bradley Arant Boult Cummings LLP, write in this week’s issue of the Bloomberg BNA Weekly State Tax Report.

Using FedEx Ground as a guide, Ely and Rhyne, in their article, which can be read here, discuss several important issues facing businesses and their tax advisers, including: (1) whether contractual language labeling a worker as an independent contractors is sufficient; (2) what constitutes true relinquishment of “control;”and (3) the potential exposure to multiple worker classification audits by different state and federal agencies and the differing standards that may apply.

Some notable developments from the State Tax Developments Tracker – Bloomberg BNA’s new tool for monitoring important developments in all the states:

Colorado Department of Revenue Announces Changes in Tax Return Processing System

Connecticut Department of Revenue Services Issues an Update Regarding Mandatory e-filing for 1040ES and Annual Sales Tax Filing

Massachusetts Department of Revenue Issues a Directive Regarding Sales and Use Tax Exemption for Certain Direct Mail Promotional Advertising Materials

For more information about this and other state tax issues, sign up for a free trial of the Bloomberg BNA Premier State Tax Library. 

In other developments…

New Jersey targets US corporations that move their incorporation offshore, by PwC

Tax Foundation Awards for Outstanding Achievement in State Tax Reform in 2014, by the Tax Foundation

State “Income Migration” Claims Are Deeply Flawed, by the Center on Budget and Policy Priorities

Compiled by Priya D. Nair

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