The opinion of the court was delivered by: TRAVIA
This action having come on to be heard before this court on the 27th day of July, 1973, and the parties having on that day stipulated to waive a jury trial, and the evidence of the parties having been adduced, and the attorneys for the parties having submitted their respective pretrial and posttrial briefs and memoranda, and upon all the papers and exhibits on file in this action, and after due deliberation this court sets forth its findings of fact, conclusions of law and opinion.
Plaintiff corporation, organized under the laws of the State of Delaware with its principal place of business at Garden City, New York, which is within the Eastern District of New York, has filed suit against defendant, United States of America, in order to recover a sum it has paid as a portion of an assessment allegedly due and owing the Government.
Plaintiff alleges that it has timely filed with the District Director of Internal Revenue at Brooklyn, New York, its Federal Insurance Contributions Act ("FICA"), Federal Unemployment Tax Act ("FUTA"), and Federal Withholding (Collection of Income Tax at Source on Wages) ("Withholding") returns for the years 1962, 1963, 1964, 1965, and 1966, and that it has paid the amounts shown thereon to be due. After an audit, however, on January 17, 1968 and February 23, 1968, the Commissioner of Internal Revenue assessed deficiencies against plaintiff for the years 1962, 1963, 1964, 1965, and 1966, in the total amounts of $105,733.20 for FICA, $6,124.51 for FUTA and $199,926.46 for Withholding. The basis of these assessments is a claim by the Commissioner that certain individuals engaged from time to time by plaintiff as "car shuttlers" were employees within the meaning of the Internal Revenue laws, so that the FICA, FUTA, and Withholding provisions were applicable to the amounts paid to them by plaintiff. That claim is the issue in this case.
On March 26, 1968 plaintiff paid a sum of $31,178.42 with respect to the assessments, and that amount constitutes a divisible portion of the additional taxes assessed. On April 30, 1968 plaintiff filed a timely claim for a refund of the additional taxes assessed, and for an abatement of the balance of the assessment.
On April 7, 1969, however, plaintiff received notice that the I.R.S. disallowed in full plaintiff's claim for a refund and an abatement of the additional assessment. These taxes, plaintiff now avers, were erroneously and illegally assessed in that the "car shuttlers," engaged by plaintiff, were not "employees" within the meaning of the applicable Internal Revenue Code provisions. As a result, plaintiff seeks the sum of $31,178.42, which is that amount paid by plaintiff to the Government as a portion of the additional taxes assessed, together with appropriate interest from March 26, 1968.
The Government in its amended answer and counterclaim filed February 16, 1973, denies that the sum paid by the plaintiff is an outgrowth of an illegal assessment, and alleges that the sum of $323,938.50, which represents the unpaid remainder of the assessment plus interest, is now due and owing the Government.
Only one witness, Mr. Edwin Hale, who is presently a City Manager with Avis Rent A Car System, Inc. ("Avis"), was called to the stand during the course of the trial. The remainder of the evidence before the court, in addition to Mr. Hale's testimony, consists of exhibits and depositions offered, "for any purpose," pursuant to Rule 32(a) (3) (B), Fed. R. Civ. P.
The issue in this case, a narrow one, turns on whether certain individuals styled "car shuttlers" were in fact employees of AVIS or independent contractors, during the years in question, for purposes of FICA, FUTA, and Withholding.
Findings of Fact, Conclusions of Law and Opinion
The Federal Insurance Contribution Act, Title 26 U.S.C. § 3101 et seq., imposes both an income tax on individuals with respect to their employment
and an excise tax on employers "with respect to having individuals in [their] employ."
Under FICA, an "employee" is defined as, among other things, "any individual, who under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee. . . ."
As an amplification of this definition, 26 C.F.R. § 31.3121(d)-1 provides in pertinent part:
"(c) Common law employees. (1) Every individual is an employee if under the usual common law rules the relationship between him and the person for whom he performs services is the legal relationship of employer and employee.
(2) Generally such relationship 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. That is, an employee is subject to the will and control of the employer not only as to what shall be done but how it shall be done. In this connection, it is not necessary that the employer actually direct or control the manner in which the services are performed; it is sufficient if he has the right to do so. The right to discharge is also an important factor indicating that the person possessing that right is an employer. Other factors characteristic of an employer, but not necessarily present in every case, are the furnishing of tools and the furnishing of a place to work, to the individual who performs the services. In general, if an individual is subject to the control or direction of another merely as to the result to be accomplished by the work and not as to the means and methods for accomplishing the result, he is an independent contractor. An individual performing services as an independent contractor is not as to such services an employee under the usual common law rules. . . .
(3) Whether the relationship of employer and employee exists under the usual common law rules will in doubtful cases be determined upon an examination of the ...