Rev. Rul. 55-543

The Internal Revenue Service has been requested to determine the status for purposes of the Federal Insurance Contributions Act, the Federal Unemployment Tax Act and the Collection of Income Tax at Source on Wages (chapters 21, 23 and 24, respectively, subtitle C, Internal Revenue Code of 1954) of helpers engaged by employee-drivers of the M company to unload `drop' freight shipments.

The M company operates a motor truck freight line between its home office and various cities where it has terminal facilities. The company also accepts `drop' freight shipments for delivery at in-between points, at which it does not have terminal facilities. The employee-drivers of the company, due to local employment conditions relating to the trucking industry, are required to employ local union helpers to unload such `drop' shipments and to remunerate them at the prevailing hourly rate, subject to a minimum of eight-hours' pay for each helper employed. The drivers are subsequently repaid by the company. Information reaching the Service indicates the payments to the helpers are generally made in cash by the drivers.

It is the position of the Service that employees performing services under the direction of an employee of a company, in connection with that employee's employment by the company, are also employees of the company for Federal employment tax purposes, even though such subemployees do not appear on the company's payroll and are paid by the supervising employee out of the gross amount received by him from the company. See S.S.T. 70, C.B. 1937-1, 387.

In the instant case, the truck drivers are admittedly employees of the M company for Federal employment tax purposes. In accordance with the position of the Service as stated above, it is held that the local union helpers engaged and paid by the employee-drivers under the circumstances stated are employees of the M company for purposes of the Federal Insurance Contributions Act, the Federal Unemployment Tax Act, and for income tax withholding under section 3402 of the Code. Accordingly, the M company is liable for the reporting on its appropriate tax returns of the wages paid to the helpers and for the payment of the taxes with respect to such wages