Rev. Rul. 68-248

Advice has been requested whether individuals employed to tune and repair pianos and organs under the circumstances described below are employees 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).

The X Company, which is in the business of repairing and tuning pianos and organs, engages the individuals under an oral agreement to tune and repair pianos and organs on a part-time basis. They perform their services in the homes of customers at the mutual convenience of the customers and themselves. They require no supervision insofar as workmanship is concerned, because training and experience is a prerequisite for employment. However, X is responsible for the quality of the work done.

The repairmen are not required to adhere to a fixed working schedule or routine. They furnish their own hand tools and X supplies each with a parts kit and repair manuals, as well as special equipment when it is needed. The repairmen furnish their own transportation to make service calls, but X suggests the mileage rates to be billed to the customer. X requires the repairmen to complete service invoice forms that are equivalent to a report on each job. X sets the prices to be charged for service and repair parts. All billing is on X's invoices and all collections made by the repairmen are turned in to it. The repairmen's compensation is based on a percentage of the service charge and parts sold. X retains the right to discharge them at any time.

The repairmen are employees for Federal employment tax purposes if they have the status of employees under the usual common law rules applicable in determining the employer-employee relationship. Guides for determining that status are found in three substantially similar sections of the Employment Tax Regulations, namely, sections 31.3121(d)-1(c), 31.3306(i)-1, and 31.3401(c)-1.

For example, it is pointed out in paragraph (2) of section 31.3121(d)-1(c) of the regulations that an employer-employee 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 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.

Whether an employer-employee relationship exists depends upon the particular facts in each case. The repairmen in this case perform personal services at frequent intervals pursuant to a continuing relationship created under an oral agreement terminable at any time; their services are both necessary and incident to the business conducted by X ; and they are not engaged in an independent enterprise in which they assume the usual business risks. Since they are skilled workmen, they do not require constant supervision.

Although the repairmen may be extremely well qualified to perform work without detailed supervision and do perform services with considerable freedom of action, these facts are not controlling in reaching a decision as to their employment status since the ultimate test for determining whether there is an employment relationship is whether the person for whom the services are performed retains the right to exercise direction and control over them in the performance of their services.

Upon the basis of the facts stated, X exercises or has the right to exercise over the repairmen in the performance of their services the degree of direction and control necessary to establish the relationship of employer-employee under the usual common law rules. Accordingly, the repairmen performing services for X under the circumstances described above are employees of X for purposes of the Federal Insurance Contributions Act, the Federal Unemployment Tax Act, and the withholding of income Tax at source on wages.