Louis & Carolyn Bortot

98-52

Taxpayers were shareholders of two small, closely held family corporations. The Taxpayers performed all of the management functions for the corporations. The corporations had no other employees. The corporations reported the compensation to the Taxpayers as non-employee compensation on a federal form 1099 and the Taxpayers reported their income on their federal income tax return on Schedule C as income from a business or profession. The Department assessed gross receipts tax upon this compensation. The Taxpayers argue that they are employees of the corporations and that their compensation was exempt as wages or salary pursuant to Section 7-9-17. The Taxpayers were unwilling to amend their federal returns to reflect the compensation as wages. Because of the requirement that taxpayers file their state and federal returns consistently, they will not be considered employees in the absence of amending their federal corporate and personal returns to reflect the compensation as wages. Protest denied.