Danny & Enid Grubb

08-01 

During 1999, Dan Grubb performed construction services for a subcontractor on a large construction project.  The Taxpayers reported Mr. Grubb’s income as business income on a Schedule C to their federal income tax return.  They reported additional business income on a separate Schedule C related to a retail store the Taxpayers owned during 1999.  The Taxpayers did not pay gross receipts tax on any of their income.  On audit, the Department accepted an NTTC supporting a deduction of some of the Taxpayers’ receipts, but assessed gross receipts tax on the balance of the business income reported on their 1999 federal return.  The Taxpayers protested, arguing:  (1) Mr. Grubb was an employee and did not owe gross receipts tax on the payments he received from the subcontractor; and (2) the income reported on the Taxpayers’ second Schedule C was attributable to additional payments from the subcontractor and not to receipts from their retail store.  The hearing officer held:  (1) Mr. Grubb was an employee and was not subject to gross receipts tax on the income reported on the Taxpayers’ first Schedule C; and (2) the Taxpayers failed to provide records or other evidence to prove that the receipts reported on the second Schedule C were not taxable receipts from their retail store.  Protest granted in part and denied in part.  ?