Greene v. Gallman

Simons, J. This is a proceeding pursuant to CPLR article 78 (transferred to the Appellate Division of the Supreme Court in the Third Judicial Department by order of the Supreme Court at Special Term, entered in Albany County) to review a determination of the State Tax Commission made after a hearing holding that petitioner is liable for an unincorporated business tax imposed under article 23 of the Tax Law for the year 1964. The petitioner challenges the respondent’s finding of tax-ability claiming lhat he was an employee of the New England Mutual Life Insurance Company during the tax year 1964. The petitioner has sold insurance for New England since 1956 and during the tax year in question, he worked under a so-called “Agent’s Career Contract” for the Schmidt Agency, the general agent for New England in New York City. Petitioner was trained by New England and he received office space, secretarial help and telephone service at the company’s expense. He was required to periodically report to New England’s supervisor. New England withheld social security benefits from his earnings and granted him fringe benefits under its health and pension plans. The “Agent’s Career Contract” was one of three types of contracts available for sales representatives. This particular contract, in its combination of features, was designed to promote long-term employment with the company. Among other things, it allowed petitioner to broker business with other companies, but he was bound to offer whatever insurance business he acquired to New England first. If he received the company’s permission, he could place the risk elsewhere. This fact did not expose him to the tax. (Tax Law, § 703, subd. [f].) The commission also found petitioner paid, from his own pocket, for academic courses in estate planning, that he used space in his home for insurance work, that for one month [272] during the tax year he used office space in Hempstead, New York (the proof developed that this was reimbursed by the company), that he advertised in an amount exceeding $700 paid jointly by himself and New England. The commission relied on these findings to determine that the taxpayer had not sustained the burden of proving he was an employee and, therefore, held him subject to the unincorporated business tax. None of these considerations, relied on by the commission, relate to control of the employee by the employer. It is the degree of control and direction exercised by the employer that is determinative of whether or not the taxpayer is an employee. (Matter of Frishman v. New York State Tax Comm., 33 A D 2d 1071, mot. for lv. to app. den. 27 N Y 2d 483; Matter of Hardy v. Murphy, 29 A D 2d 1038; Matter of Britton v. State Tax Comm., 22 A D 2d 987, affid. 19 N Y 2d 613.) The petitioner was not an, .individual engaged in business in the sense contemplated by the Tax Law. His loyalties and efforts were directed toward New England’s business. That there were policies that he could not place with New England was conceded, but these represented a relatively minor part of his work and could never be brokered by him without the consent of New England.1 Only then was he allowed to go outside of the company to maintain the goodwill of his and the company’s clients. Petitioner’s work facilities were supplied by New England, he received fringe benefits of the company and was solely responsible and answerable to it. Considering the nature of the business of selling life insurance and taking a realistic view of a sales representative’s regimen, it is clear that New England exercised all the control and direction which is to be expected under the circumstances to make petitioner an employee within the intendment of the Tax Law. The factual picture presented by this record conforms substantially with that recited in the respondent’s own ruling reported at 20 NYCRR 281.32 published in 1959 [273] and which states that an unincorporated business tax would not be imposed on such a taxpayer. The determination should be annulled, with' costs, and the matter remitted for further proceedings not inconsistent herewith. Footnotes [1] The taxpayer did pay an unincorporated business tax on these earnings. [2] 20 NYCRR 281.3 “ A full-time life insurance soliciting agent whose principal activity is the solicitation of insurance for one life insurance company and who is forbidden by contract or practice from placing insurance with any other company without the consent of his principal company; who uses office space provided by the company or its general agent, is furnished stenographic assistance and telephone facilities without cost, is subject to general and particular supervision by his company over sales, is subject to company established production standards, will generally not be subject to the unincorporated business tax on commissions received from his prime company, [273] regardless of the provisions of the agreement existing between him and the insurance company, but commissions received from other companies will he subject to such tax. Such an agent shall generally be considered an independent contractor subject to the tax with respect to all his commissions where, for example, he operates from his own office, paying rent not specifically reimbursed to him by his principal company, or where, for example, he, himself, employs one or more permanent employees (rather than temporary help employed from day to day when needed), paying their salaries which are not specifically reimbursed to him. In every case all the relevant facts and circumstances will be considered before a decision is made whether or not the agent is subject to the unincorporated business tax.”