Concepts in Staffing, Inc., No. 4547 (April 9, 2003)
Docket No. SIZ-2003-01-02-02
    

 
                              
                  UNITED STATES OF AMERICA
               SMALL BUSINESS ADMINISTRATION
               OFFICE OF HEARINGS AND APPEALS
                      WASHINGTON, D.C.


                                )      
                                )      Docket No. SIZ-2003-01-02-02
SIZE APPEAL OF:                 )      
                                )      
Concepts in Staffing, Inc.      )      Decided:  April 9, 2003
                                )
     Appellant                  )
                                )
SBA Disaster Loan Application   )
No. 9M49-01157                  )
                                )

                              
                         APPEARANCE
                              
                  Sydney Nurse, Controller
                 Concepts in Staffing, Inc.
                        for Appellant
                              
                              
                           DIGEST

When  one  individual is President and sole  shareholder  of
four   firms,  the  firms  are  affiliated  through   common
ownership  and common management, and their annual  receipts
must be aggregated when determining their size.

SBA  must  not deduct from a firm's receipts its commissions
paid to recruiters when determining its annual receipts.

SBA must use a firm's last three completed fiscal years when
determining its annual receipts, and may not take account of
a recent drop in revenues.


                          DECISION

HOLLEMAN, Administrative Judge:

                              
                              
                        Jurisdiction

     This appeal is decided under the Small Business Act  of
1958, 15 U.S.C. Section 631 et seq., and 13 C.F.R. Parts 121
and 134. [1]
     
                           Issues
                              
      Whether,  when  one individual is President  and  sole
shareholder of four firms, the firms are affiliated  through
common  ownership  and common management, and  their  annual
receipts must be aggregated when determining their size.

      Whether  SBA  must deduct from a firm's  receipts  its
commissions paid to recruiters when determining  its  annual
receipts.

      Whether  SBA may take account of a recent  drop  in  a
firm's revenues in determining its annual receipts.


                       I.  BACKGROUND

       On  October  9,  2001,  Concepts  in  Staffing,  Inc.
(Appellant) applied for financial assistance from the  Small
Business  Administration (SBA), under the Expanded  Economic
Injury   Disaster  Loan  (EIDL)  program  and  the  disaster
declaration  for  the September 11, 2001 terrorist  attacks.
On   October   24,  2001,  SBA  declined  Appellant's   loan
application  because  it  was  not  a  small  business.   On
September  9,  2002, Appellant requested reconsideration  of
its  application.   On  September 17, 2002,  SBA's  Disaster
Assistance  Office  -- Area 1, in Niagara  Falls,  New  York
(Area  Office) informed Appellant it must submit  copies  of
its tax returns and certain other information.  On September
24, 2002, Appellant submitted the requested information.

      On  December 20, 2002, the Area Office issued  a  size
determination  finding  Appellant  other  than  small.   The
effective  date  for the size determination  was  March  15,
2002.   [2]   The  Area  Office  designated  North  American
Industry   Classification  System   (NAICS)   code   561310,
Employment  Placement Agencies, with a corresponding  annual
receipts  size standard of $7.5 million, as the  appropriate
NAICS code for Appellant. [3]

      According to Appellant's SBA Form 355, Mona Abrams  is
its  President  and sole shareholder.  Ms.  Abrams  is  also
President  and  sole shareholder of the three  other  firms;
Corporate  Management Associates, Inc., Computer Information
Contractors, Inc., and Concepts in Temps, Inc.

      The  Area  Office found Appellant was affiliated  with
Corporate  Management Associates, Inc., Computer Information
Contractors,  Inc., and Concepts in Temps,  Inc.   Appellant
had  maintained to the Area Office that the amount which  it
paid in commissions to recruiters should not be included  in
its   annual  receipts.   The  Area  Office  rejected   this
contention,  reviewed Appellant's annual  receipts  for  the
years 1999 - 2001, together with those of its affiliates for
the same years, and concluded their combined annual receipts
exceeded  the  applicable size standard, and that  Appellant
was thus other than small.

     On January 2, 2003, Appellant filed the instant appeal.
Appellant asserts that 50% to 60% of its gross receipts  are
paid  in commissions to its recruiters, and that its  income
is  thus  50%  to 60% less than that indicated  on  its  tax
returns.   Appellant  also  asserts  that  its  sales   have
declined while its expenses remain the same, forcing  it  to
operate  at  a loss.  Appellant requests that  its  size  be
determined by taking the amount of its "Sales, Less the Cost
of Sales."

      On  January  13, 2003, Appellant filed a  supplemental
pleading,  arguing that because there are  several  separate
companies, each in a different line of business with its own
employer  tax identification number, the Area Office  should
not have aggregated the companies' annual receipts in making
its  size determination.  Appellant admits that Mona  Abrams
is   the   President   and  owner  of  Appellant,   Computer
Information    Contractors,   and    Corporate    Management
Associates.


                              
                       II.  DISCUSSION

      Appellant filed the instant appeal within 30  days  of
receiving  the  size determination, and thus the  appeal  is
timely.  13 C.F.R. Section 134.304(a)(2).

     Appellant has the burden of proving, by a preponderance
of  the evidence, all elements of its appeal.  Specifically,
it must prove the Area Office size determination is based on
a  clear error of fact or law.  Size Appeal of Rebmar, Inc.,
SBA No. SIZ-4173, at 4 (1996); 13 C.F.R. Section 134.314.

      In determining size, SBA must combine the receipts  of
the  concern whose size status is at issue with those of all
its  affiliates.  13 C.F.R. Section 121.103(a)(4).  Concerns
are  affiliates of each other when one concern  controls  or
has  the  power  to  control the other,  or  a  third  party
controls  or  has  the  power to control  both.   13  C.F.R.
Section  121.103(a)(1).    SBA  considers  factors  such  as
common   ownership  and  common  management  in  determining
affiliation.  13 C.F.R. Section 121.103(a)(2).   SBA  treats
individuals  or firms which have identical or  substantially
identical  business or economic interests as one party.   13
C.F.R. Section 121.103(a)(3).  Here, Appellant and the other
three   firms  all  have  the  same  sole  shareholder   and
President,  and  thus  they  are clearly  affiliated.   Size
Appeal  of  Rochester Hospitality Company, SBA No. SIZ-4495,
at  4  (2002).  The fact that the firms may be in  different
lines of business is irrelevant to the issue of whether they
are affiliated, if there is common ownership and management.
Size Appeal of Ridge Instrument Co., Inc., SBA No. SIZ-4207,
at  5-6  (1996).   Thus, it clear that the four  firms  were
affiliated,  and  that the Area Office  properly  aggregated
their annual receipts in making the size determination

      The  Area  Office properly relied on  Appellant's  tax
returns  in  calculating its annual receipts.   A  concern's
receipts are determined by "total income" and "cost of goods
sold"  as  those  terms are defined by the Internal  Revenue
Service.   13  C.F.R. Section 121.104(a)(1).  SBA  must  use
these figures to calculate a firm's receipts, unless it  has
reason  to  believe the returns are false.  Size  Appeal  of
Phillips National, Inc., SBA No. SIZ-4332, at 8 (1998).  The
Area  Office  clearly did this.  Appellant's receipts,  even
without affiliates, exceeds the applicable size standard.

      Appellant  seeks  to exclude its commissions  paid  to
recruiters, but the regulation explicitly lists those  items
which   may   be  excluded  from  a  firm's  receipts,   and
commissions  paid  to recruiters are  not  among  them.   13
C.F.R.  Sections 121.104(a)(1); 121.201, n.10.  Accordingly,
the  Area  Office was correct in not excluding  these  items
when  calculating  Appellant's  receipts.   Size  Appeal  of
Feola, Inc., d/b/a F +A Architects. SBA No. SIZ-4528,  at  4
(2003).

      The  fact  that  Appellant's  receipts  have  recently
declined  is  irrelevant in calculating the  amount  of  its
annual   receipts.   The  regulations  require  that  annual
receipts  be  calculated by adding together the receipts  of
the  last three completed fiscal years of Appellant and  its
affiliates,  and dividing the resulting sum  by  three.   13
C.F.R.  Section  121.104(b)(1).   A  review  of  the  record
establishes   that  the  Area  Office  did  just   that   in
calculating  Appellant's annual receipts.  Accordingly,  the
Administrative  Judge  must reject  Appellant's  request  to
consider its recent reverses in determining its size.

      Appellant has thus failed to establish that  there  is
any  clear  error of fact or law in the Area  Office's  size
determination, and this Office must deny its appeal.


                      III.  CONCLUSION

     For the above reasons, the Administrative Judge AFFIRMS
the  Area Office's size determination and DENIES the instant
appeal.
     
     This  is  the  final  decision of  the  Small  Business
Administration.  13 C.F.R. Section 134.316(b).






                           CHRISTOPHER HOLLEMAN
                           Administrative Judge

                              
                              
_________________________

     1  The  Small Business Administration (SBA) has revised
its   regulations   governing  the   small   business   size
determination program and appeal procedures.  67  Fed.  Reg.
47244  (July  18,  2002)  (Final Rule).   Because  the  size
determination,  which is the subject  of  this  appeal,  was
issued after the effective date of this rule (September  16,
2002),  the  amended regulations apply to this appeal.   See
Final  Rule at 47244.  The amended regulations are available
in   codified  form  through  this  Office's  home  page  at
www.sba.gov/oha.
      2   Under  the  Expanded  EIDL  program  and  disaster
declarations  for the September 11, 2001 terrorist  attacks,
the  applications of firms which were submitted before March
15,  2002,  and  denied because of size  status  are  deemed
resubmitted on March 15, 2002, and their size is  determined
as of that date.  67 Fed. Reg. 11874, 11880 (March 15, 2002)
(to   be   codified   at  13  C.F.R.  Sections   121.302(c),
123.300(b), and 123.601(b)).
      3   Effective February 22, 2002, the SBA  changed  the
size  standard for NAICS code 561310 to $6 million.  67 Fed.
Reg.  3041,  3053 (Jan. 23, 2002).  Because  Appellant  will
operate  within a Labor Surplus Area, the size  standard
is increased by 25%.  13 C.F.R. Section 121.301(e).

                                           Posted: May, 2003