COURT OF APPEALS OF VIRGINIA

Present: Judges Bray, Bumgar dner and Senior Judge Hodges Argued by te leconference

CENTRAL DELIVE RY SERVICE OF WASHIN GTON, INC. MEMORANDUM OPINION * BY v. Record No. 2046-00-2 JUDGE WILLIAM H. HODGES NOVEMBER 6, 2001 VIRGINIA EMPLOY MENT COMMISSION

FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND Theodore J. Markow, Judge E. Duncan Getche ll, Jr. (Wil liam H. Baxter II; McGuireWoods LLP, on briefs), for appellant. William A. Diamond, Assistant Attorney General (Mark L. Earley , Attorney General; Richard B. Zorn, Senior Assistant Attorney General, on brief), for appellee.

* Pursuant to Code § 17.1-413, this opinion is not designated for publication. Central Delive ry Service of Washin gton, Inc. (Central Delivery) appe als a July 27, 20 00 circuit court order affirming a decision of the Vi rginia Employment Commissi on (the VEC). The VEC held that services pe rformed by contract ca rrier courie r drivers for Central Delive ry constituted "employment" for which Central Delivery is liab le for unemployme nt insurance taxe s pursuant to Code § 60.2-212 and that their services were not exempt under Code § 60.2-219(22). Central Delivery argues that the VEC and the circuit court er red in denying their exemption from stateunemployment taxation. For the reason s that follow, we agree and

reverse. BACKGROUND For unemployment compensation purposes, the term "employment" is defined in Code § 60.2-212. Generally, that term means any service performe d for remunera tion or unde r any contract of hire. The VEC, in its commission decision, determ ined that th e services performed by Central De livery's drivers cons titute "employment" under Code § 60.2-212, an d that issue is not be fore us on appeal. However, Code § 60.2-619 contains a list of services that are statutorily exem pt from the "e mployment" definition. Code § 60.2-619(22) provid es that the term "e mployment" shall not include: "Servi ce performed . . . as a driver of an executive sedan . . . provid ed the Commission is furnished evidence that such individual is excluded from taxati on by the Federal Unemployment Tax Act" (FUTA). The VEC an d the circ uit court determined that Central Delive ry had not provid ed the VEC with sufficient evidence to prove that its driver s are excluded from FUTA taxation. Centra l Delivery appeals from that determination. In its findings of fact, the VEC found that Central Delivery is engaged in, among other things, delivery and messenger service. Central Delivery engages the services of contract courier drivers to perform the actual deliveries according to customer specifications. It is the status of these drivers that is at issue in this case. The VEC noted that the Internal

- 2 -Revenue Service (IRS) has audited Central Delivery on several occasions. In 1996, representatives of Central Delivery responded to the IRS "20 questions" with respect to whether the contract operators are independent contractors or employees. By a form letter dated in February 1996, the district director of the IRS advised Central Delivery that it had completed the review and had taken action indicated by the check below. The box that read, "We have accepted the report" was checked.
ANALYSIS The findings of the VEC as to the facts, "if supported by the evidence and in the absence of fraud, shall be conclusive, and the jurisdiction of the court shall be confined to questions of law." Code § 60.2-500(B)(1). "On appeal, we consider the evidence in the light most favorable to the finding by the VEC." V.E.C v. Thomas Regional Directory, Inc. , 13 Va. App. 610, 613, 414 S.E.2d 412, 415 (1992). Thus, unless we can say as a matter of law that the evidence established the exceptions, the VEC's decision must be upheld. In this case the evidence provided by Central Delivery was sufficient to establish that its drivers are excluded from taxation by FUTA. Code § 60.2-219(22). In Revenue Ruling 87-41, 1987-1 C.B. 286, the IRS provided a list of factors used to determine whether contractors are "employees . . . for the purposes of . . . the Federal Unemployment Tax Act." The list of factors is the IRS's "20 questions" that Central Delivery answered in its audit and which

- 3 -the IRS accepted. Code § 60.2-219(22) required Central Delivery to furnish "evidence" of its drivers' exemption from FUTA taxation. Although the VEC asked Central Delivery to provide an IRS Form SS-8 specific to the individuals in question, the statute allows, as the VEC acknowledged, other evidence which would demonstrate the drivers' exemption. The IRS letter accepting Central Delivery's "20 questions" answers sufficiently demonstrated that the IRS considered Central Delivery's drivers exempt from FUTA taxation. See Rev. Rul. 87-41, 1987-1 C.B. 286. Thus, as a matter of law, the evidence supported a finding that Central Delivery is exempt from state unemployment taxes under Code § 60.2-219(22). Accordingly, the de cision of the circuit court is reversed. Reversed.

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