T.C. Mem o. 2 01 6- 5

UNITED STAT ES TAX COURT

JOR GE QUINTA

NILLA, Peti ti on er v . COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 13 55 6- 12
. Fi le d J anuary 7, 2 01 6.
Jo rg e Qui nt an il la , pro se. Tho m as T. Thom as , Jam es A. Nels on , Cathe rin e G. Cha ng , andPau lm ik el l A. Fab ian, fo r res po nd en t.

MEMORANDUM OPINION AND FINDINGS OF FACT HOLMES, Ju dg e: Jo rg e Qui nt an il lagro ss edm or e th an$8 4,0 00 in20 09
an d a lm os t $ 90 ,00 0 in20 10 as a n e xc ep ti on al ly ski ll edpro du ct io n wo rk er o n ap pr ox im at el y

15 0 c omm erci al s s ho t i n S ou th ernCal ifo rn ia . He earn edth is
m on ey bo th inhi s o wn n am e an d t hr ou gh hi s co rp or at io n, an d h e say s tha t h e- 2 -

[* 2] earn editas a n i nd ep en de ntco nt ract or , no t as anem pl oyee. The Co m m is si on er d is ag rees . OPINION The re ar e o nl y

two is su es th atth e p art ie s fo ug htab ou t i n t hi s ca se , andth e law is set tl edforeach
. The bi g i ss ue is whet he r Qui nt an il laco rrec tl y rep orte d h is bu si ne ss
ex pe ns es on Sch edul e C (the sch edul e th atpe op le who are i n b us in es s fo r th em se lv es us e to rep ort the ir e xp en se s) an d n otonSch edul e A (th e sc he du le th at pe op le who workforso m eb ody els e u se to rep ort b us in es s ex pe ns es ). The di st in ct io n m at te rs be cau se th e Co de li m it s Sc he du le A deduc ti on s m or e th anit li mit s Sc he du le C de du ct io ns . The m os t i m po rta ntof t he se li m it s i s the 2% ru le : An em pl oyee who in cu rs un rei m bu rs edbu si ne ss ex pe ns es m ay de du ctth em

on ly
as m is cel lane ou s i te m iz edde du ct io ns an d o nl y to th e ex te ntth atth ey

ex ceed2% of hi s ad jus te d g ro ss in co m e. Secs . 62 (a)( 2) , 63 (a), (d ), 67 (a) and(b) , 16 2( a). 1 Oth er Co de sec ti on s, e.g ., sec ti on 68 , m ay li m itth es e d educ ti on s ev enm or e. And th enth ere’s the dre ad edalt ern at iv e m in im um tax , whi chcanbe tri gg eredby cert ai n S ch edul e A de du ct io ns . Sect io n re fere nc es are t o t he Int ern al Rev enue Co de , as a m en de d a ndin 1 effe ctforth e y ears at i ss ue , andRu le refer en ces are t o t he Tax C ou rt R ul es of Prac ti ce an d P ro cedur e.- 3 -

[* 3] In de pe nd en t co nt ract or s an d s el f-em pl oyed p ers on s re po rt b us in es s de du ct io ns on Sch edul e C. See Ch ap m anv. Ap fel , 23 6 F .3d48 0, 4 86 (9th C ir. 20 00 ); Webe r v. C omm is si on er, 1 03 T.C. 37 8, 3 86 (19 94 ), aff’d, 6 0 F .3d11 04 (4 th Cir . 19 95 ). The Co de bu rd en s the se pe op le indi ffer en t ways, bu t i n h is pa rti cu lar ci rcum st an ces Qui nt an il lawou ldbe be tt er o ff i f he were o ne of t he m
an d n otso m eo ne els e’s em pl oyee. Andhe m ak es th ree a rg um en ts forwhy he is an in de pe nd en t co nt ract oran d n otth e em pl oyee of th e v ari ou s p ro du ct io n c om pa ni es th athe work edfor . He clai m s fi rs t tha t h e rep orte d a s an in de pe nd en t co nt ract or in 20 08 an d n ot hi ng ch an ge d o ve r th e n ex t two years. He cl ai m s tha t h e p as se s the
m ul ti fact ortes t b ui ltup by cases to di st in gu is h c omm on -la w em pl oyees fr om in de pe nd en t co nt ract or s. An d h e cl ai m s tha t h e was a st atut ory em pl oyee--a pe rs on who m ay

be a co m m on -la w in de pe nd en t co nt ract orbu t wh om th e Co de tre at s as if h e were an e m pl oyee fo r so m e p ur

po se s wh il e st il l al lo win g h im to de du ctbu si ne ss ex pe ns es on Sch edul e C. See sec . 31 21 (d )(3 )(D); Ro sa to v. Co m m is si on er, T.C. Mem o. 2 01 0- 39
. W e d on ’t hav e to sp en d m uc h t im e o n t he fir starg um en t. Eachtax y ear s tand s al on e, an d t he Co m m is si on er m ay

ch al le ng e in a la te r y ear wh athe pe rm itte d i n a n e arl ie r on e. Aut o. Cl ub of M ic h. v . Commis si on er, 35 3 U.S. 1 80 (19 57 ); R os e v . Comm is si on er, 5 5 T.C. 2 8, 3 2 (1 97 0) . The- 4 -

[* 4] Co m m is si on er’s fai lu re t o c ha ll en ge Qui nt an il la ’s st atus forth e 2 00 8 t ax y ear do es n’t d is ab le hi m

fro m ch al le ng in g t ha t s ta tu s fo r 20 09 an d 2 01 0. The leg al di st in ct io n b etweenanin de pe nd en t co nt ract oran d aco m m on -la w
em pl oyee is als o s et tl edas age ne ral m at te r, th ou gh it ’s oft enm urky in app li cat io n. W e’ll s tart wi th th e eas y

pa rt: An i nd ep en de ntco nt ract or is on e who work s fo r
an ot he r bu t ac co rd in g t o h is ownm an ne r an d m etho d, fr ee fr om di rect io n o r ri gh t of di rect io n i n m at te rs rel at in g t o p erfo rm an ce o f work s av e as to res ul ts . See Pro f’l & Exe c. Leas in g, In c. v. Co m m is si on er, 8 9 T.C. 2 25 , 23 2- 33 (19 87 ), aff’d, 86 2 F .2d75 1, 7 53 (9t h C ir. 1 98 8) ; Si m ps on v. Co m

m is si on er, 6 4 T.C. 9 74 , 98 5 (1 97 5) ; s ee al so Ill . Tri-Se al Pro ds ., Inc . v Un it edSta te s, 3 53 F.2d21 6 (C t. Cl
. 19 65 ). W e h av e o ve r th e y ears bu il t up ali stof f act or s tha t we l oo k a t t o d eci de whe th er a wo rk er h as en ou ghau to no m y inhi s wo rkto be anin de pe nd en t
co nt ract or : ! th e d eg ree o f co nt ro l ex erci se d b y th e p rin ci pa l o ve r th e worke r; ! th e worke r’s in ve st m en t i n h is workpl ace; ! hi s o pp ortu ni ty to m ak e a p ro fitor s uf fer alo ss ; ! whe th er the pri nc ip al canfir e h im ;- 5 -

[* 5] ! whe th er the workis part o f th e p rin ci pa l’s re gu lar bu si ne ss ;

! th e p erm an en cy

of h is rel at io ns hi p wi th th e p rin ci pa l;
! th e rel at io ns hi p t he pa rti es be li ev edth ey were cr eat in g; an d
! th e p rin ci pa l’s p ro vi si on of e m pl oyee be ne fit s. See Ewen s & Mi ll er, In c. v. Co m m is si on er, 1 17 T.C. 26 3, 2 70 (20 01 ); Webe r, 10 3 T.C. at 3 87 ; Pr of’l & Exec . Leasi ng , 89 T.C. at 2 32 ; Si m ps on , 64 T.C. at 9 84 -8 5; Co le v. Co m

m is si on er, T.C. Mem o. 2 00 6- 44 . Cou rts do n’t wei gh th e fac to rs equa ll y , andco ns id er the ir s ig ni fic an ce d iff eren tl y de pe nd in g o n t he pa rti cu lar fact s o f a cas e. W eb er, 1 03 T.C. at 3 87 ; Si m ps on , 64 T.C. at 9 85 ; Gam al -Eld in v. Co m m is si on er, T.C. Mem o. 1 98 8- 15 0, af f’d, 87 6 F .2d89 6 (9 th Cir . 19 89 ). A sec on da ry

is su e is whet he r Qui nt an il laowes a pe na lty . The l aw he re i s
eas y to st at e as well : Se ct io n 6 66 2 i m po se s an “ accu racy-rela te d p en al ty” of 2 0% of th e p orti on of t he un de rp aym en t o f ta x tha t i s at tri bu tabl e to th e ta xp ay er’s
ne gl ig en ce o r to hi s d is reg ardof rul es or r eg ul at io ns . Sec. 6 66 2( a) an d (b )(1 ). A ta xp ay er ca n e sc ap e th e p en al ty if he sh ows th athe ha d re as on ab le cau se forth e
un de rp aym en t an d a ct edingo odfai th . Sec. 6 66 4( c)(1 ). Whe th er a t ax pa y er ac te d with re as on ab le cau se an d i n g oo d fa ith i s a f act s- an d- ci rcu m st an ces de ci si on , and th e m os t i m

po rtantfactis th e ex te ntof t he tax pa y er’s eff ort t o a ss es s h is pro pe r- 6 -

[* 6] tax li ab il ity

inli gh t o f hi s kno wled ge an d e xp eri en ce. Sec . 1.6 66 4- 4( b) (1 ), In co m e Tax Reg s. FINDINGS OF FACT Qui nt an il lati m el y

fil edhi s i nc om e ta x re tu rn s fo r th e 2 00 9 a nd20 10 tax y ears . The Co m

m is si on er d et erm in edth atQui nt an il laha d ade fic ie nc y of m or e th an$1 1,0 00 for

20 09 , and$1 5,0 00 for20 10 . He als o t ack edon anaccu racyrel at edpe na lty

forbo th y ears . Qui nt an il la , a Cal ifo rn iares id en t, t im el y fil eda pe ti ti on ch al le ng in g t he se de te rm in at io ns . Qui nt an il laown eda co m pa ny nam edPre Ca ll Stu di os , Inc . Pre Cal l fi le d a Fo rm 11 20 , U.S. Corp or at io n In co m e Tax Return, fo r 20 09 . For 2 01 0, Pr e Cal l Stud io s m ad e anS-co rp or at io n e le ct io n a ndfil eda Fo rm 11 20 S, U.S. Inc om e Tax Return fo r anS Co rp or at io n. Se ct io n 1 36 2 a ll ows a sm al l b us in es s co rp or at io n t o el ecttre atm en t as anS co rp or at io n fo r ta x p ur po se s. Bo th Qui nt an il laan d h is acco un tantcred ib ly test ifi edab ou t the ir
reco rdke ep in g a ndtax -p rep arat io n ro ut in e. Qui nt an il ladi li ge nt ly col le ct ed
rece ip ts an d m ad e n ot es ab ou t h is ex pe ns es . He th enorg an iz edth em inenve lo pe s by categ ory

an d h an de d t he m

ov er t o h is m om , who act edas h is bo okke ep er. Qui nt an il laor h is m om

gave th e acc ou nt an t al l the do cu m en ta ti on th athe ask ed- 7 -

[* 7] for . Qui nt an il laals o re li edon hi s ac co un tantan d h adno reas on to qu es ti on hi s co m pe te nc y . Qui nt an il lam ay

no t h av e b eenve ry

so ph is ti cat edinhi s b us in es s bo okke ep in g, b uthe was h ig hl y sk il le d i n h is fie ld , whi chis pro du ct io n wo rkon adve rti se m en ts an d TV co m m erci al s. In20 09 an d 2 01 0 h e worke d o n anu m be r of pr ojec ts th atlas te d fr om

on e d ay to ov er a m on th fora varie ty of pr oduc ti on
co m pa ni es . W e h av e n o d oubtth athe po ss es se s u ni qu e sk il ls th atare v al uabl e to th is in du st ry . His sk il ls do n’t fi t s nu gl y withi n t he in du st ry ’s us ua l cl as si fic at io ns , and Qui nt an il la ’s ti tl es va rie d fr om job to job . They in cl ud ed“ dr iv er”, “ hyph en at e dr iv er,” an d “ se t dres se r.” Each of t he se ti tl es ha s a d efi ne d m ean in g i n the in du st ry : A “ dr iv er” driv es pe op le , pro ps , or o th er equi pm en t an d m ay or m ay no t pr ov id e h is ownve hi cl e. A “ hyph en at e driv er” i s a driv er wh o c anals o d o a
se co ndjob su chas b ui ldset s o r pr ov id e o th er s erv ic es . A “ se t dres se r” can b ui ld
orpa in t a s et , m ov e se ts or f urni tu re, o r actas afor em anan d o ve rs ee a c rew wh o do th es e th in gs . Butth e ro le s o n t he sm al le r cre ws o f co m m erci al sh oo ts bl ur , and Qui nt an il la ’s ti tl e fo r a job di d n otalwa y s ac cu rat el y de sc rib e wha t ro le he fil le d. W e fi ndth atth e p ro du ct io n c om pa ni es th athi redQui nt an il lahi redhi m to bu il d s et s. Th ey

ex pe ct edhi m

to pro vi de any

to ol s h e n eed edto co m

pl et e th e job
.- 8 -

[* 8] Qui nt an il laha s an en orm ou s co ll ect io n o f to ol s- -wh ic h h e st or es intwo 40
- fo otst eel co nt ai ne rs --tha t trav el s wi th hi m to job si te s. Th es e co nt ai ne rs are al so pa ck edwith m ach in ery th atQui nt an il laus es to fab ric at e p ie ces of s et s o n t he sp ot . He de sc rib edth es e co nt ai ne rs an d h adph ot os th atsh owe d m ach in ery in cl ud in g po wer t oo ls , sp eci al ty san de rs , sl ed ge ham m ers , weld ers , a na il gu n, an d m or e. So m e were qui te ex pe ns iv e: He own eda Germ ansp eci al ty san de r th atco stm or e th an$2 50 0, an d fo ur

weld ers th atco st$3 50 0 e ach . He als o re nt s s om e equi pm en t,
an d h is ch oi ce t o b uy or ren t i s h is own . It’s c omm on pra ct ic e fo r pr oduc ti onco m pani es to hi re p eo pl e th ey kn ow t o
work o n t he ir p ro

jects , bu t the se co m

pa ni es oft enou ts ou rce t he pape rwo rkto firm s tha t s pe ci al iz e in ba ck -o ffi ce ch or es . In 2 00 9 a nd20 10 th es e p ayro ll
co m pa ni es in cl ud edGEP Comm pr odServ ic es , LLC, CAPS, Inc ., Team Alt ern at iv es , Mo na rch Co ns ul ti ng , andFSI Pr oc es si ng , Inc . Produc ti on
co m pa ni es typic al ly use th e sa m e h an df ul of p ayro ll co m

pa ni es . Thu s, Qu in tani ll a
m ig htbe pa idby the same payro ll co m pa ny for s ix m on th s, b utactua ll y be
worki ng on 20 or m or e p ro jects run by m an y

di ffer en t p ro du ct io n c om pani es . A key qu es ti on inco ntract or -v .-em pl oyee cas es is “who tel ls who m to do wha t? ” Andinth is in du st ry , th ere’s n otaneas y an swe r. The p ro du ct io n
co m pa ni es de sc rib e wha t the y wou ldli ke th e se t t o l oo k l ik e. They will oft ensen d- 9 -

[* 9] a sk et chan d m ay

be a ve rb al de sc rip ti on . Qui nt an il lath enbe co m es
res po ns ib le form ak in g t he im ag in edseta real ity . He has so m e d is cret io n t o a lt er th e sk et chto m ak e itwork . Andif aco m pa ny do es n’t g iv e h im

a sk et ch , Qui nt an il lacrea te s a wo rk ab le sk et chhi m se lf. He al so ha s au th or ity to hi re
worke rs to he lp hi m

co m pl et e th e job
. Qui nt an il la ’s si tu at io n i s al so co m pl ic at edby his de ci si on to work
so m et im es inhi s o wn n am e an d s om et im es th ro ug h h is co rp or at io n. We fin d t ha t th e p ro du ct io n c om

pa ni es di dn ’t m

uc h c are- -th ey

were h iri ng Qui nt an il la ’s
ex pe rti se on e way

or t he ot he r. Andwe be li ev edQui nt an il lawhen he sai d i t di dn ’t m at te r to hi m

whet he r th ey

ask edforPre Ca ll or f

orJo rg e Qui nt an il la --al l th e cal ls wentto th e sa m e cel l p ho ne nu m be r. He di d s ay

th athe fel t h e h ada bi t
m or e cl ou t an d abi t fe wer tru stis su es when he ba rg ai ne d wi th a pr oduc ti on
co m pa ny as a co rp or at io n. Bu t we fi ndth at , asi de fro m who m th e ch eckwas m ad e
ou t t o, the re was li tt le pra ct ic al di ffer en ce b etweenth e co nd it io ns wher e Qui nt an il lawork edas h im se lf andth os e whe re h e worke d t hr ou gh hi s co rp or at io n. The re was , ho wev er, a d iff eren ce i n t he pape rwo rkin vo lv ed . W he n a pr oduc ti on co m

pa ny hir edQui nt an il laas a n i nd iv idua l, i t wo ul d g en eral ly iss ue hi m a Fo rm W -2 , W ag e an d Tax Sta te m en t. An d t he co m pa ny lis te d o n t he Fo rm W -2 as t he em

pl oyer was u su al ly a payro ll co m pa ny. Eve n ati ny bitof- 10 -

[* 10 ] qu es ti on in g s ho wedth athi s s itua ti onis m uc h d iff eren t fr om

m os t t ax pa y ers who ge t a W-2 fr om

th ei r em pl oyer, andno bo dy inv ol ve d i n t hi s ca se th in ks th e pa yro ll co m

pa ny hadan y

co nt ro l wh at so ev er o ve r ho w Qui nt an il ladi d h is work
. In de ed , Qui nt an il laoft enpe rfo rm eddi ffer en t jo bs for di ffer en t p ro du ct io n
co m pa ni es whi le be in g p ai d b y th e sam e p ayro ll co m

pa ny. He was hi redform or e th an80 di ffer en t jo bs by pro du ct io n c om pa ni es in20 09 , bu t s om e o f th es e pr oduc ti on co m

pa ni es hi redhi m

form ul ti pl e job s atdi ffer en t t im es th ro ug ho utth e y ear. Th e sa m e was tru e in 20 10
. To s ho w th e b oo kk eep in g t an gl e o f th es e job s, we l is t tho se jus t fr om 20 09 :
D a t e P a ye e P r o d u c t i o n P a yr o l l C o m p a n y J o b T i t l e H o u r s G r o s s P a y 1 / 7 / 0 9
- 1 / 1 5 / 0 9 J o r g e

Q u i n t a n i l l a K n u c k l e h e a d
-

J C P e n n e y C A P S , In c . D r i v e r 8 4
. 7 5 $ 5 , 0 9 7 1 / 2 7 / 0 9
- 1 / 3 1 / 0 9 J o r g e

Q u i n t a n i l l a D i g i t a l

K i t c h e n - A A R B i g N u m b e r s T e a m

A l t e r n a t i v e s S e t D r e s s e r -

D r i v e r 6 0 $ 2 5 0 0

2 / 4 / 0 9
- 2 / 5 / 0 9 J o r g e

Q u i n t a n i l l a P a rk A v e n u e

T e l e p r o d u c t i o n s N / A C o n s t ru c t i o n 2 4 $ 9 0 0

2 / 8 / 0 9
- 2 / 1 1 /
- 0 9 J o r g e

Q u i n t a n i l l a P a rk A v e n u e

T e l e p r o d u c t i o n s N / A C o n s t ru c t i o n 4 8 $ 1 8 0 0

3 / 1 4 / 0 9
- 3 / 1 6 / 0 9 G e o r g e

Q u i n t a n i l l a E p o c h F i l m s -

M i n u t e M a i d C A P S , In c . D r i v e r 3 0 $ 1 2 0 0 3 / 1 4 / 0 9
- 3 / 1 6 / 0 9 G e o r g e

Q u i n t a n i l l a E p o c h F i l m s -

M i n u t e M a i d C A P S , In c . D r i v e r K i t R e n t a l $ 7 5- 11 -

[* 11 ] 4 / 0 9 / 0 9 P r e C a l l

S t u d i o R e n t a l s C h e l s e a

P i c t u r e s G E P A d m i n .

S e r v i c e s D r i v e r 3 0 $ 1 6 5 0

4 / 1 5 / 0 9 P r e C a l l

S t u d i o R e n t a l s C h e l s e a

P i c t u r e s G E P A d m i n .

S e r v i c e s D r i v e r 1 0 $ 5 5 0

4 / 1 5 / 0 9 J o r g e

Q u i n t a n i l l a S m u g g l e r -

U S P S C A P S , In c . H yp h e n a t e D r i v e r 1 0 $ 4 5 0 4 / 1 4 / 0 9
- 4 / 2 3 / 0 9 J o r g e

Q u i n t a n i l l a E p o c h F i l m s -

W e l l s F a r g o C A P S , In c . D r i v e r 8 0 $ 3 , 8 0 0 C h e c k D a t e 4 / 2 1 / 0 9 P r e C a l l

S t u d i o R e n t a l s C h e l s e a

P i c t u r e s G E P A d m i n .

S e r v i c e s R e n t T N T 0 $ 1 0 0

5 / 2 8 / 0 9
- 5 / 2 9 / 0 9 J o r g e

Q u i n t a n i l l a S m u g g l e r -

D o m i n o ’ s C A P S , In c . D r i v e r 3 1 $ 1 8 4 1 6 / 1 6 / 0 9
- 6 / 2 2 / 0 9 J o r g e

Q u i n t a n i l l a S a v a n t F i l m -

P u r i n a C A P S , In c . H yp h e n a t e D r i v e r 5 3 $ 2 5 0 8 6 / 2 8 / 0 9 J o r g e

Q u i n t a n i l l a Im p e r i a l

W o o d p e c k e r - N F L C A P S , In c . D r i v e r 8 $ 4 7 5

6 / 2 2 / 0 9
- 6 / 2 5 / 0 9 J o r g e

Q u i n t a n i l l a S m u g g l e r -

B e s t B u y C A P S , In c . D r i v e r 4 9 $ 3 1 6 4 6 / 2 9 / 0 9
- 7 / 1 / 0 9 J o r g e

Q u i n t a n i l l a S m u g g l e r -

B e s t B u y C A P S , In c . H yp h e n a t e D r i v e r 2 4
. 5 $ 1 4 3 2
7 / 1 3 / 0 9
- 7 / 1 7 / 0 9 J o r g e

Q u i n t a n i l l a A n o n ym o u s

C o n t e n t - - C a d i l l a c C A P S , In c . D r i v e r 6 1
. 7 5 $ 3 5 6 5

7 / 1 9 / 0 9
- 7 / 3 0 / 0 9 J o r g e

Q u i n t a n i l l a A n o n ym o u s

C o n t e n t - - C a d i l l a c C A P S , In c . H yp h e n a t e 5
- T o n 1 1 3
. 7 5 $ 7 , 1 0 2

7 / 3 1 / 0 9 J o r g e

Q u i n t a n i l l a A n o n ym o u s

C o n t e n t - - C a d i l l a c C A P S , In c . 5
- T o n T ru c k D r i v e r 1 0 $ 5 0 0

8 / 1 2 / 0 9
- 8 / 1 9 / 0 9 J o r g e

Q u i n t a n i l l a A n o n ym o u s

C o n t e n t - - C o m c a s t C A P S , In c . S e t D r e s s e r 8 8 $ 5 , 3 8 6- 12 -

[* 12 ] 9 / 2 2 / 0 9 J o r g e

Q u i n t a n i l l a Im p e r i a l

W o o d p e c k e r - B u d w e i s e r C A P S , In c . D r i v e r 1 0 $ 5 0 0

9 / 2 8 / 0 9
- 1 0 / 1 / 0 9 J o r g e

Q u i n t a n i l l a H S I/

J C P e n n e y G E P A d m i n .

S e r v i c e s D r i v e r 2 0 $ 1 0 0 0 1 0 / 0 5 / 0 9
- 1 0 / 1 2 / 0 9 J o r g e

Q u i n t a n i l l a T o o l o f N o r t h

A m e r i c a - W e n d y’ s C A P S , In c . H yp h e n a t e D r i v e r 6 3 $ 3 3 0 0

1 0 / 2 7 / 0 9
- 1 0 / 3 0 / 0 9 J o r g e

Q u i n t a n i l l a F u r l i n e d L L C

- T a r g e t C A P S , In c . H yp h e n a t e 5
- T o n 5 3 $ 2 2 9 5 1 1 / 2 4 / 0 9 J o r g e

Q u i n t a n i l l a S m u g g l e r -

G a t o r a d e C A P S , In c . H yp h e n a t e D r i v e r 1 5 $ 9 5 3 1 2 / 1 1 / 0 9 J o r g e

Q u i n t a n i l l a A n o n ym o u s

C o n t e n t - - A T & T C A P S , In c . H yp h e n a t e 5
- T o n 1 0 $ 5 0 0

1 2 / 1 3 / 0 9
- 1 2 / 1 4 / 0 9 J o r g e

Q u i n t a n i l l a A n o n ym o u s

C o n t e n t - - A T & T C A P S , In c . S e t D r e s s e r 2 0 $ 1 0 0 0

1 2 / 1 5 / 0 9
- 1 2 / 1 7 / 0 9 J o r g e

Q u i n t a n i l l a A n o n ym o u s

C o n t e n t - - A T & T C A P S , In c . S e t D r e s s e r 3 0
. 2 5 $ 1 6 9 9

1 2 / 1 8 / 0 9
- 1 2 / 1 9 / 0 9 J o r g e

Q u i n t a n i l l a A n o n ym o u s

C o n t e n t - - A T & T C A P S , In c . S e t D r e s s e r T r a v e l 1 6 $ 1 0 0 0

1 2 / 2 1 / 0 9 J o r g e

Q u i n t a n i l l a A n o n ym o u s

C o n t e n t - - A T & T C A P S , In c . D r i v e r 1 0 $ 5 0 0

1 2 / 2 2 / 0 9 J o r g e

Q u i n t a n i l l a A n o n ym o u s

C o n t e n t - - A T & T C A P S , In c . S e t D r e s s e r 1 0 $ 5 0 0

N o D a t e P r o v i d e d ( 2 0 0 9 ) J o r g e

Q u i n t a n i l l a F S I P r o c e s s i n g , IN C $ 3 3 5 3 2- 13 -

[* 13 ] Of th e n earl y

11 00 ho ur s fo r whi chQui nt an il lapro vi de d d et ai le d wo rklo gs , he sp en t 4 35 as adri ve r, 33 2 a s a h y ph en at e driv er, 2 24 as asetdre ss er, an d 7 2 pe rfo rm in g c on st ru ct io n. In20 09 he work edon ly 40 h ou rs th ro ug h P re Ca ll , all as a driv er. He al so earn eda bi t o f in co m e th ro ug h P re Ca ll fro m ren ti ng to ol s an d equi pm en t. W e co nc lu de th atalm os t al l the se fact s fa vo r fi nd in g t ha t Qu in tani ll a was an in de pe nd en t co nt ract oran d n otanem pl oyee. The m os t i m

po rta ntis th at Qui nt an il laha d alar ge de gr ee o f co nt ro l as to ho w to acco m pl is h t he tas ks he ha d to do th ro ug ho utth e y ear. A p ro du ct io n c om pa ny sometim es ga ve Qui nt an il laa sk et chdra wn b y

a se t d es ig ne r. Andso m et im es itjus t g av e h im th e d ire ct or ’s vi si on forth e p ro

ject. Bu t i n e ithe r si tu at io n Qu in tani ll a h ada larg e d eg ree o f in de pe nd en ce i n d et erm in in g h ow t o a cco m pl is h t he pro

ject. He o rd eredpro ps
an d m od ifi edth em

to th e sp ecs , he h adauth or ity to hi re ad di ti on al work ers as
ne ed ed , andhe ha d t he au th or ity no t t o u se work ers th atweren ’t per fo rm in g. Th e Co m m is si on er as se rts th atsi nc e th e p ro du cers ha d avi si on of t he setinm in d, the pr oduc ti on co m

pa ni es ret ai ne d alar ge de gr ee o f co nt ro l o ve r Qui nt an il la . W e di sa gr ee-- we fi ndth atQui nt an il laha d alar ge de gr ee o f di sc ret io n i n h ow t o
co ns tru ctth e se t. He en gi ne eredset s fr om dra win gs an d o fte n t ol d t he pro du cers- 14 -

[* 14 ] th atth ei r in it ia l v is io n n eed edto be m od ifi ed . Thathe was g iv enco nt ex t fo r bu il di ng a se t d oe sn ’t tran sl at e in to a la ckof c on tro l. Qui nt an il laals o p ro vi de d a ll th e to ol s u se d, an d h e in ve st edhe av il y inth em . He al so bo ug hta nu m

be r of hi gh -d ol lar it em s re qu ire d fo r hi s wo rk . There is no
ev id en ce t o s ug ge stth atth e p ro du ct io n c om pa ny sup pl ie d t oo ls or abu dg etto pu rch as e th e n eces sa ry

equi pm en t. The factth ata worke r pr ov id es hi s o r he r own to ol s o r own s a v eh ic le th atis us edfor hi s wo rkweig hs to wardfin di ng hi m to be
anin de pe nd en t co nt ract or . Ewens & Mi ll er, In c., 11 7 T.C. at27 1. An o pp ortu ni ty to ea rna pr of itor s uf fer alo ss als o d is ti ng ui sh es an in de pe nd en t co nt ract orfro m anem pl oyee. Sim

ps on , 64 T.C. at 9 88 ; Ro sa to v. Co m m is si on er, T.C. Mem o. 2 01 0- 39 . The Co m mis si on er ar gu es th atth e rea l po te nt ia l fo r pr of

itor l os s l ie s wi th th e fi rm s h ire d t o p lan m ark et in g c am pa ig ns , an d wi th th e p ro du ct io n c om pa ni es th atth e adve rti si ng firm s h ire to sh oo t
co m m erci al s an d a ds . Andwe ag ree t ha t the pl ay ers at t he se lev el s h av e th e po te nt ia l t o m ak e g reat er p ro fit s o r su ffer gre at er l os se s. Bu t ev eninth e pr oduc ti on of c omm erci al s, Ho ll ywoo d i s a p io ne er o f th e g ig eco no m y . Pro du ct io n wo rk ers li ke Qui nt an il laha ve so m e rea l ri skof p ro fitor l os s. Qui nt an il laco ul d a ccep t o r de cl in e p ro jects (an d o n o ccas io n c ou ldsubm ita bi d)
. At t im es a pr oduc ti on co m pa ny woul d g iv e a fi xe d fe e fo r Qui nt an il la ’s servi ces .- 15 -

[* 15 ] He cred ib ly test ifi edth athe wou ldpre pa re a b ud ge t t o s ee i f he co ul d pe rfo rm th e work fo r th atam ou nt . Pro du ct io n c om

pani es di d s om et im es hi re Qu in tani ll a subjec t t o h ou rly
un io n s cal e rat es , whi chare s etby col le ct iv e b arg ai ni ng . Buton othe r pr ojec ts he
wou ldsethi s o wn ra te de pe nd in g o n t he job at h an d. Whil e so m e co m pa ni es pa id
ren t fo r th e u se of h is to ol s, s om e ref us ed , andhe wou ldin crea se hi s h ou rly rate t o
co m pe ns at e fo r th ei r us e. So m e co m pa ni es pa idin vo ic es th atQui nt an il lapre pa red ba se d o n h is est im at es , whi le ot he rs pa idon th e b as is of h ou rs he bi ll edan d rep orte d t o t he m . Butonall th es e we fi ndth athe co ntro ll edwhi chpro jects he
worke d o n a ndwhet he r to acce ptth e am ou nt s h e was off ered
. W e al so fin d tha t the pro du ct io n c om pa ni es ha d t he rig htto fir e Qui nt an il la
. Bu t the re’s a b itof aqu al ifi cat io n h ere- -th atrig htwou ldve ry sel do m be ex erci se d. As Qu in tani ll a cre di bl y

expl ai ne d, b ecau se of t he sh ort-t erm na tu re o f th e job s, i f a pr oduc ti on co m

pa ny or cl ie ntwere d is sa ti sf ie d wi th so m eo ne ’s workth atpe rs on
wou ldrare ly be fi red ; he wou ldin st eadjus t n ev er g etan ot he r ph on e cal l t o wo rk 2 fo r th atpa rti cu lar pr oduc ti on co m pany or cl ie nt .
See Be th A. Bech ky, “ Gaffe rs , Gofe rs , andGrip s: Rol e-Ba se d 2 Co or di na ti on inTem

po rary Organ iz at io ns ,” 17 Org . Sci ., 9 (2 00 6) (no ti ng th atth e fil m pe op le do n’t g etfir eddu e to th e dur at io n o f pr ojec ts an d b ecau se oft enth e pr oduc ti on s n eedth e to ol s the y pro vi de .)- 16 -

[* 16 ] Ourcas es tel l u s tha t wo rkth atis part o f th e p rin ci pa l’s re gu lar bu si ne ss in di cat es em

pl oyee st atus . Sim

ps on , 64 T.C. at 9 89 ; Ro sa to v. Co m mis si on er, T.C. Mem o. 2 01 0- 39 . Butit ’s a li tt le bi t h ardto fig ur e o utex act ly who is th e

“pr in ci pa l” on a co m

m erci al sh oo t. If i t’s an adve rti si ng ag en cy , it s “ reg ul ar” bu si ne ss m ig htbe to pro m ot e th e p ro du ct s o f it s cl ie nt s, an d m ay be no t t o p ro du ce
co m m erci al s. If the “pr in ci pa l” is a pr oduc ti on co m pa ny, its bu si ne ss mig htbe
sa idto be th e p ro du ct io n o f co m m erci al s, b utno t al way s s etde si gn an d
co ns tru ct io n. We th in k the arg um en ts co ul d g o b ot h ways o n t hi s fa ct or , andfin d itne ut ral
. Ano th er fa ct oris th e p erm an en cy of awork in g re lati on sh ip --the m or e pe rm an en t the rel at io ns hi p, the li ke li er i t s ho ws anem pl oyer-em

pl oyee rel at io ns hi p. Ewen s & Mi ll er, In c., 11 7 T.C. at27 3, Ro se m an n v . Comm is si on er, T.C. Mem o. 2 00 9- 18 5. Th e Co m m is si on er as se rts th atQui nt an il lawas e m pl oyed by GE P Co m

m pr odServ ic es LLC, CAPS, In c., ParkAven ue Tele pr oduc ti on s, Team Alt ern at iv es , Mo na rch Co ns ul ti ng , andFSI Pr oc es si ng , Inc . Qui nt an il la cred ib ly test ifi edat t ria l, h owe ve r, th atGEP andCAPS ar e p ay ro ll co m pa ni es us ed by sev eral di ffer en t p ro du ct io n c om pani es . Mul ti pl e p ro du ct io n c om pa ni es m ay
us e th e sa m e p ayro ll co m pa ny, andthus th e wag es are t ot al edforth e y ear. Se e ge ne ral ly Cenca stServ s., L.P. v. Un it edSta te s, 7 29 F.3d13 52 , 13 62 (Fed . Cir
.- 17 -

[* 17 ] 20 13 ). Forin st an ce, Qu in tani ll a was pa idth ro ug h C APS fo r ab ou t s ix
m on th s, b utth atwas fo r ov er 2 0 i nd ep en de ntpro jects
. A revi ew of

in vo ic es 3
subm it te d b y

th e p ayro ll co m

pa ni es sh ows th atth e p ayro ll co m pany nam e was at th e to p o f th e in vo ic e, th e p ro du ct io n c om pa ny was li st edbe lo w alo ng with a cl ie ntco de th atid en ti fie d t he pro ject, an d t he n the wage s wer e d es cri be d. Whil e
so m e p ro du ct io n c om

pani es , su chas B is cu itor Arr ow Fi lm s, h ire d h im sev eral ti m es ina si ng le y ear, i t was alwa y s fo r se pa rat e adcam pa ig ns --fo r ex am

pl e, Nik e, St arb uc ks , GMC--a ndoft enm on th s ap art . The lo ng es t co m

m erci al sh oo t tha t Qu in tani ll a worke d o n was ab ou t o ne
m on th , bu t m os t ar e sh orte r. Duri ng th e y ears at i ss ue he work edon 80 -1 00 job s pe r y ear. Th atth e job s wer e so sh ort-t erm als o s ug ge st s tha t Qu in tani ll a was an in de pe nd en t co nt ract orrathe r th ananem pl oyee. Thro ug ho utth e y ears at i ss ue Qui nt an il laha d re la ti on sh ip s wi th m an y pr oduc ti on co m

pa ni es an d t wo u ni on s. Th e rel at io ns hi ps with p ro du ct io n
If two or m or e rel at edco rp or at io ns em pl oy the same ind iv idua l, o ne of t he 3 co rp or at io ns canserve as the co m m on pa ym as te r fo r al l o f th e rel at ed co rp or at io ns . See s ec. 3 1.3 12 1( s) -1 , Em pl oym en t Tax Reg s. Th is all ows th e gr oup o f co m

pa ni es to be tre at edas asi ng le em pl oyer, whi chpre ve nt s the m fro m ha vi ng to pa y

m or e in to ta l So ci al Secu rit y an d M ed ic are t ax es th ana si ng le em pl oyer wou ldha ve to pa y . Id. Inth is in st an ce, h owe ve r, Hol lywoodis ag ai n di ffer en t. The co rp or at io ns th atpa idQui nt an il laare n otrel at ed , bu t m an y of t he m us e th e sa m e th ird -p arty

pa y ro ll co m pa ny.- 18 -

[* 18 ] co m

pani es ap pe ar t o h av e b eentra ns it ory an d t as k- fo cu se d. Neithe r pa rty 4 in te nd edto m ak e a p erm an en t o r em pl oyer-em

pl oyee rel at io ns hi p. So far, the n, the us ua l fa ct or s d on ’t hel p t he Co m m is si on er m

uc h. Bu t h e ha s o ne ve ry

stro ng arg um en t l eft : Qu in tani ll a is a un io n m em be r, an d m an y

of h is job s wer e p ric edat r at es setth ro ug h c ol le ct iv el y ba rg ai ne d c on tra ct s. Un io n
co nt ract s ty

pi cal ly pro vi de th atwork ers are em pl oyees andno t i nd ep en de nt
co nt ract or s. See ge ne ral ly K rau s v . Comm is si on er, T.C. Mem o. 2 00 3- 10
. Qui nt an il lacred ib ly exp la in edth athe an d m an y of h is pe ers inth e in du st ry joi n
un io ns m ai nl y

to ob ta in he al th in su ran ce an d t o ales se r ex te ntto ap pe ar o n c al l bo ard s. His ex pe rie nc e was typic al --h e was a m em be r of a un io n a ndrece iv edhi s he al th in su ran ce fr om

it . Thatun io n re qu ire d Qu in tani ll a to sh ow a m in im um
nu m be r of ho ur s t o re cei ve th is in su ran ce. Bu t n ei th er the un io n c on tra ct s n orth e pr oduc ti on co m

pa ni es ga ve hi m

va cat io n d ay s o r si ckti m e. As Qu in tani ll a So m ewh ere t he re i s p ro babl y aneco no m is t wh o’s fo rm ul at edth e equa ti on 4 fo r de fin in g wh enth e o ve rh eadco st s s av edex ceedth e tr an sa ct io n c os ts in cu rred fo r anin du st ry

li ke th is , bu t s oc io lo gi st s h av e n ot ic edth is pe cu li ari ty of eco no m ic li fe i n Ho ll ywoo d: “ Whe n s y st em s o f act iv ity are as se m

bl edan ew, subs tant ia l co nt ro l o f fi xe d o ve rh eadcanbe ach ie ve d t hr ou gh sh ort-t erm co nt ract in g. Tie s are a ls o d ev el op edbe twee n e nt rep ren eurs an d fi lm stud io s o n ape r-p ic tu re b as is .” Ro be rt R . Fau lkne r & An dy B. Ande rs on , “ Sh ort-Te rm Pro jects an d Em erg en t Care ers : Ev id en ce fr om

Hol lywood ”, 92 Am . J. o f So c. 87 9, 8 89 (19 87 ). As Fau lkne r an d An de rs on im pl y , ho wev er, the se tra ns act io n c os ts canbe ke ptdo wn with t he pre di ct ab il ity

of i nd iv idua ls pe rfo rm in g t he same rol es fro m job to job
. Id . at 8 90
.- 19 -

[* 19 ] cred ib ly exp la in ed , if h e wan te d ava cat io n h e wou ldjus t n otan swe r hi s ph on e. Andth e uni on co nt ract s ev enex cl ud edfix edwage s an d wo rk in g
co nd it io ns fro m

th ei r co ve rag e--t he y

ex pr es sl y

res erv edth e p owe r of

em pl oyees t o
cu t b et te r de al s i f th ey

co ul d. Qu in tani ll a te st ifi edth atall of h is job s ca m e fro m pe rs on al co nn ect io ns an d n oton e cam e fro m a un io n c al l b oa rd
. See Su sa n 5 Ch ris to ph ers on & Mi ch ael Sto rp er, “ The Effect s o f Fl ex ib le Sp eci al iz at io n o n In du stria l Po li ti cs an d t he Labo r Marke t: The M ot io n P ic tu re In du st ry ,” 42 Indus . & Lab . Rel . Rev . 33 1, 3 35 (19 89 ) (d es cri bi ng th e ro st er s y st em as an i nt erm ed iary labo r m ark etfortem

po rary em

pl oym en t i n re la ti on to craf t jo bs .) At ti m es he was pa idun io n ra te s, b utat o th er t im es he ne go ti at edhi s fe e. Qui nt an il lacred ib ly test ifi edth atev erythi ng inHol lywoodis a ne go ti at io n,
an d c on tra ct s ar e d is cu ss edda il y . At ti m es a stud io ev enus es an ot he r stud io ’s st ag e if th e p ric e is lo wer tha n t he rat e fo r it s o wn s ta ge . Con ti nu al ne go ti at io ns
an d e ve r-ch an gi ng co nt ract s ar e ev id en ce tha t the stud io s d idn’t i nt en d t o m ak e a pe rm an en t re la ti on sh ip . Em pl oyers d on ’t neg ot ia te with the ir e m pl oyees d ai ly. 6

“ Tem po rary org an iz at io ns co nt ras t wi thtra di ti on al hi erar ch ic al 5 or ga ni zat io ns as t he y

are g ov ern edth ro ug h n etworks of r el at io ns hi ps .” Beth A. Bec hky , supr a n . 2, at3. Co as e, R. H., “ The Natu re o f th e Fi rm ”, 4 Eco no m ic a New Seri es , 39 1 6 (1 93 7)
.- 20 -

[* 20 ] Afte r rev ie win g t he fact or s, we fi ndth atQui nt an il lais anin de pe nd en t
co nt ract or . It fo ll ows th athe ap pr op ria te ly deduc te d i te m s o n h is Sch edul e C. 7 W ith o urrul in g i n h is fav oron th e m eri ts , th e p en al ty also di sapp ears . 8

Deci si on wil l b e en te red
un de r Ru le 15 5.

As fo r Qui nt an il la ’s fin al arg um en t, i t i s p os si bl e to be a st atut ory 7 em pl oyee if o ne is a co m

m on -la w in de pe nd en t co ntract or . Buthe do es n’t fi t an y of th e cat eg or ie s o f st atut ory em pl oyees l is te d i n s ec. 3 12 1( d) (3 ), an d i t d oe sn ’t m at te r be cau se in de pe nd en t co nt ract or s an d s tatu to ry em pl oyees c anbo th de du ct bu si ne ss ex pe ns es on Sch edul e C i ns te adof S ch edul e A. Ros at o v . Co m m is si on er, T.C. Mem o. 2 01 0- 39
. Ther e is a sm al l i ss ue forwhi chth is is n’t tru e--wh ethe r Qui nt an il laha d t o 8 pa y tax on th e st at e in co m e-t ax refu nd s h e rec ei ve d i n 2 00 9 a nd20 10 . The l aw is bl acklet te r on th is on e: He m us t i nc lu de refu nd s o f st at e in co m e ta xe s tha t h e de du ct edina pr ev io us tax y ear. Se e Franc is co v. Co m m is si on er, 1 19 T.C. 31 7, 33 4 (2 00 2) , aff’d, 3 70 F.3d12 28 (D.C. Cir . 20 04 ); Ka du nc v. Co m m is si on er, T.C. Mem o. 1 99 7- 92 . Becau se he rece iv eda Fo rm 10 99 -G, Cert ai n Go ve rn m en t Paym en ts , foreach y ear at i ss ue , we fin d h im li ab le forth e d efi ci en cy

an d as so ci at edpe na lt ie s at tri bu tabl e to hi s fa il ur e to in cl ud e th es e ref un ds on hi s returns . He di dn ’t con te stth is is su e, an d n eg li ge nc e is stro ng ly ind ic at edwhena ta xp ay er d oe sn ’t rep ort i nc om e fo r whi chhe ge ts a 10 99 . Sec. 1 .66 62 -3 (b )(1 )(i ), In co m e Tax Reg s.; see als o Vez ey v. Un it edSta te s, 1 91 F.3d46 2 (9 th Cir . 19 99 ); Bac hm an n v . Comm is si on er, T.C. Mem o 2 00 9- 51 ; s ec. 1 .66 64 -4 (b )(1 ), In co m e Tax Reg s.