Legal Question in Business Law in New York

Is this a legal way to pay employers/contractors?

This is something interesting I learned of and wonder if it's legal.

Basically the Contractor is ''hired'' to do the work that an employee would normally do. The job under normal circumstances would run 120k a year plus commissions(sales person type of thing).

Instead of paying the contractor the ''employer'' gives the contractor ''gifts'' that at a retail level is equivalent to that of what the contractor would have made at the job.

This is done since the contractor could then in turn sell these items himself(which if sold under a certain amount becomes tax free income) and in turn the employer is getting an ''employee'' for free since the items purchased for your business to sell is tax deductible(the cost of them, not the profit). Since no profit is made the employer simply deducts that amount from their yearly profit.

Contractor makes tax free money and employer gets a worker for free.

Is this legal?


Asked on 6/11/05, 4:37 pm

1 Answer from Attorneys
Scott Ziegler Ziegler, Ziegler & Associates LLP

Re: Is this a legal way to pay employers/contractors?

I believe that the contractor would need to report as income the value of the items given to him in exchange for his working. If he sold the items given and profited on the sale, the profit on such items would likewise be considered income.

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Answered on 6/11/05, 5:11 pm


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