USA State Unemployment Insurance Tax Audit


Jul 17, 2018
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United States
Hi all,

States require the workers to have business license in order for the contractor (hiring entity) to be able to treat them as independent contractors, provided the direction/control test is met. Unlike the IRS, they don't ask or care for W-9 or contracts. One of my clients runs a painting business but the owner doesn't even paint. He hires painters to paint for him and these painters have their own tools and supplies; also the painters would quote him for the service fee they want before they would accept the job. They appear to be IC to the client and me. The painters don't get supervised by the owner. So the auditor nailed us on business license itself for the reclassification. The painters refuse to get business license so it doesn't seem right to me that the client becomes the ultimate responsible party for the business license effectively. I thought the painters should get nailed for the business license instead of the client who now has to reclassify them as employees. The painters refused to be treated as employees neither. Any feedback for corresponding with the auditor is appreciated, thank you.


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