COUNTRY CLUB DIRECTS & CONTROLS GOLF PRO'S SERVICES
U.S. INTERNAL REVENUE SERVICE, REVENUE RULING 68-626
Rev. Rul. 68-626; 1968-2 C.B. 466
July, 1968

This Revenue Ruling considered the federal employment tax status of "a salaried golf professional and his assistants who manage the golf shop of a country club under its supervision and are required to give lessons to the club's members at its established rates are employees of the club." Specifically, the issue was "whether a golf professional, and the persons whom he engages to assist him in performing services, are employees of a country club, for purposes of the Federal Insurance Contributions Act, the Federal Unemployment Tax Act, and the Collection of Income Tax at Source on Wages," i.e., social security, unemployment and federal withholding taxes on wages paid to employees. The circumstances of this particular situation were as follows:

The golf professional performs services at the country club and receives a fixed salary each month. He also receives the proceeds from the operation of the golf shop, which consist of a certain amount every month for each bag of clubs cleaned and kept in the shop, and the profits from the sale of golf balls, bags, and supplies. In addition, he instructs club members at an hourly rate established by the club. The club has the right to direct and control the manner in which he manages the golf shop, his books are open to club inspection at all times, he must be available for, and is required to keep, lesson appointments, and he may engage such further help as the needs of the business require.

In pertinent part, the Internal Revenue Service regulations provide that "generally the relationship of employer and employee exists when the person for whom services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished." Sections 31.3121(d)-1(c), 31.3306(i)-1, and 31.3401(c)-1 of the Employment Tax Regulations.

That is, an employee is subject to the will and control of the employer not only as to what shall be done but how it shall be done. In this connection, it is not necessary that the employer actually direct or control the manner in which the services are performed; it is sufficient if he has the right to do so. The right to discharge is also an important factor indicating that the person possessing that right is an employer. Other factors characteristic of an employer, but not necessarily present in every case, are the furnishing of the necessary tools and supplies and the furnishing of a place to work, to the individuals who perform the services.

In general, if an individual is subject to the control or direction of another merely as to the result to be accomplished by the work and not as to the means and method for accomplishing the result, he is an independent contractor. An individual performing services as an independent contractor is not, as to such services, an employee under the usual common law rules.

Applying these principles to the instant case, the IRS found that "the facts show that the golf professional and the individuals whom he engages to assist him are subject to the direction and control of the country club in the performance of the services described." Accordingly, the IRS concluded that "the golf professional and his assistants are employees of the country club for purposes of the Federal Insurance Contributions Act, the Federal Unemployment Tax Act, and the Collection of Income Tax at Source on Wages." As "employees of the club," the IRS further stated that "the golf professional's wages should be computed" in the following manner.

The golf professional's monthly salary, plus the proceeds derived from the golf shop and lessons given to members, minus the wages paid to his assistants and any expenses incurred in connection with the operation of the golf shop, are his "wages" for purposes of the above-mentioned taxes.

(In contrast, see Revenue Ruling 68-625, described herein, which held that "a golf professional selling golf clubs and lessons on the premises of a golf club is not an employee of that club for Federal employment tax purposes" due to the lack of control exercised in that particular situation.)