Rev. Rul. 68-624

The purpose of this Revenue Ruling is to update and restate, under the current statute and regulations, the position set forth in S.S.T. 104, C.B. 1937-1, 481.

The question presented is what percentage of the total amount paid by a Missouri corporation for the use of a truck and the services of a driver is allocable as wages of the driver for purposes of the Federal Insurance Contributions Act, the Federal Unemployment Tax Act, and the Collection of Income Tax at Source on Wages (chapters 21, 23, and 24, respectively, subtitle C, Internal Revenue Code of 1954).

The corporation hires a truck and driver to haul stone from its quarry to its river loading dock, at a fixed amount per load. In similar cases the Division of Workmen's Compensation (formerly the Missouri Workmen's Compansation Commission) has agreed that one-third of the amount paid to such an employee should be considered as wages and two-thirds as payment for the use of the truck. The corporation asks whether it will be permitted to report on the same basis, for Federal employment tax purposes, wages paid under the contract of employment with the employee.

With certain exceptions not material here, sections 3121(a) and 3306(b) of the Code define the term `wages' as all remuneration for employment. Section 3401(a) of the Code relating to the withholding of income tax contains a similar definition of `wages.'

The allocation of the amount paid to an individual where the payment is in consideration of both personal services and the use of equipment must be governed by the facts in each case. If the contract of employment does not specify a reasonable division of the total amount paid between wages and equipment, a proper allocation may be arrived at by reference to the prevailing wage scale in a particular locality for similar services in operating the same class of equipment or the fair rental value of similar equipment.

If the allocation adopted by the Division of Workmen's Compensation is determined by reference to the factors stated above, it may be accepted for purposes of the Federal Insurance Contributions Act, the Federal Unemployment Tax Act, and the Collection of Income Tax at Source on Wages.

S.S.T. 104 is superseded, since the position set forth therein is restated under current law in this Revenue Ruling.

¹ Prepared pursuant to Rev. Proc. 67-6, C.B. 1967-1, 576.