Taxpayers received compensation for managing a small, family owned business owned by Mr. Garoutte’s mother-in-law. Taxpayers did not receive an hourly wage or salary, but drew down small amounts as they were needed or the business could afford to pay, in an effort to keep the business afloat. Taxpayer’s reported the compensation on Federal Schedule C, but did not register and pay gross receipts tax upon the compensation. The Taxpayer’s were assessed gross receipts tax on the compensation paid and protested the assessment on the grounds that they were not engaging in business. Held that Taxpayers were engaging in business and were thus subject to gross receipts tax. Held additionally that Taxpayers were not employees and therefore the deduction at Section 7-9-17 does not apply. Protest denied.
Aaron & Gaye Baroutte