U.S. Code » Title 26 » Subtitle Subtitle C— Employment Taxes › Chapter CHAPTER 25— GENERAL PROVISIONS RELATING TO EMPLOYMENT TAXES

26 U.S.C. § 3508

Treatment of real estate agents and direct­ sellers

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(a) General ruleFor purposes of this title, in the case of services performed as a qualified real estate agent or as a direct seller—(1) the individual performing such services shall not be treated as an employee, and(2) the person for whom such services are performed shall not be treated as an employer.(b) DefinitionsFor purposes of this section—(1) Qualified real estate agentThe term “qualified real estate agent” means any individual who is a sales person if—(A) such individual is a licensed real estate agent,(B) substantially all of the remuneration (whether or not paid in cash) for the services performed by such individual as a real estate agent is directly related to sales or other output (including the performance of services) rather than to the number of hours worked, and(C) the services performed by the individual are performed pursuant to a written contract between such individual and the person for whom the services are performed and such contract provides that the individual will not be treated as an employee with respect to such services for Federal tax purposes.(2) Direct sellerThe term “direct seller” means any person if—(A) such person—(i) is engaged in the trade or business of selling (or soliciting the sale of) consumer products to any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis which the Secretary prescribes by regulations, for resale (by the buyer or any other person) in the home or otherwise than in a permanent retail establishment,(ii) is engaged in the trade or business of selling (or soliciting the sale of) consumer products in the home or otherwise than in a permanent retail establishment, or(iii) is engaged in the trade or business of the delivering or distribution of newspapers or shopping news (including any services directly related to such trade or business),(B) substantially all the remuneration (whether or not paid in cash) for the performance of the services described in subparagraph (A) is directly related to sales or other output (including the performance of services) rather than to the number of hours worked, and(C) the services performed by the person are performed pursuant to a written contract between such person and the person for whom the services are performed and such contract provides that the person will not be treated as an employee with respect to such services for Federal tax purposes.(3) Coordination with retirement plans for self-employed

This section shall not apply for purposes of subtitle A to the extent that the individual is treated as an employee under section 401(c)(1) (relating to self-employed individuals).

(Added Pub. L. 97–248, title II, § 269(a), Sept. 3, 1982, 96 Stat. 551; amended Pub. L. 104–188, title I, § 1118(a), Aug. 20, 1996, 110 Stat. 1764.)Editorial NotesAmendments

1996—Subsec. (b)(2)(A). Pub. L. 104–188 added cl. (iii).

Statutory Notes and Related SubsidiariesEffective Date of 1996 Amendment

Pub. L. 104–188, title XI, § 1118(b), Aug. 20, 1996, 110 Stat. 1764, provided that: “The amendments made by this section shall apply to services performed after December 31, 1995.”

Effective Date

Pub. L. 97–248, title II, § 269(e), Sept. 3, 1982, 96 Stat. 553, provided that:“(1)In general.—Except as provided in paragraph (2), the amendments made by this section [enacting this section and amending section 410 of Title 42, The Public Health and Welfare] shall apply to services performed after December 31, 1982.“(2)Subsection (c).—The amendments made by subsection (c) [amending provisions set out as a note under section 3401 of this title] shall take effect on July 1, 1982.”

Rules and Regulations

Pub. L. 97–248, title II, § 269(c)(3), Sept. 3, 1982, 96 Stat. 553, provided that: “Nothing in section 530 of the Revenue Act of 1978 [set out as a note under section 3401 of this title] shall be construed to prohibit the implementation of the amendments made by this section [enacting this section, amending section 410 of Title 42, The Public Health and Welfare, and amending provisions set out as a note under section 3401 of this title].”

Notes of Decisions
Cited in 30 cases (5 in the last 5 years), 1983–2025 · leading case: Cleveland Inst. of Elec., Inc. v. United States, 787 F. Supp. 741 (N.D. Ohio 1992).
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Cleveland Inst. of Elec., Inc. v. United States, 787 F. Supp. 741 (N.D. Ohio 1992). · cites it 21× “In response to the “problems arising from increased employment tax status controversies,” Congress enacted 26 U.S.C. § 3508 . Staff of Joint Comm, on Taxation, 97th Cong.”
Advanced Sports Info., Inc. v. Novotnak, 956 P.2d 806 (Nev. 1998). · cites it 5× “144 is derived from 26 U.S.C. § 3508 , which exempts direct sellers of “consumer products” from the status of employee.”
MacDougall v. Weichert, 677 A.2d 162 (N.J. 1996). “The definition of a “qualified real estate agent” *439 includes a licensed real estate agent who is compensated on the basis of sales made rather than hours worked and who has contracted that he or she will not be treated as an employee for federal tax purposes.”
Acn Opportunity, LLC v. Emp't Dep't, 418 P.3d 719 (Or. 2018). · cites it 2× “In arguing otherwise, ACN points to 26 USC § 3508 , enacted by Congress in 1982 to define the direct-seller exemption from employment at the federal level.”
Smoky Mountain Secrets, Inc. v. United States, 910 F. Supp. 1316 (E.D. Tenn. 1995). · cites it 3× “Gee did not consider it important to keep copies of the contracts between SMS and its sales force because 26 U.S.C. § 3508 does not address retention of contracts in any respect.”
Patricia Seaman v. Arvida Realty Sales & Arslp, 985 F.2d 543 (11th Cir. 1993). “Arvida also contends that 26 U.S.C. § 3508 , which permits it to employ real estate brokers as independent contractors for tax purposes, authorizes it to terminate salespersons who are currently employees receiving benefits so that it can reclassify them as independent…”
Westgate Smoky Mountains at Gatlinburg v. Burns Phillips, Comm'r, Tennessee Dep't of Labor & Workforce Dev., 426 S.W.3d 743 (Tenn. 2013). · cites it 3× “26 U.S.C. § 3508 (b)(l)(A)-(C) (West 2013).”
863 To Go, Inc. v. Dep't of Labor, 2014 VT 61, 99 A.3d 629. “Compare 26 U.S.C. § 3508 (b)(2)(A)-(C), with 21 V.”
Vector Mktg. Corp. v. New Hampshire Dep't of Revenue Admin., 942 A.2d 1261 (N.H. 2008). “See 26 U.S.C. § 3508 (2000) (Section 3508). Under Section 3508, to be considered an independent contractor for federal income tax purposes, one is not required to work for multiple employers.”
Grubb & Ellis Co. v. Spengler, 143 Cal. App. 3d 890 (Cal. Ct. App. 1983). “The status of real estate salespersons for purposes of federal employment taxes has been settled by the recent enactment of Internal Revenue Code section 3508 ( 26 U.S.C.A. § 3508 , Pub.L. No. 97-248, 96 Stat.”
Locations, Inc. v. Hawai'i Dep't of Labor & Indus. Relations, 900 P.2d 784 (Haw. 1995). “26 U.S.C. § 3508 (b)(1). 4 . HRS § 383-7 provides in pertinent part: “Employment” does not include the following service: [[Image here]] (17) Service performed by an individual for an employing unit as a real estate salesperson], if all such service performed by such individual…”
Nevada Emp. Sec. Dep't v. Capri Resorts, Inc., 763 P.2d 50 (Nev. 1988). “Their activities are controlled in large part by a regulatory authority, and not the particular developer for whom they are selling timeshares.”
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26 U.S.C. § 3508(b)(1)(A): 1 case
MacDougall v. Weichert, 677 A.2d 162 (N.J. 1996). “The definition of a “qualified real estate agent” *439 includes a licensed real estate agent who is compensated on the basis of sales made rather than hours worked and who has contracted that he or she will not be treated as an employee for federal tax purposes.”
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