                        T.C. Memo. 2000-375



                      UNITED STATES TAX COURT



                ROBERT PATRICK DAY, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 7118-98.                 Filed December 13, 2000.


     Robert Patrick Day, pro se.

     Tracy Anagnost Martinez, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     PARR, Judge:   This case is before the Court on a petition

for a redetermination of a Notice of Determination Concerning

Worker Classification Under Section 7436.1



     1
      Section references are to the Internal Revenue Code in
effect for the taxable year in issue, and all Rule references are
to the Tax Court Rules of Practice and Procedure, unless
otherwise indicated.
                                 - 2 -

       The issues for decision are:   (1) Whether the individuals

(the drivers) who drove petitioner's trucks2 during 1995 were

employees of petitioner or independent contractors.     We hold they

were employees.    (2) Whether petitioner is eligible for relief

provided to employers by section 530 of the Revenue Act of 1978,

Pub. L. 95-600, 92 Stat. 2763, 2885 (section 530).     We hold he is

not.

                          FINDINGS OF FACT

       At the time the petition in this case was filed, petitioner

resided in Mazeppa, Minnesota.

       During 1995, petitioner owned or leased five or six trucks

and operated a sole proprietorship called Dayline Trucking (the

company).    Petitioner's business consisted of hauling freight

mainly between North Dakota and Texas and to the east coast.

       Petitioner recruited drivers to operate his trucks through

newspaper advertisements and by word of mouth.     Usually, at the

time he hired a driver, petitioner already had contracted with a

broker or a shipper for a load to be transported to a particular

destination.    Every driver that petitioner hired held a

commercial license to operate a truck and had performed

satisfactorily on a short test drive conducted by petitioner.       In



       2
      A trucking rig   is made up of a tractor and a semitrailer.
For convenience, and   to avoid confusion of petitioner's vehicles
with an agricultural   implement, we refer to the tractors and
semitrailers in this   case as trucks.
                                 - 3 -

the year at issue, petitioner had 11 drivers who operated his

vehicles.

     Petitioner had the right to discharge the drivers, and the

drivers had the right to quit, at any time.    During the year at

issue, most of the drivers worked only a few months for

petitioner.

     The driver chose the route to take between the point where

he engaged the load and the destination point, and also which

hours he would drive and rest.    If the driver delivered the load

late, the company, not the driver, was liable for any penalties.

     Petitioner required the drivers to call him daily while they

were on the road to inform him of their progress so that he could

arrange timely loads near the delivery points for the drivers to

haul on the return trips.   Petitioner provided each driver with a

cellular telephone for that purpose, and petitioner paid the

expense of these telephone calls.

     On the occasions that a driver delivered a load to a place

where petitioner had not been able to arrange a return load, the

driver would try to find a load by contacting a broker or by

consulting the "load board" at a truck stop.    On these occasions,

the driver would call petitioner for approval of the terms of the

haul before engaging the load.    The contract for the

transportation of the freight always was between the company and

the broker; the contract was never between the driver and the
                                - 4 -

broker.    The driver was never paid for the time spent locating a

return load, and the driver was always responsible for his own

living expenses while on the road.      Almost without exception, the

drivers slept in the trucks rather than in motels.

     Petitioner paid the drivers 25 cents per mile for driving a

truck hauling a load, whether the driver or petitioner arranged

for the load, and, usually, 12-1/2 cents per mile for driving a

truck pulling an empty semitrailer.      Some shipments were required

to be off-loaded upon delivery.   In these instances, petitioner

allowed the driver $50 to $100 to hire a "lumper" to perform the

offloading; however, if a driver preferred to do the work

himself, the driver would be paid the lumper's fee.

     Petitioner paid the acquisition and maintenance costs of the

trucks and all operating expenses including insurance, fuel, oil,

repairs, tolls, and scale charges.      The drivers provided their

commercial driver's licenses and carried their own mechanic's

tools, which they used occasionally to make minor repairs to the

trucks (e.g., replace a burned-out flasher or fuse) while in

transit.

     If a truck required a repair that prevented the operation of

the vehicle, e.g., a tire blowout, the driver would turn the

truck over to a professional truck mechanic for the repair work.

In these instances, petitioner would authorize the repair over

the telephone.   If a truck had a mechanical problem that did not
                                - 5 -

prevent its operation, the driver would inform petitioner of the

problem, and petitioner would decide whether to have the truck

repaired while in transit or after the truck returned to

petitioner's place of business.   In either event, petitioner paid

for the repair.

     If the truck was involved in an accident, the company was

liable for any loss not paid by insurance for the damage to the

trucking rig or freight.   The driver was responsible for the

payment of fines imposed for driving violations.

     Drivers were provided a "Comcheck" to pay expenses incurred

while hauling the freight.   A Comcheck has a number code that the

driver submits at truck stops to pay for fuel, oil, and other

necessary expenditures.    The driver may also use the Comcheck to

draw cash advances and to pay for personal items, such as food.

At the end of the run, the driver reconciled the sum of the cash

advances and the amounts spent on personal items against the

amount earned for driving the truck; then either petitioner paid

the driver the balance owed or the driver repaid petitioner the

amount overdrawn.   If a driver submitted incomplete records to

petitioner for the miles driven, the loads hauled, and expenses

incurred, petitioner charged the driver $25 to $100 to complete

the paperwork.
                                 - 6 -

     For employment tax3 purposes, petitioner treated all the

drivers as independent contractors, rather than as employees, and

issued every driver a Form 1099 instead of a Form W-2.    Most of

the drivers working for petitioner considered themselves to be

employees, but some considered themselves independent

contractors.

                                OPINION

Issue 1.   Whether the Drivers Are Employees or Independent
           Contractors

     Respondent determined that for employment tax purposes the

drivers of petitioner's trucks during 1995 were employees, not

independent contractors.    Relying mainly on his own previous

experiences as a driver and his interpretation of a State

multiple-factor test, petitioner asserts that the drivers of his

trucks were independent contractors.

     Respondent's determinations of fact are presumptively

correct, and petitioner bears the burden of proving by a

preponderance of the evidence that those determinations are

erroneous.     See Rule 142(a); Welch v. Helvering, 290 U.S. 111,

115 (1933); Day v. Commissioner, 975 F.2d 534, 537 (8th Cir.

1992), affg. in part and revg. in part T.C. Memo. 1991-140.


     3
      For convenience, we use the term "employment tax" to refer
to taxes under the Federal Insurance Contributions Act (FICA),
secs. 3101-3125, the Federal Unemployment Tax Act (FUTA), secs.
3301-3311, and income tax withholdings, secs. 3401-3406 and 3509.
See Henry Randolph Consulting v. Commissioner, 112 T.C. 1, 1 n.1
(1999).
                               - 7 -

These general principles apply to the Commissioner's

determination that a taxpayer's workers are employees.   See Boles

Trucking, Inc. v. United States, 77 F.3d 236, 240 (8th Cir.

1996); Kiesel v. United States, 545 F.2d 1144, 1146 (8th Cir.

1976); see also Air Terminal Cab, Inc. v. United States, 478 F.2d

575, 578 (8th Cir. 1973) ("The issue of whether an employer-

employee relationship exists for purposes of employment taxes has

generally been held to be one of fact.").

     For the purposes of employment taxes, the term "employee"

includes "any individual who, under the usual common law rules

applicable in determining the employer-employee relationship, has

the status of an employee".   Sec. 3121(d)(2); accord sec.

3306(i).

     The regulations provide that

          Generally, such relationship 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. 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 tools and
     the furnishing of a place to work, to the individual
     who performs 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
                               - 8 -

     the work and not as to the means and methods for
     accomplishing the result, he is an independent
     contractor. * * * [Secs. 31.3121(d)-1(c)(2),
     31.3306(i)-1(b), Employment Tax Regs.]

     The regulations provide a "summary of the principles of the

common law, intended as an initial guide" for the employer-

employee determination, rather than a workable test complete in

itself for determining whether an employer-employee relationship

exists.   United States v. W.M. Webb, Inc., 397 U.S. 179, 194

(1970); see also Breaux & Daigle, Inc. v. United States, 900 F.2d

49, 51 (5th Cir. 1990); In re McAtee, 126 Bankr. 568, 571 (N.D.

Iowa 1991).

     In Avis Rent A Car System, Inc. v. United States, 503 F.2d

423, 429 (2d Cir. 1974), the Court of Appeals for the Second

Circuit distilled the following seven factors for determining

whether an employer-employee relationship exists (the Avis test)

from the Supreme Court's decisions in Bartels v. Birmingham, 332

U.S. 126 (1947), and United States v. Silk, 331 U.S. 704 (1947):

(1) If the person receiving the benefit of a service has the

right to control the manner in which the service is performed,

the person rendering the service may be an employee.    (2) If a

person rendering a service has a substantial investment in his

own tools or equipment, he may be an independent contractor.    (3)

If a person performing a service undertakes a substantial cost,

for example, by employing and paying his own laborers, he may be

an independent contractor.   (4) If a person performing a service
                                - 9 -

has an opportunity to profit depending on his management skill,

he may be an independent contractor.     (5) If a service rendered

requires a special skill, the person rendering it may be an

independent contractor.    (6) If the relationship between a person

rendering a service and the person receiving it is permanent, it

may be an employment relationship.      (7) If a person rendering a

service works in the course of the recipient's business, rather

than in some ancillary capacity, he may be an employee.

       The Court of Appeals for the Eighth Circuit, the court to

which any appeal in this case would lie, has adopted the Avis

test.    See Nuttelman v. Vossberg, 753 F.2d 712, 714 (8th Cir.

1985); In re McAtee, supra at 572.      The list of factors in the

Avis test is not exhaustive or exclusive.     See Breaux & Daigle,

Inc. v. United States, supra at 51; Avis Rent A Car System, Inc.

v. United States, supra at 429 n.3; In re McAtee, supra at 571-

572.    Determination of whether individuals are "employees" for

the purpose of employment taxes depends upon the totality of

their circumstances, and no single consideration governs.     See

Avis Rent A Car System, Inc. v. United States, supra at 430; Azad

v. United States, 388 F.2d 74, 76 (8th Cir. 1968).

       Although the determination of employee status is to be made

by common law concepts, a realistic interpretation of the term

"employee" should be adopted, and doubtful questions should be

resolved in favor of employment in order to accomplish the
                               - 10 -

remedial purposes of the legislation involved.     Breaux & Daigle,

Inc. v. United States, supra at 52; see also United States v.

Silk, supra at 712 ("As the federal social security legislation

is an attack on recognized evils in our national economy, a

constricted interpretation of the phrasing by the courts would

not comport with its purpose.").

     Applying these criteria to the facts and circumstances of

the present case, we conclude that during the year at issue

petitioner's drivers were employees.

     1.    Petitioner's Right To Control

     "The absence of need to control should not be confused with

the absence of right to control."     McGuire v. United States, 349

F.2d 644, 646 (9th Cir. 1965).     The degree of control necessary

to find employee status varies with the nature of the services

provided by the worker.    See United States v. W.M. Webb, Inc.,

supra at 192-193; Breaux & Daigle, Inc. v. United States, supra

at 52; Azad v. United States, supra at 77; McGuire v. United

States, supra at 646 ("The right to control contemplated by the

Regulations relevant here and the common law as an incident of

employment requires only such supervision as the nature of the

work requires.").    It is not necessary that the purported

employer "'stand over the employee and direct every move that he

makes.'"    Simpson v. Commissioner, 64 T.C. 974, 985 (1975)

(quoting Atlantic Coast Life Ins. Co. v. United States, 76 F.
                              - 11 -

Supp. 627, 630 (E.D.S.C. 1948)).

     In this case, the drivers were required to deliver the loads

to a certain place at a certain time, and the drivers chose the

routes and the speeds that would take them to that destination

point by that time.   Petitioner was not in the cabs of the trucks

supervising every movement of the drivers, directing which routes

to take or controlling the speeds at which to drive.    Nor did he

control which hours the drivers drove or rested.    Petitioner did

not direct the intimate details of the drivers' work, because the

drivers' work requires little supervision.    Though petitioner was

not required to supervise closely the drivers hour by hour, the

right to control was not lacking.    See Air Terminal Cab, Inc. v.

United States, 478 F.2d at 580.

     Petitioner exercised control by requiring the drivers to

call him daily on the cellular phones, which he provided, to

inform him of their locations and progress.    Petitioner

controlled which loads the drivers would haul and the prices

charged for the transportation of those loads.    Petitioner

determined whether repairs to the trucks should be performed on

the road or deferred until the driver returned the truck to

petitioner's business location.    On this record, petitioner

exercised the necessary control over the drivers' activities

consistent with an employer-employee relationship.    See Avis Rent

A Car Systems, Inc. v. United States, 503 F.2d at 430; Air
                              - 12 -

Terminal Cab, Inc. v. United States, supra at 580-581; Frische v.

Commissioner, T.C. Memo. 2000-237; In re McAtee, 126 Bankr. at

572 (while truck drivers had some discretion as to route chosen

to get to particular destination, drivers were obligated to

follow directions of employer as to where and when to transport

various loads).

     2.   Substantial Investment

     The fact that a worker provides his or her own tools

generally indicates independent contractor status.   See United

Sates v. Silk, 331 U.S. at 716-717; Breaux & Daigle, Inc. v.

United States, supra at 53.   The drivers had a small investment

in their mechanic's tools, which were incidental to their service

of driving the truck, and their commercial driver's licenses.

Although the drivers incurred some cost in their hand tools and

in obtaining and maintaining their commercial driver's licenses,

the amount of each driver's investment is insignificant in

comparison to petitioner's substantial investment to acquire and

maintain his five or six trucks.   See In re McAtee, supra at 572;

see also United Sates v. Silk, supra (value of the workers' tools

was so minimal that this factor was not of great weight); Breaux

& Daigle, Inc. v. United States, supra (same).

     Most importantly, the drivers had no investment in the

trucking equipment; i.e., the tractors and the semitrailers.    See

Avis Rent A Car System, Inc. v. United States, supra at 430; cf.
                                - 13 -

Carrell v. Sunland Constr., Inc., 998 F.2d 330 (5th Cir. 1993)

(welders were found to be independent contractors partly because

welders invested average of $15,000 each in welding equipment).

Furthermore, the drivers undertook none of the costs of operating

the trucks or transporting the freight; petitioner paid for all

repair expenses and maintenance costs on the trucks, and all

operating expenses, including insurance, fuel, oil, repairs,

tolls, and scale charges.     Cf. Labor Relations Div. of Constr.

Indus. v. Teamsters Local 379, 156 F.3d 13, 20 (1st Cir. 1998)

(independent contractor owner-operators of trucks bear cost of

owning and insuring their own trucks and cover fuel, repair, and

tax expenses stemming from operation of those vehicles).

     The relatively minor investment by the drivers and the

substantial investment by petitioner support a finding that the

drivers were petitioner's employees.

     3.     Substantial Costs Incurred by Drivers

     The drivers in this case did not incur any substantial

costs.     The drivers paid their own living expenses while on the

road.     However, expenditures on personal items are not costs

relevant to this factor.     Occasionally, the driver hired a lumper

to unload a semitrailer; however, the lumper's fee was paid by

petitioner, not the driver.     (Petitioner's argument regarding the

lumpers is considered thoroughly in the discussion of the next

factor.)     This factor does not support a finding that the drivers
                                - 14 -

were independent contractors.

     4.   Ability To Profit by Management Skills

     In considering whether the drivers had an opportunity to

profit, we also consider whether they were at risk of loss.     See

United States v. Silk, supra at 716, 717.

     The drivers had a limited ability to profit by their own

management skills.   Drivers were paid by the mile; therefore, to

maximize his earnings, a driver had to rely on his own knowledge

of traffic patterns and road conditions, his ability to read a

map, and his ability to anticipate the need for an alternate

route.

     However, the ability to read a map and choose a quicker

route does not constitute a management skill.      The execution of

this duty is only evidence of efficient and hard-working

employees.    See In re McAtee, supra at 572.    "[I]nitiative, not

efficiency, determines independence".    Brock v. Mr. W Fireworks,

Inc., 814 F.2d 1042, 1053 (5th Cir. 1987).      The drivers' energy,

care, and judgment may have conserved the equipment and increased

their earnings, but petitioner was the director of their

activities.

     In this case, the drivers were dependent primarily upon

petitioner's ability to locate loads for them to haul with his

trucks.   If petitioner failed to locate a return load, the

drivers would attempt to arrange one through a broker or the load
                              - 15 -

board at a truck stop; however, the terms and the acceptance of

the contract were petitioner's domain.   The drivers were unable

to exert initiative in any of the major components open to

initiative; i.e., advertising, pricing, and choice of clients.

See Brock v. Mr. W Fireworks, Inc., supra; Usery v. Pilgrim

Equip. Co., 527 F.2d 1308, 1313 (5th Cir. 1976).   The drivers

were not allowed the initiative and did not have the independence

or the decision-making authority normally associated with an

independent contractor.

     Finally, petitioner argues that the drivers had an

opportunity to profit through the use of their management skills

in unloading the trucks.   Petitioner's argument is that the

driver could choose to hire a lumper to unload the truck, or the

driver could profit by unloading the truck himself.   We disagree.

     Unloading a truck to earn a lumper's fee is not profiting by

management skill.   See United States v. Silk, supra at 717-718.

Furthermore, if a driver hired a lumper instead of unloading the

truck himself, he did not incur a loss through mismanagement.

The lumper's fee was provided by petitioner, not by the driver;

therefore, a driver who hired a lumper incurred an opportunity

cost, not an out-of-pocket expense.

     Because the drivers were paid by the mile, they had no real

risk of loss.   One driver, appearing as respondent's witness,

testified that when he chose an alternate route which required
                                - 16 -

payment of higher tolls, petitioner charged him for the extra

expense.   We do not find this instance of a driver's liability

for the extra toll charges supportive of petitioner's assertion

that his drivers were independent contractors.

     Charging an employee for losses caused by the employee is

not incompatible with employee status.    See Gierek v.

Commissioner, T.C. Memo. 1993-642 (employee stockbroker charged

for substantial trading loss errors); Butchko v. Commissioner,

T.C. Memo. 1978-209 (racetrack teller's cash register shortages

characterized as employee business expenses and deductible only

as itemized deductions), affd. 638 F.2d 1214 (9th Cir. 1981).

This factor supports respondent's determination that the drivers

were employees.

     5.    Special Skill

     Although the Court recognizes that driving a truck requires

skill, we do not think that it is the type of skill envisioned by

the Court of Appeals for the Second Circuit in deciding Avis Rent

A Car System, Inc. v. United States, 503 F.2d 423 (2d Cir. 1974).

See In re McAtee, 126 Bankr. at 572.     Rather, the special skill

pertains to services that are outside of the ordinary course of

petitioner's business.     See id.; McLaughlin v. Seafood, Inc., 861

F.2d 450 (5th Cir. 1988) (the workers were not specialists called

in to solve a problem, but laborers who performed the essential,

everyday chores of their employer's operation).    In this case,
                                - 17 -

the services provided by the drivers were an essential and normal

part of petitioner's regular business.       See In re McAtee, supra

at 572.    This factor supports a finding that the drivers were

petitioner's employees.

     6.     Permanency of the Relationship

     Generally, the drivers worked for petitioner for a short

time.     A transitory work relationship may point toward

independent contractor status.     See Herman v. Express Sixty-

Minutes Delivery Serv., Inc., 161 F.3d 299, 305 (5th Cir. 1998).

However, if the workers work in the course of the employer's

trade or business, that they do not work regularly is not

significant.     See United States v. Silk, 331 U.S. at 718; see

also Avis Rent A Car System v. United States, supra at 430

(transients may be employees); Kelly v. Commissioner, T.C. Memo.

1999-140 (working for a number of employers during a tax year

does not necessitate treatment as an independent contractor).

     In considering the permanency of the relationship, we must

also consider petitioner's right to discharge the drivers, and

the drivers' right to quit, at any time.      Usually, the right to

discharge a worker, and the worker's right to quit, at any time

indicates an employer-employee relationship.      See United States

v. W.M. Webb, Inc., 397 U.S. at 193 ("'The right to discharge is

also an important factor indicating that the person possessing

that right is an employer.'" (quoting sec. 31.3121(d)-1(c)(2),
                              - 18 -

Employment Tax Regs.)); Breaux & Daigle, Inc. v. United States,

900 F.2d at 53 (same); Air Terminal Cab, Inc. v. United States,

478 F.2d at 581.

     Although most of the drivers worked for only a few months,

we find the facts that the drivers' brief periods of employment

were in the course of petitioner's regular business and that

petitioner had the right to discharge the drivers, and the

drivers had the right to quit, most persuasive.    See United

States v. Silk, supra.   Accordingly, this factor supports a

finding that the drivers were employees of petitioner.

     7.   Service Integral to the Business

     The drivers in this case did not have their own independent

businesses; rather, they performed a function that was an

essential part of petitioner's company's normal operations.      The

success of petitioner's trucking business depended, in part, upon

the work performed by the drivers.     Therefore, the drivers'

services were an integral part of petitioner's business.     See

Breaux & Daigle, Inc. v. United States, supra (financial success

of processor of crab meat was dependent upon crab meat pickers;

therefore, crab meat pickers' services were integral part of

processor's business); Air Terminal Cab, Inc. v. United States,

supra at 581 (taxicab drivers were performing personal services

constituting integral part of taxpayer's business operations); In

re McAtee, 126 Bankr. at 572 (truck drivers services were
                                - 19 -

integral part of taxpayer's trucking business).   This factor

supports respondent's determination.

     Other Factors

     Other factors courts have considered in determining the

status of workers are the relationship the parties believed they

were creating, see Simpson v. Commissioner, 64 T.C. at 984-985,

and whether the taxpayer withheld taxes, worker's compensation,

and unemployment insurance funds, see Professional & Executive

Leasing, Inc. v. Commissioner, 862 F.2d 751, 753 (9th Cir. 1988),

affg. 89 T.C. 225 (1987).

     Petitioner treated all of the drivers as independent

contractors; he issued the drivers Forms 1099 instead of Forms

W-2, and he did not withhold or make contributions of employment

taxes.   Most of the drivers, on the other hand, believed they

were employees, and reported their earnings from driving

petitioner's trucks as wages.    None of the drivers who appeared

as a witness testified that he reported his earnings on Schedule

C, Profit or Loss From Business (Sole Proprietorship).

     Thus, it is clear that petitioner and the drivers were not

in agreement about the relationship that they were creating.

This factor does not support a finding that the drivers were

independent contractors.

     Moreover, as we must decide this issue to resolve

petitioner's obligation to comply with the employment tax
                              - 20 -

provisions, consideration of the fact that petitioner did not

comply with those provisions, e.g., withhold taxes, worker's

compensation, and unemployment insurance funds, would provide no

value to our determination.   Cf. id. (issue for determination was

whether corporation's pension and profit-sharing plans qualified

under section 401, I.R.C. 1954).

     On the basis of the facts and circumstances of this case, we

hold that the drivers were employees of petitioner.

Issue 2.   Whether Petitioner Is Eligible for Section 530 Relief

     In the notice of determination concerning worker

classification, respondent determined that petitioner is "not

entitled to relief from this classification pursuant to section

530 of the Revenue Act of 1978".   Petitioner assigned error in

his petition to this determination and asserts that he is

entitled to such relief.

     Congress enacted section 530 to alleviate what it perceived

as the "overly zealous pursuit and assessment of taxes and

penalties against employers who had, in good faith, misclassified

employees as independent contractors."   Boles Trucking, Inc. v.

United States, 77 F.3d at 239 (citing In re Rasbury, 130 Bankr.

990 (N.D. Ala. 1991)).   Section 530(a)(1) shields a taxpayer who

has mistakenly not classified his workers as employees from

employment tax liability if the taxpayer had a reasonable basis

for not treating the workers as employees and has filed all
                                - 21 -

required Federal employment tax returns on a basis consistent

with this treatment.   Petitioner never treated the drivers as

employees and consistently issued them Forms 1099.    Therefore,

the threshold requirement petitioner must satisfy to qualify for

section 530 relief is that he had a reasonable basis for treating

the drivers as nonemployees.

     Section 530(a)(2) provides that reasonable reliance on any

of three "safe harbors" shall be treated as a reasonable basis

for not treating a worker as an employee.   See Boles Trucking,

Inc. v. United States, supra.    Paragraph (2) provides:

     For purposes of paragraph (1), a taxpayer shall in any
     case be treated as having a reasonable basis for not
     treating an individual as an employee for a period if
     the taxpayer's treatment of such individual for such
     period was in reasonable reliance on any of the
     following:
                (A) judicial precedent, published rulings,
          technical advice with respect to the taxpayer, or
          a letter ruling to the taxpayer;

               (B) a past Internal Revenue Service audit of
          the taxpayer in which there was no assessment
          attributable to the treatment (for employment tax
          purposes) of the individuals holding positions
          substantially similar to the position held by this
          individual; or

               (C) long-standing recognized practice of a
          significant segment of the industry in which the
          individual was engaged.

     Petitioner provided no evidence that he had a reasonable

reliance on any of these safe harbor provisions.     Respondent

called as witnesses five of petitioner's former drivers, all of

whom were employed as truck drivers at other times for other
                              - 22 -

trucking companies.   Although, petitioner never questioned the

witnesses about their worker status at those other companies,

petitioner testified that when he was a driver for other

companies, he was treated as an independent contractor.

     Petitioner's experience by itself is not evidence of the

"long-standing recognized practice of a significant segment" of

the trucking industry.   See, e.g., Small Business Job Protection

Act of 1996, Pub. L. 104-188, sec. 1122, 110 Stat. 1755, 1766

(amending section 530 by adding new subsection (e), which

provides that "in no event shall the significant segment

requirement * * * be construed to require a reasonable showing of

the practice of more than 25 percent of the industry (determined

by not taking into account the taxpayer)").

     The three statutory safe harbor methods are not the

exclusive ways that a taxpayer may qualify for section 530

relief.   A taxpayer may qualify by demonstrating that it had some

other reasonable basis for treating its workers as independent

contractors.   See H. Rept. 95-1748, at 5 (1978), 1978-3 C.B.

(Vol. 1) 629, 633 ("A taxpayer who can demonstrate a reasonable

basis for the treatment of an individual in some other manner

also is entitled to termination of employment tax liabilities.");

see also Boles Trucking, Inc. v. United States, supra at 239.

     As evidence of a reasonable basis for treating the drivers

as independent contractors, petitioner proffered a letter dated
                               - 23 -

March 31, 2000, sent to him from the Minnesota Department of

Economic Security (MDES).   The letter states:

     Based on the information we have in our files at this
     time we will not be making any further effort to hold
     you individually liable for the unemployment tax debts
     of the above business [Dayline Trucking]. If new
     information is made available that changes the
     situation you will be notified before any further
     action is taken.

     This letter does not support petitioner's assertion that he

is entitled to section 530 relief.      Petitioner could not have

relied on this letter for his treatment of the drivers as it is

dated 5 years after the year at issue in the instant case.

Furthermore, the letter provides no indication of what

information in the MDES files prompted the department to

discontinue its efforts to hold petitioner liable for the

unemployment debts of his company.      Petitioner has not proved

that he had a reasonable basis for treating his drivers as

independent contractors.    Accordingly, we hold that petitioner is

not entitled to section 530 relief.

     To reflect the foregoing,

                                             Decision will be entered

                                      sustaining respondent's notice

                                      of determination.
