TRUCKING COMPANY DRIVERS WERE INDEPENDENT CONTRACTORS.

1. Judgment BE, and the same hereby IS ENTERED in favor of Plaintiff, in the amount of $ 7,369.26, plus costs and interest.

3. The clerk is directed to transmit copies of the Memorandum Opinion and this Order to counsel for the parties and CLOSE this case.

[3] Mr. Sam operated a trucking business as a sole proprietor, contracting with common carriers for delivery of goods. Following an employment tax examination of his business for years 1992 and 1993, the IRS determined that the truck drivers were employees rather than independent contractors as maintained by Mr. Sam. Assessments for employment taxes, interest and penalties were made, and paid by Mr. Sam.

[4] Mr. Sam testified that pursuant to contracts with carriers, he would provide a truck and driver to haul the carriers' loads. The carrier and the driver would agree on the price, and the carrier paid Mr. Sam the agreed amount, minus 1) any advances the carrier may have made to the driver, and 2) any amounts the carrier may have paid for fuel or truck maintenance during the trip.

[5] Mr. Sam introduced a copy of the standard contract he executed with all of his drivers. The driver agrees to operate Mr. Sam's equipment for a percentage of gross revenue less road expenses, with fuel cost and normal maintenance not considered road expenses. The contract provides that neither party intends to create an employment relationship and that Mr. Sam will not pay tax, social insurance benefits, or workers compensation and unemployment insurance. The driver agrees to indemnify Mr. Sam from liability from operation. Either party may terminate the contract at any time. Upon termination, the driver must return the truck to a location designated by Mr. Sam.

[6] Mr. Sam also testified regarding his relationship with the drivers. Mr. Sam provided the truck, which he owned and for which he paid routine maintenance, licensing, and upkeep. While under contract, the driver kept possession of the truck and used it to haul the carriers' loads. After negotiating the hauling price with the carrier, the driver was entitled to 25% of the revenue from each delivery. The driver had the discretion to decline a load if he or she deemed the potential for profit insufficient. Mr. Sam did not tell the drivers what hours or days to work or what routes to follow, and the driver paid his or her food and lodging costs (or slept in the truck). Fuel, tolls, and on-the-road maintenance costs were deducted from the revenue before the drivers' percentage was computed.¹

[7] The parties do not dispute the amounts of the assessments or that Mr. Sam has paid all assessed amounts.² The only issue presented is whether Mr. Sam's drivers were employees, rendering the assessments proper, or whether they were independent contractors, which would entitle Mr. Sam to a refund of the $7,369.26 which remains in the case.

[8] The United States relies on the established presumption that in a tax refund suit, the Commissioner's deficiency determinations are correct, and the taxpayer bears the burden of proving that the Commissioner's findings were erroneous. Helvering v. Taylor, 293 U.S. 507, 514-15 (1935); Mays v. United States, 763 F.2d 1295, 1297 (11th Cir. 1985). Combining the presumption with the rule that a taxpayer's claim "must be substantiated by something other than . . . uncorroborated oral testimony, . . . or self-serving statements," id., the United States concludes that Mr. Sam did not meet his burden of proof because his oral testimony was uncorroborated and/or his statements were self-serving.

[9] Mr. Sam's oral testimony was corroborated by the written contract, the provisions of which are materially consistent with Mr. Sam's testimony regarding both the intent of the parties and the details of the relationship between Mr. Sam and the drivers. Nor can his evidence be viewed as merely self-serving. The preclusion on reliance on "self-serving statements" is directed at conclusory statements or after the fact documents prepared solely to justify or validate some prior action. See, e.g., Mays, 763 F.2d at 1297 (computer printout, prepared after the IRS audit had been completed and unsupported by any contemporaneous documentation, deemed insufficient): see also Trucks, Inc. v. United States, 234 F.3d 1340, 1342 (11th Cir. 2000) (evidence of company president's state of mind on the question of the reasonableness of her decisions was not a mere self-serving statement); Novotny v. United States, 184 F. Supp. 2d 1071, 1083 (D. Col. 2001) (statements prepared ten years later in response to a request from the government were "uncorroborated and self-serving"). Mr. Sam's testimony was not conclusory, but rather was highly specific, and the contract was contemporaneous with the pertinent events.

[10] The United States points out that Mr. Sam did not offer a copy of his contract with the carriers or testimony from his drivers. However, he is not required to offer all possible evidence, but rather must present evidence that is legally sufficient to overcome the presumption in the United States' favor. The United States also appears to be contending that the fact that the contract sought to prevent the creation of an employment relationship renders it "self-serving." This argument would bear weight if the contract had been prepared for purposes of this litigation or the audit, but it was not. The contract is not "self-serving" for the present purpose of determining whether it achieved its intended effect.

[11] In sum, Mr. Sam's testimony is corroborated by the drivers' contract, and the contract provides contemporaneous documentation of his relationship with the drivers. This evidence is legally sufficient( to overcome the presumption that the Commissioner's determination is correct.³

[12] The United States did not offer any evidence to rebut or contradict Mr. Sam's evidence. Based on this, as well as, Mr. Sam's demeanor as a witness, I find that Mr. Sam's evidence was credible. Accordingly, I find the facts regarding Mr. Sam's relationship with the drivers to be in accordance with his testimony and the written contract.

[13] Application of the law to these facts requires an assessment of the factors relevant to determining whether an employment relationship exists. These include (1) the degree of control exercised by the principal over the details of the work; (2) which party owns the facilities used in the work; (3) the worker's opportunity for profit or loss; (4) whether the principal has the right to discharge the individual; (5) whether the work is part of the principal's regular business; (6) the permanency of the relationship; and (7) the relationship the parties believe they are creating. Eren v. Commissioner of Internal Revenue, 180 F.3d 594, 596 (4th Cir. 1999); Weber v. Commissioner of the I.R.S., 60 F. 3d 1194, 1110 (4th Cir. 1995). The "right-to-control" is the most important factor. Id.

[14] The evidence establishes that Mr. Sam exercised little control over his drivers. He did not dictate when they worked, did not decide whether they would take a particular load, and did not decide the route they would take when making a delivery. He permitted them to keep possession of the trucks at all times, working and non-working, during their contracts. He did not retain the right to control the manner or means by which the drivers performed their delivery obligations. This factor weighs heavily in favor of a determination that the drivers were independent contractors.

[15] The second factor, which party invested in the work facilities, does not weigh in either party's favor here. Mr. Sam did not provide a workplace. Although Mr. Sam owned and provided routine maintenance for the trucks, the drivers had possession at all times. The drivers also had an interest in the maintenance of the trucks because they were responsible for handling on-the-road repairs and were required to pay a portion of the costs of those repairs. In addition, the drivers indemnified Mr. Sam from liability for their actions.

[16] The drivers clearly had the opportunity to control their profit. They could both negotiate the price and refuse a load if they felt that their profit potential was too low. They had the ability to determine whether or not they would work at any particular time. They could also affect their profit by their selection of routes and travel times.

[17] Mr. Sam, of course, retained the right of discharge since the contracts provided that either party, could terminate at any time. However, the right of discharge does not, in this case, serve its customary function of providing an employer with oversight as to the manner or means of job performance, and it thus weighs only slightly in the United States' favor.

[18] The fifth factor, whether the work is part of the principal's regular business, weighs in the United States' favor, since providing transportation was Mr. Sam's sole business, The sixth and seventh factors, however, weigh in Mr. Sam's favor, since his relationships with the drivers were not permanent and neither he nor the drivers believed they were creating an employment relationship or intended to do so.

[19] In sum, four of the seven factors, including the most important factor, indicate that Mr. Sam's drivers were independent contractors. Of the three remaining factors, one indicates that the drivers were employees, one weighs slightly in that direction, and one is neutral. The , preponderance of the evidence establishes that Mr. Sam's drivers were independent contractors.

[20] For the reasons stated, judgment will be entered in favor of Mr. Sam in the amount of $7,369.26, plus costs and interest.

Date: November 27, 2002

² At trial, Mr. Sam sought to revisit the summary judgment ruling concerning the amount of his claim that is barred by limitations or failure to seek administrative relief. However, his request was untimely and was in any event not supported by any new evidence or law, and is thus denied. See Federal Rules of Civil Procedure 56 and 60.

³ Plaintiffs exhibit two, documents concerning a 1984 audit, has not been considered as I find it has no relevance to the issues presented in this case.