Office of Tax Compliance
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Office of Tax Compliance

Guidelines for Use: Independent Contactor Classification

Overview

The Independent Contractor Classification Policy formally addresses the requirement to obtain a determination of Independent Contractor status when engaging the services of an Individual, Sole Proprietor, or Single-Member Limited Liability Company. You can review the policy in Drexel's Policy Directory under the sub-category "Finance &Treasurer." The below Guidelines for Use outline the process required to request and obtain a determination. The Guidelines are adaptable to changing circumstances and can be updated as necessary to provide guidance to the University.

The Certification for Determination of Independent Contractor Status (“Certification”) process must be completed when the University engages the services of an Individual Service Provider, as defined in the Independent Contractor Classification Policy.

Exceptions

Payments to service providers who are eligible to use and are engaged using the Limited Engagement Services Agreement (LESA) and who will be paid $1,000 or less are not required to complete the certification. The LESA is limited to no more than five instances per calendar year. Please follow the steps outlined on the Procurement Services website for these types of transactions.

Payments to service providers who are eligible to use and are engaged using the Peer Review/Advisory Services Agreement (PRASA) and who will be paid $1,000 or less are not required to complete the certification. The PRASA is limited to no more than five instances per calendar year. Please follow the steps outlined on the Procurement Services website for these types of transactions.

Payments to Game Officials who are eligible to use and are engaged using the Game Official Agreement and will be paid $1,000 or less are not required to complete the certification.

Aside from the three exceptions noted above, no payments will be made to Individual Service Providers before a properly completed certification has been approved by the Office of Tax Compliance.

Process for Completing Certification for Determination of Independent Contractor Status

Certification must be completed PRIOR to the provision of any services.

1. Requesting department reviews the Independent Contractor Policy [.docx] in full before completing the Certification for Determination.

2. Requesting department completes Section 1 of the Certification for Determination of Independent Contractor Status form, located on the Independent Contractors Resource page.

  • If all pre-determination questions in Section 1 can be answered “No”, the Section 1 certification is signed by the employee responsible for contracting the services AND an individual within the contracting department with authority to approve the purchase.
  • If any pre-determination questions in Section 1 are answered “Yes,” follow the instructions on the Certification form.

3. Department provides Section 2 of the Certification form to the Individual Service Provider for completion and certification. Section 1 of the form should not be provided to the Individual Service Provider.

4. Department emails the following materials to the Office of Tax Compliance at taxdept@drexel.edu for review:

  1. Completed and signed Certification Form (Sections 1 and 2);
  2. Scope of Work (must be descriptive; one-word answers will not be accepted); and
  3. Individual Service Provider supporting documentation. The amount and type of support needed to justify Independent Contractor status will vary based on the service(s) being provided, as well as the Individual Service Provider's background. Generally, at least one of the following support items will be required to make an Independent Contractor determination:
    1. Business website
    2. Client list or performance list
    3. Professional certification
    4. Curriculum Vitae

5. The Office of Tax Compliance, in consultation with other University units, as deemed necessary, makes an Independent Contractor or Employee status determination and then notifies the requesting department of this determination. Approvals for Independent Contractor status are valid for one year from start date.

If the Service Provider Is Determined to Be an Independent Contractor:

  • The requesting department works with Procurement Services and the Office of the General Counsel (OGC) to ensure that a signed, written agreement for services is obtained before the Independent Contractor is engaged and before services are provided. Please refer to the Contract Protocol Policy (OGC-2) and contact Procurement at sourcing@drexel.edu and/or OGC at 215.895.1433 to determine next steps.

If the Service Provider Is Determined to Be an Employee:

Classification of Individual Service Providers as Employees or Independent Contractors: Factors to Consider

The determination of whether an Individual Service Provider is an Employee or an Independent Contractor depends upon the facts and circumstances of each situation. The factors described below are provided for illustrative purposes to assist with gathering information that will be used to make the determination on a good-faith basis; they do not represent all of the applicable “tests” or “factors” that go into determining an appropriate classification.

1. Behavioral control: Relates to whether the University has a right to direct and control how the Service Provider performs the task(s) for which they are engaged. In general, anyone who performs services for the University is an Employee if the University has the right to control what will be done and how it will be done. Some of the factors to be considered are:

  • Is the Service Provider required to comply with instructions about when and where to do the work? Does the University specify the order or sequence to follow in performing the work?
  • Does the University train and supervise the Service Provider?
  • Does the University determine what tools or equipment to use?
  • Does the University direct what workers to hire or assist with the work?
  • Does the University direct where to purchase supplies and services?
  • Does the University specify what work must be performed by a specified individual?

2. Financial control: Whether a Service Provider has the ability to affect financial decisions in connection with the services performed. Some of the factors to consider are:

  • Does the Service Provider have a significant investment in assets or tools?
  • Can the Service Provider realize a profit or loss as a result of the work to be performed?
  • Are there unreimbursed expenses that the Service Provider is solely responsible for?
  • Are the Service Provider’s services available to the public? Does the Service Provider advertise?
  • What is the method of payment? Will the Service Provider get paid whether or not the work is done, or do they get paid only if they finish the job?
  • Can the Service Provider make business decisions that affect their bottom line?

3. Relationship of the parties: How the parties perceive their relationship. Some of the factors to consider are:

  • Is there a written contract between the Service Provider and the University?
  • Does the Service Provider get any type of benefits – vacation and sick pay, pension plan and health or life insurance?
  • Is the relationship between the University and the Service Provider expected to be permanent, or will it continue only for a specific project or period?
  • Are the Service Provider’s activities an integral part of the University’s overall mission and purpose?

Contact

Office of Tax Compliance
Phone: 215.895.6880
Fax: 267.359.9020

International students and employee inquiries: nonresident_tax@drexel.edu

All other inquiries: taxdept@drexel.edu

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