Martin L. Springfield, Dba Douglas Motors, Plaintiff-Counter-Defendant-Appellant v. United States of America, Defendant-Counter-Claimant-Appellee

When the government ignores a taxpayer’s contentions as to the real world conditions of the marketplace, despite the requirements of Congress that it consider them, it invites the result reached here.

Martin L. Springfield brought this action to recover various employment taxes, penalties and interest paid under protest for the tax quarter ending September 30,1986. The government counterclaimed for the balance of the assessments of tax, interest and penalties made against him for the taxable quarters ending September 30 and December 31, 1983, and each of the taxable quarters ending 1984 through 1988. After a bench trial, judgment was entered against Springfield and in favor of the government. Because the trial court erred in concluding that Springfield is liable for the assessments, we reverse.

Springfield owned Douglas Motors, a used car business in the San Diego area. From 1983 to 1988, Springfield treated his salesmen as independent contractors and filed Forms 1099 on their behalf. Because of this treatment, Springfield did not withhold income taxes or the salesmen’s share of the Federal Insurance Contributions Act (FICA or Social Security) taxes as required for employees…