Tax Court Case Involving Radio DJ Strikes Close to Home for Me, Part 2

On Tuesday I wrote about a Tax Court case involving a Mr. Ramirez, who was a radio station employee who sold advertising on his own, and was treated as an independent contractor in regards to his sales. This post is about my observations on this case.

Observations from an Ex-Radio Guy

As an ex-radio guy, several things stand out as odd about this case.

One: The ruling itself.

Based on the facts as presented, I can kinda-sorta see where the Tax Court was coming from in ruling that Ramirez was self-employed in regards to his promotional income. What surprises me is the setup of the whole arrangement between the sponsors, the radio station and himself. Which leads to….

Two: Why Didn’t Univision Keep Part of His Sales?

The Court ruling says Univision acted as a “conduit” for billing the customers Mr. Ramirez found, which implies that everything passed directly through to Ramirez. In the year in question before the Court, Ramirez received $82,000 from his sales. The ruling doesn’t explicitly say it, but it appears that this was what he actually sold, NOT just a commission on his sales.

I am shocked that the station didn’t deem that they were entitled to keep most of his sales and just pay him a commission.

Three: Why Didn’t the Station Try to Take Over His Clients?

At the station I worked at (which admittedly was a tiny, locally owned station rather than a big outfit like Univision), sales work was territorial and cutthroat. If you were in sales, you didn’t want to so much as say hello to someone else’s client or you’d get called on the carpet.

And if you weren’t in sales, management wasn’t keen on non-sales staff trying to break into sales.

I was the news director and wasn’t in sales. I wanted to get sales experience, so I asked to have a few accounts to manage. I was told no.

In denying my request, the exact words management said to me were: “You’d never make it in sales. You don’t have a sales personality.”

Management and sales staff are typically defensive about anyone infringing on “their gig.” So the whole arrangement Mr. Ramirez had just boggles my mind.

I’m pretty sure that if I had gone out and gotten sponsors on my own, and read my sponsor’s commercials on the air, and used my “celebrity” status — afforded to me by virtue of being a radio station employee — to get paid for doing remotes and live appearances, that my employer would not have been happy with me — especially if I was keeping 100% of the proceeds for myself and the station was getting nothing!

And I sure can’t imagine them agreeing to bill those customers for me and then passing through 100% of the proceeds to me while keeping nothing for the station!

Click here to view the Tax Court opinion.