SSA logo: link to Social Security Online home1135. Real Estate Agents and Direct Sellers

1135.1 Are real estate agents self-employed?

Effective January 1, 1983, certain qualified real estate agents are treated as self-employed persons. To be considered self-employed, you must:

  1. Be a licensed real estate salesperson;

  2. Derive substantially all payment received for services performed as a real estate salesperson directly from sales or other output, such as appraisal activities, rather than from the number of hours worked; and

  3. Perform the services under a written contract or agreement which stipulates that you will not be treated as an employee with respect to the services for Federal tax purposes.

1135.2 What direct sellers are self-employed?

Effective January 1, 1996, The Small Business Job Protection Act of 1996, H.R. 3448, Section 1118 expanded the definition of “Direct Sellers” to include persons engaged in the delivering or distribution of newspapers or shopping news for Federal income tax purposes. To be considered self-employed, you must:

  1. Be engaged in the trade or business of selling (or soliciting the sale of) consumer products:

    1. To any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis, for resale (by the buyer or any other person) in the home or in other than a permanent retail establishment;

    2. In the home or in other than a permanent retail establishment; or

    3. Be engaged in the trade or business of the delivering or distribution of newspapers or shopping news (including any services directly related to such trade or business);

  2. Derive substantially all payment for services performed as a direct seller directly from the sales of the product or the performance of services such as motivation, training, and recruitment activities, rather than from the number of hours worked; and

  3. Perform the services under a written contract or agreement that stipulates you will not be treated as an employee with respect to the services for Federal tax purposes.

1135.3 What are the rules if these conditions are not met?

If all conditions are not met, your status as a real estate agent or direct seller must be determined under the common-law rules. (See §§802-823.)