Recent media coverage and concern from citizens has sparked an interest in how theatre and entertainment industry personnel should be reported for Unemployment Insurance Tax purposes. Under current laws, most individuals working in the theater and entertainment industry are considered employees and their wages should be reported to the Employment Security Department (ESD). Additionally, the workplace should also post Washington Unemployment Insurance posters.
However, there are exceptions. In considering whether taxes should be paid on an individual’s wages, the department applies an Employment Exception Test. This test helps us decide whether the individual is an employee, a volunteer, or an independent
contractor.
The following questions help determine if the individual you pay is an independent contractor.
1. Are you hiring someone for more than personal labor?
This is someone who brings his or her own employees to perform the work and you are not supervising them, or brings more than “ordinary hand tools” to the job and you are not supervising the work. Examples include props, costumes, instruments, etc.
If you answered “Yes” to one of the two scenarios above, then unemployment insurance tax is NOT due. If “No,” see question #2.
2. Are you supervising the individual’s work?
Are you only scheduling and inspecting the work? If you answered “Yes” to this question then you are considered “not supervising” and unemployment insurance tax is NOT due.
Are you telling your worker or a subcontractor’s workers how to do the job, assigning tasks, training, keeping time sheets, paying a wage, or setting regular hours? If you answered “Yes” to this question, then you are supervising and required to pay unemployment insurance tax. Whenever you are required to pay UI, then you are also required to post Washington Unemployment Insurance posters.
If “No,” see question #3.
3. Do workers have an established business of their own?
Supervision: Do they perform the work free of your direction and control?
Business office: Do they maintain and pay for a place of business that is separate from yours?
Previously established business: Do they have an established, independent business that existed before they worked at your business? Evidence may include other customers or advertising.
State and Federal taxes: When you entered into the work arrangement, were they responsible for filing Federal taxes or other taxes to appropriate state agencies?
Required registrations: Do they have all required registrations, such as a UBI number or a contractor registration number?
Maintains books: Do they maintain a set of books dedicated to the expenses and earnings of the business?
If you answered “Yes” to ALL SIX bullets above, then unemployment tax is NOT due.
