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So here is one of the more controversial topics in the airbrush industry. Are Airbrush artists Employees or are they Independent Contractors(self employed)? It’s controversial because everyone has their own opinion and hence decide to “interpret” the IRS guidelines in their favor.
“Independent contractor vs Employee” is an extremely “Gray” area as far as the IRS is concerned. These two links below are the most important thing anyone can read who is considering hiring someone or is being hired by someone who is paying as a “Independent Contractor”. I highly suggest that everyone in these two situations read them COMPLETELY. You will see for yourself that they lean towards artists being “employees” yet it is still a VERY gray area.
Self-employed/independent-contractor-defined
Independent Contractor or Employee
For the majority of the airbrush artists out there you are more than likely “Self Employed” because most of you work for yourself, do it out of your homes or travel and do festivals, fairs, events etc… The key here is that you work for yourself, and/or by yourself.
But what about the artists who not only do the above but also work inside an established store? Maybe they work part-time all year long or just seasonal. Or maybe they work full time but inside somebody else business. What are these artists considered?
If we do a little look back into the history of Airbrush you will see that the whole idea of “Independent contractor” came about in the 70’s-80’s and into the 90’s simply because most airbrush artists back then painted on t-shirts in tourist areas such as the Florida Pan handle and the Great Smokey Mountains. They were definitely “self employed because most of them worked seasonally by setting up in the corner of an established “Tourist Shop” and painted on shirts that the customer brought in or purchased from the store. Back then the airbrush artist didn’t really “sell” anything, they provided a service. They showed up whenever they wanted(because they were not really part of the store staff), they had all their own supplies, they charged what they wanted, they worked as long as they wanted each day and they stayed at that particular shop as long as they wanted. Then they would move on to a different store in the same area or even another part of the country and do it all over again. They basically just paid “rent” to the store owner for the space they were using. In most cases this “rent” was a percentage of the airbrush sales.
Does that sound like the same thing that is STILL going on today? Possibly, but it’s not that simple anymore for two reasons.
1.) The 80’s-90’s boom of airbrush artists flooding all the tourist traps made it a “business boom” like no other. The competition grew so big that artists were now competing for “space” as well as competing with their prices. This whole “competing for space” made way for a whole new player in the game….the “Agent”. …they had different names but we will use the term “Agent” for this article.
The Agent was usually an already established airbrush artist in a certain area who made connections with shop owners and other local businesses to supply them with an artist for their store. They would then go out and “recruit” new artists, telling them they could get them set up in a great location. In turn the artist would give them a small percentage of their sales. This could range from as little as 5% up to possibly 10% or higher. Keep in mind they still also had to pay the shop owner their percentage, which could be another 20%-30%. So when all is said and done this artist was making only 50%-60% of what they were actually bringing in and they still had to pay all their own expenses for equipment, supplies, lodging, transportation…etc.. The Agent however, was not only making 5% of all the artists he/she set up in other shops, they were also making their 70%-85% of the artwork from the shop they where set up in and painting.
These artists were still for the most part “seasonal” and therefore probably still within the guidelines of “independent contractor” What started to change however was that these artists, in order to simply make good money started taking on responsibilities that are not those of a “Independent Contractor”. The “Agents” started telling them they need to work more(because the Agent or the shop owner wasn’t happy with the amount of money they were bringing in). So they started “opening” and “closing” the store for the store owner, simply because they had so many orders to fulfill that they had to either come in early or stay late to catch up. The owners saw this as an opportunity and gave the artist keys to the shop and in turn that shop got opened earlier or stayed open later than shops without airbrush artists and therefore made more sales… and they didn’t even have to “pay” the artists to do this. The agent most certainly wasn’t the sole cause of artists starting to take on more “store responsibilities” , a lot of artists chose to do this on their own.
Over time this opened the door to the second reason why it’s not exactly the same as it used to be.
2.) These “tourist shops” that had airbrush artist inside them, found themselves competing against something that probably no one expected… the rise of the “Airbush Shop”. These days there are a lot more stores that are dedicated to just airbrushing. They do not sell all the “transfers” and knick knacks that the “tourist shops” sell. They are just “Airbrush Shops”
These are the shops that eventually started to appear next to the “tourist shops” and in malls, amusement parks, and free standing stores all over the country. So the question became, How do you staff an “airbrush shop”( especially a mall) for 11-14 hour days 363 days out of the year with skilled labor, people who are supposed to be able to set their own hours, provide their own equipment and supplies(which is now triple because they are no longer working for just 3 months), they also can not be dictated to or given any responsibilities that are out side of just doing their job of “airbrushing”…because they are “independent contractors”? On top of that how can they still be paid just a percentage? These are the differences that have arisen from the old “tourist trap” artist.
This is how the whole “independent contractor and “percentage pay” started. Is it still applicable today?
The IRS rules are still as “Grayed” as they always have been which is why you should read the above links in their entirety. But in this day and age the title of “independent contractors” just does not work as well. A few reasons would be:
1.) the prices in the shop are pre-determined(all artists have to charge the same, at least for standard designs)
2.) the store now sells items to paint on like shirts, hats etc…which the artist is now involved in selling.
3.) a schedule needs to be made to fill the hours
4.) the artists need to share in the responsibilities of opening and closing the shop as well as it’s daily upkeep.
5.) covering shifts when someone is sick is now the responsibility of everyone.
In reality, the only two areas of the retail airbrush industry that paying as independent contractors can truly be justified is:
1.) the seasonal “tourist trap” artist
2.) event artists
Both of these type of artists usually have their own equipment and pick and choose when they want to work(two of the requirements of an independent contractor as far as the IRS is concerned)
Any “permanent”or “semi-permanent” location that needs multiple hours filled by skilled labour is probably NOT going to pass the IRS definition of an independent contractor.
So how do you know what is the right way? At this point, if you read the above links with an open mind you can clearly see that it is a greater possibility that the IRS will categorize anyone who works in an “established” airbrush shop as an “employee”
For those artists that are working in an established store or are considering it, they should take the time to talk this over with the owner and see what kind of agreement you can come up with. Keep in mind as an independent contractor you are responsible for more taxes then may be necessary. If you want to be an employee and the owner wants you to be a independent contractor then maybe you can come up with some kind of “hybrid” solution. We have other payment examples in our article “How to Pay Airbrush Artists”
For business owners, at the very least you should have some form of written agreement for all your artists to read and sign, explaining their status as an independent contractor. Now lets be clear, this “agreement” will in no way protect you if the IRS decides you have been paying your artists incorrectly…after all, it’s the IRS….lol. One important thing to keep in mind is that if anyone ever questions your decision to pay them as a “Independent Contractors” and files a form SS-8 to have the IRS determine which is the true way they should be being paid….you could be liable for paying their back taxes….that alone should make someone re-consider the situation. Not to mention the possibility of State and City agencies deciding they want their cut of what should have been employee taxes.
As I have said a few times so far, it is a “Gray area”. It will be interpreted differently by both artist and shop owners because some situations will vary. A one on one discussion between owner and artist is the best way to work things out before things can go wrong.
We will end this article with this. “It is better to err on the side of caution”.
As always lets hear some feedback.