The question for decision in this action for the recovery of alleged overpayments of employment taxes for the years 1943 and 1944, assessed under the Internal Revenue Code, Title 26 U.S.C.A. § 1600 et seq., is whether the real estate salesmen of the plaintiff (appellant), a Missouri corporation engaged in the real estate brokerage business in the City and County of St. Louis, Missouri, were its employees within the meaning of § 1607(i) of the Internal Revenue Code as amended by Congressional Joint Resolution 296 of June 14, 1948, retroactive to February 10, 1939, c. 468, 62 Stat. 438, § 1, 26 U.S.C.A. § 1607 (i). Section 1607(i) of Title 26 U.S.C.A., provides:

"§ 1607. Definitions.

"When used in this subchapter —

"(i) Employee. The term `employee' includes an officer of a corporation, but such term does not include (1) any individual who, under the usual common-law rules applicable in determining the employer-employee relationship, has the status of an independent contractor or (2) any individual (except an officer of a corporation) who is not an employee under such common-law rules."

The plaintiff asserted that to the extent that the employment taxes for the years in suit were based upon the remuneration paid to its salesmen, the taxes were illegal, since the salesmen were not its employees, but were independent contractors. This the defendant (appellee) denied. The case was tried to the court without a jury. There was virtually no dispute as to the evidentiary facts. Two questions were presented to the Court: (1) whether the salesmen were employees of the plaintiff under the evidence and the applicable common-law rules realistically applied; and (2) whether the decision of the Supreme Court of Missouri in the case of A. J. Meyer & Company v. Unemployment Compensation Commission of Missouri, 348 Mo. 147, 152 S.W.2d 184, — holding that, under the usual tests, real estate salesmen of substantially the type here in question were not employees, but were independent contractors not within the coverage of the Missouri Unemployment Compensation Act, Mo.R.S.A. § 9421 et seq. — was determinative of the status of the plaintiff's salesmen. The District Court resolved the issues in favor of the defendant, and entered a judgment of dismissal. This appeal followed.

The usual common-law rule for determining the existence of the relationship of employer and employee was concisely stated by the Supreme Court of the United States in Singer Manufacturing Co. v. Rahn, 132 U.S. 518, 523, 10 S. Ct. 175, 176, 33 L. Ed. 440, as follows: "* * * And the relation of master and servant exists whenever the employer retains the right to direct the manner in which the business shall be done, as well as the result to be accomplished, or, in other words, `not only what shall be done, but how it shall be done.' New Orleans, M. & C. Railroad Co. v. Hanning, 15 Wall. 649, 656 [21 L. Ed. 220]."

The applicable Treasury Regulations, which are an elaboration of the rule (Radio City Music Hall Corp. v. United States, 2 Cir., 135 F.2d 715, 717-718), are set out in the margin.1

For the purpose of this opinion it may be conceded that the question of the coverage of the federal taxing act in suit is a matter of federal, and not of state, law, and that the District Court and this Court are not concerned with whether the salesmen were or were not entitled to unemployment compensation under the law of Missouri.

The question, as we see it, is whether the plaintiff, in its contractual arrangement with its salesmen, retained the right to control the manner in which they did business. The contracts were all the same.2

While the practical construction placed by the contracting parties upon their arrangement is, no doubt, of importance in ascertaining whether there was a sufficient retention of control by the plaintiff over the operations of the salesmen to make them its employees, we think it is unnecessary to state in minute detail all of the facts which are accorded significance by counsel in their arguments. Our failure to mention them does not mean that they have been overlooked.

The factual situation, as we see it and as it appears to be reflected in the evidence and the findings of the evidentiary facts by the court, is, in substance, as follows: The plaintiff's business consisted primarily of selling the real estate of others upon commission. It had an office with the usual facilities for conducting such a business. In order to sell real estate, it was necessary for the plaintiff to secure listings of properties which were for sale and to find purchasers for them. In order to secure listings and to find purchasers, it needed salesmen to canvass the territory in which it did business. The plaintiff recruited the necessary sales force by entering into a contract with each salesman to make available to him the facilities of its office and its listings of property for sale; to assist him by advice and co-operation; to furnish him with necessary business cards, forms, and stationery; and to divide with him, according to a fixed schedule, any commissions resulting from sales which he procured. The salesman, on his part, agreed to work diligently for the plaintiff. The contract was terminable upon notice. Each salesman purchased the license required of him by State law, and paid the dues for his membership in the local real estate exchange. Each provided his own means of transportation and paid his own expenses incurred in the solicitation of business. Most salesmen had automobiles, but were not required to have them. Those who had automobiles paid the expenses of their operation and upkeep and for the liability insurance upon them. The policies of liability insurance procured by the salesmen usually contained a rider for the protection of the plaintiff. The salesmen ordinarily reported at plaintiff's office daily, but that was not compulsory. They generally attended the salesmen's meetings held weekly at the office, but their attendance was not mandatory. They took turns at keeping the office open on Saturday afternoons and Sundays, for their own benefit as well as that of the plaintiff. They were not required to keep fixed hours. Some worked full time and some part time. Some of them were housewives and some had businesses other than selling real estate. They were not permitted to sell real estate for other brokers nor to make sales in their own names and on their own behalf. The salesmen sometimes prepared advertisements which, if approved, were published at the plaintiff's expense. The plaintiff furnished "For Sale" signs to the salesmen. Two of the most experienced of the salesmen were designated as "Sales Managers" and assisted the others with advice and suggestions and received an overriding commission on sales. Each salesman was furnished a manual or booklet explaining the plaintiff's business policies in great detail. It is too long to be included in this opinion. Whether the booklet be regarded as the rules and regulations of the plaintiff, as the defendant claims, or as a statement of business policies and helpful suggestions, as the plaintiff asserts, we do not regard as of controlling importance. The booklet reasonably may be regarded as the plaintiff's instructions for the guidance of the salesmen, with which they were expected to, and did, comply in conducting business. The stationery, business forms, and "For Sale" signs furnished the salesmen bore the plaintiff's name. The plaintiff attended to the closing of all sales procured by the agents. Commissions on sales were paid to the plaintiff and were divided once a month among the salesmen who had earned them. Some salesmen received a bonus. The salesmen had no expense accounts, but occasionally the plaintiff would advance money to a salesman against his commissions earned or to be earned. A salesman selling his own property was required to pay a commission to the plaintiff. There is no evidence that any such sales were made.

The Supreme Court of Missouri has been of the opinion that, under the usual tests for determining the employer-employee relationship, salesmen such as those here involved are not the employees of their principal, but are independent contractors. A. J. Meyer & Company v. Unemployment Compensation Commission of Missouri, supra, 348 Mo. 147, 152 S.W.2d 184. See, also, and compare, Barnes v. Real Silk Hosiery Mills, 341 Mo. 563, 108 S.W.2d 58; Snowwhite v. Metropolitan Life Ins. Co., 344 Mo. 705, 127 S.W.2d 718; Vert v. Metropolitan Life Ins. Co., 342 Mo. 629, 117 S.W.2d 252, 116 A.L.R. 1381. The Circuit Court of Appeals of the Ninth Circuit, in the case of Henry Broderick, Inc. v. Squire, 163 F.2d 980, reached the same conclusion with respect to real estate brokers whose relation to their principal, we think, differed in no controlling respect from the relation of the salesmen in the instant case to the plaintiff. See, also, Brown v. Luster, 9 Cir., 165 F.2d 181, 184-185. It seems probable to us that the Court of Appeals of the Second Circuit would hold that such salesmen were not the employees of their principal, under the applicable common-law tests. Compare, Radio City Music Hall Corp. v. United States, 2 Cir., 135 F.2d 715, supra; McGowan v. Lazeroff, 2 Cir., 148 F.2d 512.

An analysis of the opinion of the Supreme Court in the cases of United States v. Silk, and Harrison v. Greyvan Lines, Inc., 331 U.S. 704, 67 S. Ct. 1463, 91 L. Ed. 1757, indicates to our minds that a ruling that the plaintiff in the instant case, under its arrangement with its salesmen, had retained the right to control the manner in which they were to accomplish results, is not justified by the evidence. We think that Greyvan Lines, Inc., as shown by the opinion of the Supreme Court, had and exercised far more control over the manner in which its truck operators, who were held to be independent contractors, did business than the plaintiff in the instant case had over the activities of its salesmen in soliciting listings and finding purchasers. We note that the truckers for Greyvan were furnished with a manual of rules and regulations, but that that was not considered a controlling factor in the Greyvan case. The decision of this Court in United States v. Kane, 8 Cir., 171 F.2d 54, is readily distinguishable from the instant case. There we were dealing with the employment of common laborers who delivered coal in wheelbarrows. Their situation was fairly comparable with that of the coal unloaders in the Silk case. Here we are concerned with competent salesmen, almost entirely dependent upon their own initiative, efforts, skill, and personality for success, working upon their own time, at their own expense, and deriving their remuneration from the results of their work.

If the regulations proposed by the Bureau of Internal Revenue of the Treasury Department which are published in the Federal Register of November 27, 1947, 12 F.R. 7966, had become effective, the applicable law might have been different. Under "Factors to be considered," the proposed regulation provided in part as follows: "* * * an employee is an individual in a service relationship who is dependent, as a matter of economic reality, upon the business to which he renders service and not upon his own business as an independent contractor. * * *"

Congress, by its Joint Resolution of June 14, 1948, repudiated the expansion of the common-law rule proposed by the Treasury Department for determining the existence of the relationship of employer and employee. This was done by adding to § 1607(i) of the Internal Revenue Code, the words: "but such term [employee] does not include (1) any individual who, under the usual common-law rules applicable in determining the employer-employee relationship, has the status of an independent contractor or (2) any individual (except an officer of a corporation) who is not an employee under such common-law rules." A reading of the reports of the Congressional Committees accompanying the Joint Resolution, U.S.Code Congressional Service, Vol. 2, 80th Congress, Second Session, 1948, page 1752 et seq., makes it clear that the coverage of the statute in suit is not to be expanded by Treasury Regulations or court decisions relaxing or changing the common-law concept of the employer-employee relationship.

It is our conclusion that the salesmen of the plaintiff were not its employees within the meaning of § 1607(i) of the Internal Revenue Code, as amended, and that their remuneration was not subject to employment taxes during the years in suit.

The judgment appealed from is reversed, and the case is remanded with directions to enter judgment for the plaintiff.