What Legislative Issues are Important to Direct Sellers?
- Preservation of the Independent Contractor Status of Direct Sellers
The Direct Selling Association, and its super PAC, opposes legislation that undermines the legitimate uses of independent contractors in the marketplace, or that would otherwise increase unnecessary bureaucratic burdens on independent contractors or those who use their services.
Recognition of the independent contractor status of direct sellers was achieved at the federal level in 1982 when Congress enacted legislation establishing that direct salespeople are independent contractors (non-employees). The law is found in §3508 of the Internal Revenue Code as amended by the Tax Equity and Fiscal Responsibility Act (TEFRA), P.L. 97-248, 96 Stat. 551 (1982).
- Independent Contractor Classification
Questions persist in other industries regarding economic abuse of independent contractors, misclassification of employees as independent contractors and compliance with income tax laws by independent contractors, which at times can impact direct sellers. Proposals have been put forward to dramatically alter the criteria under which individuals are determined to be independent contractors, or lessen the protections against state government and Internal Revenue Service reclassification of contractors as employees. However, the status of direct sellers as independent contractors has been consistently recognized, and the direct seller tax compliance rate is very high by virtue of existing special income reporting requirements applicable only to direct sellers.
- Distinguishing Between Legitimate Direct Selling Opportunities & Pyramid Schemes
Pyramid schemes seek to make money from you—as opposed to from the sale of goods and services. They are illegal business operations in which consultants or distributors at the top of the pyramid make money from those who buy in below, making recruiting new consultants or distributors a primary or exclusive goal. There is often a substantial buy-in fee, and no goods or services to sell. In addition, pyramid schemes promise substantial earnings potential with little effort. Legitimate direct selling companies offer real business opportunities to sell products and services that consumers depend on. Although your earning potential typically increases when you recruit others to join your sales organization, recruitment is not a requirement of direct selling. Like traditional businesses, profits are derived from the sale of goods and services to consumers.