SBA ruling comes up in Blackwater investigation – Washington Business Journal:

Rep. Henry Waxman, D-Calif., is raising questiona about whether Blackwater isevading U.S. taxes by classifying its armerd guards who are working in Iraq underr contract to the State Department as independent contractor s insteadof employees. Businesses do not have to pay payrollk taxes or unemployment taxes or withholr income taxes forindependent contractors. Waxman, who chairds the House Oversight and GovernmentRefornm Committee, noted that and Triple Canopy, two other companiea that provide security services to the State Department, classify their guards as The Internal Revenue Service ruled in March that Blackwater's classificatiobn of a security guard in Afghanistab as an independent contractor was "without merit," Waxman The IRS warned its ruling "may be applicable to any othedr individuals engaged by the In response, Blackwater cited an SBA "official that "Blackwater security contractors are not employees.
" The independenr contractor model better suits its needs, the companuy said. That reference to the SBA troubled Sen. John Kerry, who chairs the Senate Small Businesws andEntrepreneurship Committee. "The SBA must explain to the American peoplwe what role they may have playedx in helping Blackwater avoidpaying $31.8 million in Kerry said Oct. 23. The SBA finding citex by Blackwater involved the classification of an affiliate as asmall business. Competitors of Blackwater affiliate protested a smallbusinesx set-aside contract awarded for helicoptedr replenishment services.
The SBA determined Blackwater's personnelk were independent contractors, not employees, and therefore the compan y qualified as a small business becaused it did not exceedthe 1,500-employee thresholdd for its industry. In an Oct. 24 lettedr to Kerry, SBA Administrator Steven Prestoh wrotethat "SBA's size determinations are solely for the purpose of ascertaininb eligibility for our smal l business programs and have no applicability to tax liability matters.
" Kerrty now contends Blackwater "erroneously and inappropriately relies on an SBA size determinationn for the classification of its He asked the Senate Finance Committee to investigate Blackwater concerning the gap between the taxeds that should be paid and the taxes actuallyt collected.
blogspot.com