Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 56-35

1956-1 C.B. 453

IRS Headnote

A partnership enters into oral agreements with farmers to cut their lettuce, pack it in shipping cartons in the field, and haul it to a commercial vacuum cooling plant. Held , services performed by the partnership's employees on the farms of its customers in connection with harvesting the lettuce, including cutting the heads, constitute `agricultural labor,' as defined in section 3121(g) of the Federal Insurance Contributions Act. Held further , services performed in the employ of the partnership, a custom operator, in handling and packing the lettuce, hauling it to the cooling plant, repairing and maintaining equipment, as well as clerical and administrative services relating to such operations, do not constitute `agricultural labor.'

Full Text

Rev. Rul. 56-35

Advice has been requested whether services performed in the employ of a partnership, a custom operator, in handling and packing lettuce in shipping cartons on the farms of its customers are a part of the harvesting operation and whether these and other services constitute `agricultural labor' as defined in section 3121(g) of the Federal Insurance Contributions Act (chapter 21, subtitle C, Internal Revenue Code of 1954).

Formerly, lettuce could not be packed in cardboard boxes in the field because it had to be iced while being packed. Now, with the vacuum cooling process, the lettuce can be field-packed in shipping cartons, hauled to a commercial vacuum cooling plant, cooled and shipped. The cartons are factory-made, of cardboard, in one flat piece, and bear the name and label of the lettuce grower.

No lettuce is raised by the partnership. It enters into oral agreements with growers to field-pack their lettuce. A grower specifies the number of cartons and the kind of lettuce he wants packed each day, and pays the partnership a set contract price for the number of cartons packed.

The partnership hires and pays its own crew to perform the following services: The truck drivers pick up the grower's flat cartons and take them to the field, where they are unloaded, assembled (flaps folded and stapled), and distributed by hand along the rows of lettuce. Other crew members cut the heads of lettuce and leave them on the ground for the packers. The packers fill the cartons as they move along. Then men with portable staple guns follow the packers and close and staple the top flaps of the cartons. Then the truckers drive through the fields, load the packed cartons, and take them to the vacuum cooling plant. Other than the trucks and tractors used to collect and deliver cartons and the stapling machines, no machinery is used in connection with this packing operation. All of the lettuce is packed for marketing purposes and is shipped in the same cartons in which it left the field.

As defined in section 3121(g) of the Federal Insurance Contributions Act, the term `agricultural labor' includes all service performed-

(1) on a farm, in the employ of any person, in connection with cultivating the soil, or in connection with raising or harvesting any agricultural or horticultural commodity * * *;

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(4)(A) in the employ of the operator of a farm in handling, planting, drying, packing, packaging, processing, freezing, grading, storing, or delivering to storage or to market or to a carrier for transportation to market, in its unmanufactured state, any agricultural or horticultural commodity; but only if such operator produced more than one-half of the commodity with respect to which such service is performed;

The question is whether the handling and packing services performed by employees of the partnership are so closely related to the harvesting operation as to be considered an integral part of harvesting and therefore an operation of the character contemplated by paragraph (1) rather than paragraph (4) of section 3121(g), supra .

It is held that handling and packing lettuce for shipment to market, even though done in the field immediately after the cutting, are not a part of the harvesting operation. These are post-harvesting operations of the character contemplated by paragraph (4) of section 3121(g) of the Act. Moving the operations from the icing plant (where they were done formerly) to the farm does not change their character. To hold that these operations are an integral part of harvesting would be to transcend the scope of operations specifically enumerated in paragraph (4).

As indicated by that part of paragraph (4) of section 3121(g ) quoted above,  the services enumerated therein constitute `agricultural labor' only if performed in the employ of the operator of a farm and such operator produced more than one-half of the commodity handled in a pay period. The `operator of a farm' means an owner, tenant, or other person, in possession of a farm and engaged in the operation of such farm. Thus, if the partnership in the instant case were the operator of the farm or farms on which more than one-half of the lettuce handled in a pay period was produced, the services of its employees in handling and packing the lettuce would constitute `agricultural labor.' See Rev. Rul. 174, C.B. 1953-2, 299.

However, the partnership involved here is not the operator of the farms on which more than one-half of the lettuce handled in a pay period was produced. Therefore, none of the services performed by its employees in handling and packing the lettuce, or in picking up cartons, assembling, distributing and sealing them, and in transporting them to the vacuum cooling plant, constitute `agricultural labor' within the meaning of section 3121(g) of the Act. Moreover, none of the services performed in connection therewith, such as maintenance and repair of trucks and other equipment, or clerical or administrative services relating to such operations, constitute `agricultural labor' within the meaning of such section.

Services performed by the partnership's employees on the farms of its customers in connection with cultivating the soil, or in connection with raising or harvesting the lettuce, including cutting the heads, constitute `agricultural labor' as defined in section 3121(g)(1) of the Federal Insurance Contributions Act.

Liability for the taxes imposed by the Federal Insurance Contributions Act is incurred by the partnership with respect to the remuneration paid for the services described herein to the extent that such remuneration constitutes `wages' as defined in section 3121(a) of the Act. The `$100-a-year' test is applicable in determining whether or not remuneration for `agricultural labor' constitutes `wages' for purposes of such taxes. See paragraphs (9) and (10) of Revenue Ruling 55-707, C.B. 1955-2, 420.

Remuneration paid for `agricultural labor,' as defined in the Federal Insurance Contributions Act, is excluded from `wages,' as defined in section 3401(a) of chapter 24 of the Internal Revenue Code of 1954 (collection of Income Tax at Source on Wages), for purposes of the income tax withholding under section 3402 of the Code. For the application of the rules relating to `included and excluded wages' in determining whether all, or none, of an employee's remuneration for a pay period shall be deemed to be `wages' subject to the income tax withholding, see paragraph (11) of Revenue Ruling 55-707, C.B. 1955-2, 420.