For the purpose of the exception the nature of the service is immaterial; the statutory test is the character of the organization for which the service is performed.
In all cases, in order to establish its status under the statutory classification, the organization must meet two tests:
(1) It must be organized and operated exclusively for one or more of the specified purposes; and
(2) Its net income must not inure in whole or in part to the benefit of private shareholders or individuals.
Corporations or other institutions organized and operated exclusively for charitable purposes comprise, in general, organizations for the relief of the poor. The fact that an organization established for the relief of indigent persons may receive voluntary contributions from the persons intended to be relieved will not necessarily affect its status under the law.
An educational organization within the meaning of the Act is one designed primarily for the improvement or development of capabilities of the individual, but, under exceptional circumstances, may include an association whose sole purpose is the instruction of the public, or an association whose primary purpose is to give lectures on subjects useful to the individual and beneficial to the community, even though an association of either class has incidental amusement features. An organization formed, or availed of, to disseminate controversial or partisan propaganda or which by any substantial part of its activities attempts to influence legislation is not an educational organization within the meaning of section 907 (c) (7) of the Act.
Since a corporation or other institution to be within the prescribed class must be organized and operated exclusively for one or more of the specified purposes, an organization which has certain religious purposes and also manufactures and sells articles to the public for profit is not within the statutory class even though its property is held in common and its profits do not inure to the benefit of individual members of the organization.
An organization otherwise within the statutory class does not lose its status as such by receiving income such as rent, dividends, and interest from investments, provided such income is devoted exclusively to one or more of the purposes specified in section 907 (c) (7) of the Act.
Money contributed by members of an organization to a common fund to be applied to the relief of the particular members of the organization or their families when in sickness, unemployed, in want, or under other disability, is not a charitable fund.
If an organization has established its status under the law, it need not thereafter make a return or any further showing with respect to its status unless it changes the character of its organization or operations or the purpose for which it was originally created. Collectors will keep a list of all such organization, to the end that they may be occasionally inquire into their status and ascertain whether they are observing the conditions upon which their classification is predicated.
Section 901 of the act
On and after January 1, 1936, every employer (as defined in section 907) shall pay for each calendar year an excise tax, with respect to having individuals in his employ, equal to the following percentages of the total wages (as defined in section 907) payable by him (regardless of the time of payment) with respect to employment (as defined in section 907) during such calendar year; * * *
Section 907 (b) of the Act
The term "wages" means all remuneration for employment, including the cash value of all remuneration paid in any medium other than cash.
Art. 907. Wages.—The term "wages" means all remunerations for employment, whether payable in money or something other than money. The name by which such remuneration is designated is immaterial. Thus, salaries, commissions on sales or on insurance premiums, fees, and bonuses, are wages within the meaning of the Act if payable by an employer to his employee as compensation for services not excepted by the Act. The basis upon which the remunerations is payable, the amount of remuneration, and the time of payment are immaterial in determining whether the remuneration constitutes "wages." Thus, it may be payable on the basis of piecework, or a percentage of profits; and it may be payable hourly, daily, weekly, monthly, or annually.
The medium in which the remuneration is payable is also immaterial, it may be payable in cash or in something other than cash, such as goods, lodging, food, and clothing.
Ordinarily, facilities or privileges (such as entertainment, cafeterias, restaurants, medical services, or so-called "courtesy" discounts on purchases), furnished or offered by an employer to his employees generally, are not considered as remuneration for services if such facilities or privileges are offered or furnished by the employer merely as a convenience to the employer or as a means of promoting the health, good will, contentment, or efficiency of his employees.
Art. 208. Exclusion from wages.—Excluded from the computation of wages is all remuneration payable by an employer to an employee for services which are excepted by section 907 (c), or which are performed outside of the United States. (See articles 206 to 206 (7), inclusive.)
Art. 209. Items included as wages.— (a) General.—The total wages payable by an employer to his employees with respect to employment during any calendar year shall include (A) items payable and actually paid during that calendar year and (B) items payable but not actually paid during that calendar year.
(A) Items actually paid shall include:
(1) Cash; and
(2) The fair value, at the time of payment, of all items other than money.
(B) Items payable but not actually paid shall include:
(1) The amount of all remuneration agreed by the employer to be paid to the employee; and
(2) The fair and reasonable value of all services performed with respect to employment during the calendar year, if there is no agreement between the employer and the employee as to the amount of remuneration for such services; and
(3) The fair estimated amount of all remuneration, if the basis of such remuneration has been agreed upon between the employer and the employee but the exact amount ultimately to be paid can not be determined until a subsequent year; and
(4) The pro rata or other amount, fairly estimated or allocated, of the total remuneration agreed to be paid by the employer to the employee, if such total remuneration is for services rendered in part in the calendar year and in part in a different year or years.
(5) When remuneration for services performed in a calendar year is paid, or when an obligation to pay such remuneration arises, in a subsequent calendar year, the employer is required to advise the collector under oath of the amount thereof (if not reported in the return for the calendar year during which the services were performed) and to pay any tax with respect thereto at the rate in effect for the calendar year during which the services were performed. (See article 210 (b).)
(b) Dismissal wages.—Payment to an employee of so-called dismissal wages, vacation allowances, or sick pay, constitutes wages.
(c) Traveling and other expenses.—Amounts paid to traveling salesmen or other employees as allowance or reimbursement for traveling or other expenses incurred in the business of the employer constitute wages only to the extent of the excess of such amounts over such expanses actually incurred and accounted for by the employees.
(d) Premiums on life insurance.—Generally, premiums paid by an employer on a policy of life insurance covering the life of an employee constitute wages if the employer is not a beneficiary under the policy. However, premiums paid by an employer on policies of group life insurance covering the lives of his employees are not wages, if the employee has no option to take the amount of premiums instead of accepting the insurance and has equity in the
