In the most recent issue of “Dealer Talk,” the Virginia Motor Vehicle Board included the following reminder about salesperson licenses that has been reprinted in full below.
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Dealer-Operators, F & I Employees, and Sales Managers must have sales licenses. Legislation in 2006 expanded the definition of a motor vehicle salesperson to include those functions performed by the sales manager, dealer -operator, and dealer employees who are in the “F&I” side of the automobile sales industry. Anyone who performs functions as described in the following definition must have a salesperson’s license. Regardless of the working title an individual has, if they fit the definition, they must have a salesperson’s license.
Section §46.2-1500, Definitions. “Motor vehicle salesperson” or “salesperson” means (i) any person who is hired as an employee by a motor vehicle dealer to sell or exchange motor vehicles and who receives or expects to receive a commission, fee, or any other consideration from the dealer; (ii) any person who supervises salespersons employed by a motor vehicle dealer, whether compensated by salary or by commission; (iii) any person, compensated by salary or commission by a motor vehicle dealer, who negotiates with or induces a customer to enter into a security agreement on behalf of a dealer; or (iv) any person who is licensed as a motor vehicle dealer and who sells or exchanges motor vehicles.
For purposes of this section, any person who is an independent contractor as defined by the United States internal revenue code shall be deemed not to be a motor vehicle salesperson. It is important for you to study this definition as all employees of your dealership that meet any of the criteria as noted in the definition will need a salesperson’s license. It is the responsibility of the dealership owner to make sure that all salespersons are properly licensed and paid on a W-2. No “1099”. Please remember that salespersons may not be independent contractors paid via IRS Form “1099”. Salespersons must be employees of the dealership and that usually means that they receive an IRS Form “W-2” at the end of the tax year. Please be sure that anyone who performs any of the functions listed in the above definition is properly licensed. In addition, anyone licensed as a salesperson must be an employee of the dealership.
Licensed salespersons must be paid on a W-2, and not be “independent contractors” paid via IRS form “1099”. Form K-1 is used by members of an LLC to report their share of the Corporation’s earnings (or loss). If a member of an LLC is also a licensed salesperson, then by definition, they are also an employee of the LLC and the LLC must issue that employee an IRS Form W-2 at the end of the tax year. Therefore, a member of an LLC who is also a licensed salesperson will receive both a “K-1” and a “W-2” at the end of the tax year.
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