Is doTerra Wellness Advocate a Specified Trade of Business for Qualified Business Income Deduction?

[George4Tacks · Accepted solution]

https://www.irs.gov/newsroom/tax-cuts-and-jobs-act-provision-11011-section-199a-qualified-business-i...

Q5. What is a qualified trade or business?

A5. A qualified trade or business is any trade or business, with two exceptions:

1. Specified service trade or business (SSTB), which includes a trade or business involving the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, investing and investment management, trading, dealing in certain assets or any trade or business where the principal asset is the reputation or skill of one or more of its employees. This exception only applies if a taxpayer’s taxable income exceeds $315,000 for a married couple filing a joint return, or $157,500 for all other taxpayers
    
2. Performing services as an employee

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Selling essential oils is NOT a SSTB

[IRonMaN]

Yeah, I did my intense research by way of a Google search.  Although my wife would make an argument that is a field of health since she thinks the "right" oils or combination thereof, will cure anything known to man.  As a caveat, I should mention that she received her medical degree from the Minnesota School of BS. :open_mouth:

[George4Tacks]

Notice I did not say SNAKE OIL
I am trying to be on very good behavior during my probationary period.

[IRonMaN]

You are doing good!

[George4Tacks]

But my steaks are done well.

[IRonMaN]

I would vote "no"

[nmms]

Why "no"?

[sjrcpa]

What is a Terra Wellness Advocate? What do they do?

[sjrcpa]

Why do you think the answer is Yes?

[nmms]

The last definition of Specified Service Trade or Business (SSTB) from TheTaxBook Tools for Tax Pros is:
"Any trade or business that consists of the following, or any combination thereof.
• Receiving fees, compensation, or other income for endorsing products or services,
• Licensing or receiving fees, compensation or other income for use of an individual’s image, likeness, name, signature, voice, trademark, or any other symbols associated with the individual’s identity, and
• Receiving fees, compensation, or other income for appearing at an event or on radio, television, or another media format."
My client earns commissions by sharing products and enrolling others in the program as wellness advocates or wholesale customers. Am I correct to conclude this client is receiving compensation for endorsing products and her business is a Specified Service Trade or Business?

[sjrcpa]

Your client is not a celebrity, is she? IRS clarified that this is basically what that language means.

[IRonMaN]

As a side note, you do realize it is better to not be a SSTB than it is to be one due to the extra limitations on the deduction?

[George4Tacks]

Why muddy the water with that tidbit? Better is not a proper tax criteria. It's like using that four letter F word with taxes.

[IRonMaN]

Fudg?  I think it has five letters.

[George4Tacks]

FAIR

[qbteachmt]

"by sharing products and enrolling others in the program as wellness advocates or wholesale customers."

= MLM