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State specific rules are all trumped by IRS rules when federal withholding is involved (always). The reason companies use contractors is to make the contractor responsible for federal withholding as it provides higher cash flow. There is a clear IRS test that almost all of these companies fail. Is the contractor wearing a company branded T-shirt? Yep: Employee. It's not all that grey, it's about enforcement and risk tolerance. However, I'm not arguing the FTE vs. contractor point. It doesn't apply here. For reference: https://www.irs.gov/newsroom/understanding-employee-vs-contr... I'm saying, at the most basic level, unless the company is specifically offering a "match making" service, the service provider is stealing from the company by cutting the company out of revenue they expected to collect. None of these services advertise as match makers. Examples of match makers in this space are yelp, angies list, thumbtack, home adviser. They each have a clearly different busines model from Wag. Like I said though, this applies to any company. If a company has made the effort to attract and close the customer with some expectation of LTV, that value can be realized in a couple of ways. 1. Providing service to that customer in perpetuity. 2. Selling that customer to a service provider at a price that provides a profit. If the service provider cuts the company out without compensation, the provider has taken unfair advantage by being on both sides of the transaction, having nothing invested and being compensated for the work completed before stealing the customer. *"In the case the match making firm is providing no value, I think most contractors would eventually decide to take a customer on directly." I think you are applying the idea of value in the wrong place. The company has no obligation to provide anything except agreed upon financial compensation to the service provider. It's the break down in value to the customer where many of these services have fallen. In that case the customer can shop for a new service. It does not mean that the service provider can use their unfair advantage and build a business from the unhappy customer. Because in that case, the "match maker" did provide value. It provided the LTV of that stolen customer to the service provider. This, again, is why Wag is also applying a fee to the service provider. For the provider, stay on the platform, get paid or pay for the customers to build your own thing. What's wrong with that? |