Top 5 Misclassified Workers Comp Codes

According to the National Council on Compensation Insurance (NCCI), there are five workers comp codes that get classified improperly more then any other class codes. Those codes include  retail, wholesale, hardware, automobile parts and accessories, and furniture and drivers.  The specific workers comp codes that are misclassified include:

• Retail (8017):  frequently confused with; 8010, 8018, 8008, 8044, & 9083.
• Wholesale (8018);  frequently confused with 8010, 8032, 8017, 8232, & 8046.
• Hardware (8010); frequently confused with 8018, 8017, 8058, 8046, & 8011.
• Furniture (8044) frequently confused with 8017, 8018, 8010, 9519, & 8235.
• Automobile Parts frequently confused with (8046); 8380, 8018, 8010, 8391, & 3821.

In most cases, store operations are required to be classified based upon the main type of merchandise sold. (typical meaning 50% of gross receipts). This is similar to the bar and restaurant industry.  The difference between retail and wholesale is that retail sales are for merchandise that is intended to be consumed by the general public for personal consumption. Not to be resold or for B2B sales. Wholesale applies to the sale of merchandise to a business entity with the primary purpose to be resold to toher consumers or businesses.

Common Reasons for Misclassification of Workers Comp Codes

In the retail and wholesale industries, the common reasons for a business to be classified wrong is that the gross receipts for one particular product amount to more than 50 % of all sales. This can happen when a store is a retail establishment that sells multiple products, but if more than 50 % of sales are for say groceries, fruits, vegetables, and meats; this store should be classified as a grocery store at class code 8006. This is also common for retail stores that sell primarily clothing, waring apparel, or dry goods.  Hardware stores are primarily reclassified to workers comp codes 8111 (Plumber Supplies Dealer) or 8046 ( Automobile Parts and Accessories). Again this is only necessary when the gross sales are more than 50% of the total revenue of the business.  In the Auto Industry, the most common misclassification is to class code 8380 (Automobile Service and Repair Center). It is not uncommon for businesses in this industry to service cars and sell auto parts. The deciding factor is amount of retail sales compared to service center sales.  In most cases, the center makes significantly more from the service center and should be classified as such. This can get tricky when businesses sale higher dollar parts like tires or engine parts because of the high dollar value of these items.  Partnering with an accountant and an independent insurance agent can help you prevent misclassifying your business.