Bonuses are wages if they are paid to an employee for services rendered by that employee for their employer. Bonuses given by a manufacturer to a dealer's salesperson, who meets a prescribed sales quota, whether paid directly by the manufacturer or through the dealer, are not wages.

An automobile dealership gives a bonus to a salesperson for meeting a sales quota. This counts as wages.

An automobile manufacturer gives a bonus to a dealership’s salesperson for meeting a sales quota. This is not considered wages because there is no employer/employee relationship between the manufacturer and the salesperson. (For a definition of employer/employee relationship, see RS 02101.010).

Reference:

IRS Ruling 70-337

A cash award an employee receives for a suggestion or outstanding work is part of the employment relationship and is wages.

EXCLUSION: Length of service and safety achievement awards, see RS 01402.205.

One-time prizes paid by a third party are not wages unless there is an employer/employee relationship between the one awarding the prize and the recipient of the prize.

Cosmetic companies provide prizes which are given at random to department store employees. Because the employees do not work for the cosmetic company and there is no employer/employee relationship, the value of the prize is not counted as wages.