The opinion of the court was delivered by: BARD
This action is brought by the taxpayers to recover taxes totalling $ 550,66, plus statutory interest, assessed by the Commissioner of Internal Revenue under the Social Security Act
and the Federal Insurance Contributions Act
and paid by taxpayers for the years 1938, 1939, 1940, 1941 and 1942. The assessment was the result of a determination by the Commissioner that the persons, upon whose compensation the taxes were based, were employees of plaintiff within the meaning of these statutes.
1. Plaintiffs John Schwing and Walter F. Schwing are co-partners doing business under the firm name of John Schwing & Son. Plaintiffs have engaged in the business of custom tailoring in Philadelphia, Pennsylvania, for many years and were so doing business from 1938 to 1942 inclusive.
2. On November 18, 1944, the Commissioner of Internal Revenue assessed the taxpayers for certain taxes, with interest, under the Social Security Act and the Federal Insurance Contributions Act for the years 1938, 1939, 1940, 1941, and 1942 in the total sum of $ 550.66. The assessments were paid under protest by the taxpayers on August 29, 1944.
3. Taxpayers filed a timely claim for refund on September 18, 1944, which was disallowed by the Commissioner of Internal Revenue.
4. The taxpayers' method of doing business was as follows:
When a suit was ordered by a customer, plaintiffs cut the cloth according to a pattern prepared from the customer's measurements. The cloth with the linings and other necessary materials were separated into three bundles, one containing the materials for the coat, another for the vest and the third for the pants. These bundles were given to different journeymen tailors, each a specialist in making coats, vests or pants, who took the bundle to his own shop and basted, and then sewed, the material into a garment. The completed coat, vest, or pants were returned to plaintiffs' establishment and, after fitting and alteration, the complete suit was delivered to the customer. Each journeyman tailor worked on only one type of garment, i.e., coat, vest, or pants.
5. The business arrangement and working agreement between plaintiffs and the various journeyman tailors was as follows:
(a) Plaintiffs supplied the cloth (cut to pattern) and other materials for the particular garment to the tailor.
(b) The tailor assembled the materials into a complete garment.
(c) Each tailor did his work at home or at his shop. None of the work was performed at plaintiffs' place of business.
(d) Each tailor furnished and owned his own equipment, including sewing machines, tables, irons, scissors and other items. None of this equipment was owned by plaintiffs. Plaintiffs did not pay for the rent, light or heat at the tailors' place of work.
(e) Each tailor was paid, on a piece-work basis, at a fixed rate for a completed garment. The tailor received his compensation at the end of each week for the garments completed in that week. The tailors ...