Appeal from the Order of the Board of Finance and Revenue in case of In Re: Appeal of Fred W. Staley and Barbara K. Staley, No. RPIT-96.
John D. Rively, for appellants.
Donald J. Murphy, Assistant Attorney General, for appellee.
President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. Opinion by Judge Mencer.
[ 21 Pa. Commw. Page 195]
This appeal by Fred W. Staley and Barbara K. Staley (appellants) is from a decision of the Board of Finance and Revenue (Board) which refused their petition for review of the decision of the Department of Revenue (Department) denying their request for reassessment of their 1971 Pennsylvania personal income tax.
The facts in this case, which are not in dispute, reveal that during 1971 Fred Staley was employed by the Prudential Insurance Company of America pursuant to an agency contract that required him, as an insurance agent, to pay all of his business expenses out of his own funds.
Appellants filed a joint return in 1971 showing Barbara Staley's income to be $3,381.61 (from which $54.65 of state income tax had been withheld) and Fred Staley's income to be $5,143 (from which $100.73 of state income tax had been withheld). Appellants computed seventwelfths of Fred Staley's business expenses, which included the use of an automobile, postage, telephone, etc., and claimed that amount of $1,981 as a reduction in appellants' gross income.*fn1
Appellants submitted their gross income as being $6,543, computed the Pennsylvania tax as being $150, and requested a refund of $5. The Department refused to allow the deduction for business expenses, concluded that there was taxable income of $8,524, a tax of $196, and therefore issued an assessment for the approximately $41 yet due.
Timely requests for review were refused by the Department and Board, and appellants now properly bring
[ 21 Pa. Commw. Page 196]
before this Court two issues fundamental to their claim and admittedly of great importance to many taxpayers in this Commonwealth.
As a background to this proceeding, we should first note that Section 302 of the Code, added by Section 4 of the Act of August 31, 1971, P.L. 362, imposed an annual tax of two and three-tenths percent on the privilege of receiving income described in Section 303 of the Code. Section 303 provided, and continues to provide, where pertinent to this discussion (see 72 P.S. § 7303), in part:
"Classes of Income. -- (a) The classes of income referred to above are as follows:
"(1) Compensation. All salaries, wages, commissions, bonuses and incentive payments whether based on profits or otherwise, fees, tips and similar remuneration received for services rendered whether directly or through an agent and whether in cash or in property."
Section 301(d) of the Code, which has been amended since August of 1971 (see 72 P.S. § 7301(d)), but which has not been changed in any way that might vary our ...