Voorhees v. Bates

Frobssel, J.

Appellant, Donald D. Voorhees, is an orchestral conductor or musical director who, during 1941, the year in question, rehearsed' and conducted the orchestras used on the weekly broadcasts of American Telephone and Telegraph’s radio program The Telephone Hour ” and of DuPont’s “ Cavalcade of America ”. The State Tax Commission has determined that, in performing his services for these two broadcasts, Voorhees was “ carrying on * * * an unincorporated business for purposes of the Unincorporated Business Tax imposed by Article 16-A of the Tax Law ”. In reaching this determination, the commission necessarily held that Voorhees was not within those provisions of section 386 of the Tax Law, which exclude from the definition of unincorporated business ” *188the practice of law, medicine, dentistry, architecture which under existing law cannot be conducted under corporate structure, and any other case in which more than eighty per centum of the gross income is derived from the personal services actually rendered by the individual or the members of the partnership or other entity in the practice of any other profession and in which capital is not a material income producing factor.”

Whether the Legislature included Voorhees’ occupation among those subjected to taxation under section 386 is a question of law proper for our review. As we stated in Matter of Good Humor Corp. v. McGoldrick (289 N. Y. 452, 455):

“ The determination of what articles or transactions are taxable is a legislative function. It is not the function of an administrative officer to determine where the line shall he drawn which divides the field subject to taxation from the field where no tax has been imposed. That line must be drawn by statute or ordinance. The tax authorities have power only to determine whether an article comes within the field selected in the ordinance for taxation. Where the facts are not disputed, the question whether a particular article falls within that field is a question of law.

“ This court has said that ‘ A statute which levies a tax is to be construed most strongly against the government and in favor of the citizen. The government takes nothing except what is given by the clear import of the words used, and a well-founded doubt as to the meaning of the act defeats the tax.’ [Citations.] ” (See, also, Matter of Delpriore v. Ball, 281 App. Div. 214, affd. 306 N. Y. 775.)

Voorhees insists that under the statutory definition he is not required to pay the assessed tax.. It will be noted that to fall within the quoted general exception Voorhees must: (1) practice a profession (2) derive more than 80% of his gross income from services rendered by himself personally, and (3) not have capital as a material income-producing factor. The third point — capital — we may disregard, because the commission does not even suggest that capital was such a factor in Voorhees’ income. We turn then to the other two points.

Whether a certain vocation constitutes a “ profession ” within the meaning of section 386 of the Tax Law is a question not unfamiliar to this court. We have held that the term “ pro*189fession ” included a landscape architect (Matter of Geiffert v. Mealey, 293 N. Y. 583) and an industrial designer (Matter of Teague v. Graves, 261 App. Div. 652, affd. 287 N. Y. 549), but excluded such vocations as customhouse broker (People ex rel. Tower v. State Tax Comm., 282 N. Y. 407; People ex rel. Robinson v. Graves, 259 App. Div. 956, motion for leave to appeal denied 284 N. Y. 821), economist (Matter of Backman v. Bates, 279 App. Div. 1115, affd. 305 N. Y. 839), life insurance agent (Matter of Recht v. Graves, 257 App. Div. 889, motion for leave to appeal denied 281 N. Y. 886), specialist in corporate reorganization and finance (People ex rel. Moffett v. Bates, 276 App. Div. 38, affd. 301 N. Y. 597, certiorari denied 340 U. S. 865), and furniture designer (Matter of De Vries v. Graves, 266 App. Div. 1030, affd. 292 N. Y. 529).

It will be noted that we have not yet had a case under this statute involving one of “ the arts ”— painting, sculpture, music, drama, dancing, writing, etc. However, in People v. Kelly (255 N. Y. 396), a zoning law case, we observed (p. 400):

“ The teaching of singing or of music is a profession and is not a business, trade or industry as these words are used in the law, zoning regulation or common parlance.

“ The arguments of counsel apparently concede that the exclusions would not reach out to the doctor, the dentist, or the lawyer consulting clients at home; but no distinction can be drawn for the purposes here involved between these professions and those of the musician, artist or teacher.” (Italics supplied.)

In any event, it seems to us that Voorhees’ occupation as a musician and orchestral conductor fulfills the requirements of a profession set forth in the language of Lewis, J.: We find nothing in the record to prove that the service rendered by a customhouse broker requires knowledge of an advanced type in a given field of science or learning gained by a prolonged course of specialized instruction and study. Such a requirement we regard as implicit in the term ‘ professional ’ when given its legal application and it is read in its context in the statute here involved.” (People ex rel. Tower v. State Tax Comm., 282 N. Y. 407, 412, supra.)

The record here clearly demonstrates that Voorhees’ occupation as an orchestral conductor requires knowledge of an advanced type in the field of music which can be gained only by *190a prolonged course of specialized instruction and study. Although advanced formal education does not appear to he an essential element in the background of the more famous conductors, probably because institutions of higher learning did not generally make such courses with degrees available a generation or more ago, music in general is a field of study now well recognized by some of our most respected colleges and universities.

Yoorhees testified at some length as to his own background in musical education, which commenced when he was five years of age. By the time he was in high school, he was already engaged in occasional professional appearances. In his second year there, he was playing in the orchestra at the Lyric Theatre in Allentown, Pennsylvania. Subsequently he conducted the orchestra at the New York Winter Garden, and in a series of Broadway musical shows. He has two honorary degrees in music from Bates and Muhlenberg colleges. When his attorney stated that he was seeking to establish by this testimony ‘ ‘ the advanced skill and training that is necessary in order to qualify as an orchestral conductor ”, the assistant director of the State Tax Commission stated: “ I don’t think there is any question but what he was qualified for what he was doing.” It would appear that a musical director comes nearer to practicing a profession than one pursuing many of the following occupations which the State Tax Commission has determined were professions: accounting; certified shorthand reporting; chiropody; dental hygiene; engineering; optometry; osteopathy; pharmacy; physiotherapy; teaching; veterinary medicine and surgery (N. Y. State Tax Comm., Income Tax Bureau, Manual 51, p. 225).

The second point in the statute — that to be exempt from the tax more than 80% of Yoorhees’ gross income must be derived from his personal services — does not entail the same far-reaching implications as the first point just discussed; rather, it poses a question more or less unique to this case.

At the hearing, the commission introduced in evidence Yoorhees’ 1941 New York State personal income tax return. On that return under Income ”, Yoorhees had reported receipt of $101,142.60 from “ E. I. DuPont — Cavalcade of America ”. Under “ Expenses ” he had listed three items *191which are pertinent here: $54,741.00 for B. I. DuPont — Musician Payroll ”, $11,035.50 for E. I. DuPont — Arrangers ”, and $2,907.24 for Payroll taxes ”. Upon analyzing these items, the Tax Commission might * have determined that some $65,000 or more than one third of the total “ Income ” listed by Voorhees, was derived not from his own personal services, but from the services of musicians and arrangers who, at least on the face of this return, appeared to have been hired and paid by Voorhees. While such a conclusion may reasonably follow from a consideration of the tax return alone, other uncontradicted evidence presented at the hearing established beyond any doubt that the return does not accurately reflect the reality of the transactions reported therein.

It is not necessary here to examine the details of Voorhees’ arrangement with DuPont. From a study of the whole record we are satisfied that, just as he said, Voorhees acted as the musicians’ and arrangers’ employer “ in name only ”; that he did so only for the convenience of DuPont (because of their pension system); that union law prevented him from being an actual employer; that the house contractor — a union man — engaged the musicians for the broadcasts, and that the remuneration was determined by the musicians’ union. The money in question was never his own. He received it from DuPont and immediately paid it out for musicians, arrangers and payroll taxes in a wash transaction. Under this arrangement he ran no risk, he made no profit, he incurred no loss, and there was no fraud. Consequently, that money did not actually constitute a part of his own gross income, which was made up solely of fixed guest fees paid to him for his services as an orchestral conductor.

If there were evidence to support contrary conclusions, the Tax Commission’s determination in this respect would of course be unassailable. However, the only “ evidence ” to support that determination consists of the aforesaid four entries on the 1941 return, standing alone. Voorhees’ uncontradicted explanation of those entries, which was corroborated by the testimony of Pryor and Keane, the only other witnesses at the hearing, and by the various documents, removed any doubt as to their true *192meaning, which meaning is definitely adverse to the commission’s position. To permit the Tax Commission to find, in the face of this uncontroverted and convincing evidence, that the money which passed through Voorhees’ bank account in this wash transaction was part of his true “ income ” merely because erroneously it was so reported on his income tax return, would exalt form over substance and ignore the manifest realities underlying the method of his accounting.

Under all the circumstances, we are of the opinion that appellant was not taxable under article 16-A of the Tax Law. In reaching this conclusion we deem it unnecessary to determine whether he was an “ employee ” of the advertising agencies which, acted for his two sponsors.

The order of the Appellate Division should be reversed and the determination of the State Tax Commission annulled, with costs in all courts.

The commission’s findings do not state whether the basis of decision was that Voorhees’ occupation was not a “profession” or that less than 80% of his gross income came from personal services.