### Carpool App Dream Crushed: No Tax Breaks Without Sales
Pennsylvania’s Commonwealth Court slammed the door on a taxpayer’s bid to deduct over $100,000 in startup losses from his free carpool website, ruling it wasn’t a true “business” under state tax law. Christopher Hackett, owner of Rides2Work (R2W), lost his exceptions to an earlier decision affirming the denial of his 2014 personal income tax deductions. The court upheld that without charging fees or generating gross profits, his venture didn’t qualify as a “commercial enterprise” eligible for expense write-offs.
The saga began when Hackett launched R2W in northeastern Pennsylvania as a platform connecting drivers and riders for carpools. He envisioned a paid service but never pulled the trigger due to lack of interest, running it for free in 2014 before shuttering the site in 2015. On his tax return that year, Hackett reported zero income from R2W but subtracted $109,600 in expenses like development costs, triggering a Department of Revenue audit. Officials hit him with over $35,000 in back taxes, interest, and penalties, arguing R2W flunked the “commercial enterprise” test in Pennsylvania’s Tax Reform Code (72 P.S. § 7301(c)), which demands an activity “engaged in … for profit” with actual marketplace sales.
At the heart of the legal showdown: Does a money-losing startup count as a business if it offers services for free while hoping for future paying customers? Hackett petitioned for reassessment, lost before the Board of Finance and Revenue, and appealed to the Commonwealth Court. A three-judge panel in Hackett I (2024) said no, leaning on a 1979 precedent (Morgan v. Commonwealth) defining “commercial enterprise” as rendering goods or services “in a marketplace”—meaning actual sales or gross receipts, not just goodwill gestures. Dictionary dives backed this: no fees collected, no “sales,” no dice. The panel also enforced Department regulations (61 Pa. Code § 103.12(b)), which require gross profits from customer sales or operations for “net profits” deductions—zero revenue meant zero eligibility, full stop.
Hackett fired back with exceptions, claiming the court cherry-picked outdated definitions ignoring modern startups and that regulations don’t mandate receipts for loss offsets. An amicus from the Competitive Enterprise Institute echoed this, warning of a chilling effect on entrepreneurs. The Commonwealth countered that commerce demands “give-and-take,” not one-way charity, and start-up costs can still be amortized—just not as full business deductions without sales.
In a unanimous en banc smackdown on December 8, 2025, President Judge Renée Cohn Jubelirer overruled the exceptions, calling Hackett’s prior arguments “thoroughly addressed” and free of error. The court stuck to its guns on statutory construction rules applying to precedents, rejected ambiguity claims (no taxpayer-favoring breaks here), and entered judgment for Pennsylvania. Hackett now owes the full tab, a stark reminder: Tax law doesn’t bank on business pipe dreams without proof of profit pursuit through real revenue.