01-1416 & 02-0042

Income Tax

Signed 2/28/03









v. ) Appeal Nos. 01-1416, 02-0042

) Parcel No. #####


THE UTAH STATE TAX ) Tax Type: Income Tax

COMMISSION, ) Tax Years: 1992 thru 1998


Respondent. ) Judge: Davis




G. Blaine Davis, Administrative Law Judge



For Petitioner: PETITIONER

For Respondent: Mr. Laron Lind, Assistant Attorney General

Ms. Angie Hillas, from the Auditing Division

Ms. Amy Gillette, from the Auditing Division




This matter came before the Utah State Tax Commission for a Formal Hearing on December 11, 2002. Based upon the evidence and testimony presented at the hearing, the Tax Commission hereby makes its:


1. The tax in question is income tax.

2. The years in question are calendar years 1992, 1993, 1994, 1995, 1996, 1997, and 1998.

3. Based primarily upon information received from the Internal Revenue Service, Respondent made assessments for the tax years in question of tax, penalty and interest in the following amounts:

Tax Penalty Interest Total

1992 $ $$$$$ $ $$$$$ $ $$$$$ $ $$$$$

1993 $ $$$$$ $ $$$$$ $ $$$$$ $ $$$$$

1994 $ $$$$$ $ $$$$$ $ $$$$$ $ $$$$$

1995 $ $$$$$ $ $$$$$ $ $$$$$ $ $$$$$

1996 $ $$$$$ $ $$$$$ $ $$$$$ $ $$$$$

1997 $ $$$$$ $ $$$$$ $ $$$$$ $ $$$$$

1998 $ $$$$$ $ $$$$$ $ $$$$$ $ $$$$$

Totals $ $$$$$ $ $$$$$ $ $$$$$ $ $$$$$

4. Petitioner timely filed a Petition for Redetermination challenging the audit assessments made by Respondent.

5. The challenge of Petitioner is substantially based upon his legal interpretations. Petitioner acknowledged that he resided within the State of Utah and earned wages and other compensation within the State of Utah in the amounts shown on the Statutory Notices of Estimated Income Tax and other documents used by Respondent to make the assessment against Petitioner.

6. Petitioner acknowledges that he did not file either federal or state income tax returns for the years in question. His reason for not filing is based upon his legal positions which are substantially as follows:

(a) He claims there is no statutory requirement for him to file a return in Utah.

(b) He claims that the compensation he received was not subject to income taxes in the State of Utah.

(c) He claims the State of Utah does not have authority to increase the income which he declared, which was zero.

(d) He claims the State of Utah has not established that he has a legitimate tax liability.

(e) He claims the Tax Commission does not have jurisdiction to make a determination of income taxes due until the matter is concluded with the Internal Revenue Service, and that matter is still going forward with the Revenue Service.


The penalties imposed by Respondent upon Petitioner were a 10% late filing penalty and a 10% late payment penalty pursuant to the provisions of Utah Code Ann. §59-1-401.


The state of Utah imposes income tax on individuals who are residents of the state in Utah Code Ann. §59-10-104 as follows:

". . . a tax is imposed on the state taxable income, as defined in Section 59-10-112, of every resident individual . . ."


State taxable income is defined in Utah Code Ann. §59-10-112 as follows:


"State taxable income in the case of a resident individual means his federal taxable income (as defined by Section 59-10-111) with the modifications, subtractions, and adjustments provided in Section 59-10-114. . . ."


Federal taxable income is defined in Utah Code Ann. §59-10-111 as follows:


"Federal taxable income" means taxable income as currently defined in Section 63, Internal Revenue Code of 1986.


Taxable income is defined in the Internal Revenue Code at 23 USC 63 as:


"Except as provided in subsection (b), for purposes of this subtitle, the term "taxable income" means gross income minus the deductions allowed by this chapter (other than the standard deduction)."


Gross income is defined in the Internal Revenue Code at 23 USC 61(a) as:


"Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items:

(1) Compensation for services, including fees, commissions, fringe benefits, and similar items; . . ."

The requirement to file a federal income tax return is established by IRC.§6012.


Utah Code Ann. §59-10-502, provides in relevant part:


"An income tax return with respect to the tax imposed by this chapter shall be filed by:

(1) Every resident individual, estate, or trust required to file a federal income tax return for the taxable year; . . . ."


The Utah Legislature has specifically provided that the taxpayer bear the burden of proof in proceedings before the Tax Commission. Utah Code Ann. §59-10-543 provides the following:

"In any proceeding before the commission under this chapter, the burden of proof shall be upon the petitioner except for the following issues, as to which the burden of proof shall be upon the commission:

(1)   whether the petitioner has been guilty of fraud with intent to evade tax. . ."

Utah Code Ann. §59-10-536(3) provides:

(3) The tax may be assessed at any time if:

(a) no return is filed;

(b) a false or fraudulent return is filed with the intent to evade tax; or

(c) a return for the taxpayer is prepared by the Commission in accordance with §59-10-506.



Petitioner’s position, that the income he received was not subject to state income tax, is without merit. The statutes and case law clearly support individual income tax.[1] Petitioner argues that the Tax Commission has no authority or jurisdiction to issue the tax deficiency against Petitioner, to hear the appeal or issue the assessment. The Tax Commission's authority, in part, is set out at Utah Code Ann. §59-10, Part 5 as well as general provisions of the Utah Tax Code at Part 1 and the Utah Administrative Procedures Act. Clearly the Tax Commission has statutory authority to issue an income tax assessment and it has jurisdiction over this appeal.

The state tax provisions are clear. They are not difficult or ambiguous. Utah "resident individuals" are subject to state income tax on their state taxable income. "State taxable income" is defined by Utah Code Ann. §59-10-112 and Utah Code Ann. §59-10-111 as "federal taxable income" as defined in Section 63, Internal Revenue Code of 1986. When the definitional links are followed, state taxable income is income from whatever source derived and specifically includes compensation for services. The Commission acknowledges that there are some statutory exemptions, but there are none that would exempt the income of Petitioner. See Internal Revenue Code at 26 U.S.C. 63 and 61(a).

There is no case that supports Petitioners' contention that compensation for services, whether in the form of wages or income earned from self employment, is not subject to tax. There have been numerous cases,[2] a number cited herein, that have looked at the issue and they all have upheld the constitutionality of the individual income tax on wages or income from self employment. In addition, Utah Code Ann §59-10-536(3) gives to Respondent the right to make the income tax assessments, which it has made in this matter. The Utah Supreme Court has affirmed these types of assessments.[3]

Petitioner also cited numerous court cases. However, his citations are either taken out of context, are inapplicable, or are so old that statutes and other case law have modified and changed those decisions. The Commission therefore finds that all of the allegations and claims of Petitioner are without merit.


Based upon the foregoing, the Tax Commission sustains the audit assessment made by Respondent and denies the Petition for Redetermination filed by Petitioner. The taxes, penalties and interest imposed by the audit assessment are hereby sustained. It is so ordered.

DATED this 28th day of February , 2003.



G. Blaine Davis

Administrative Law Judge



The Commission has reviewed this case and the undersigned concur in this decision.

DATED this 28th day of February , 2003.





Pam Hendrickson R. Bruce Johnson

Commission Chair Commissioner





Palmer DePaulis Marc B. Johnson

Commissioner Commissioner


[1]See United States v. Mann, 884 F.2d 532 (10th Cir. 1989). In that case, Mann offered many theories as to why he was not required to file income tax returns. The court stated, “His many theories include the asserted beliefs that 1) the United States Supreme Court has declared that the sixteenth amendment applies only to corporations, 2) the Internal Revenue Service (IRS) has no jurisdiction over him, 3) he is not a “person” within the meaning of 26 I.R.C. §7203, 4 ) wages are not income, 5) federal reserve notes are not legal tender, and 6) the income tax is voluntary.” The court in Mann responded to these assertions as follows, “. . . each of the views offered by Mann, whether found in his published materials or articulated additionally at trial, falls somewhere on a continuum between untrue and absurd.”


[2]The 5th Circuit stated "it is clear beyond peradventure that the income tax on wages is constitutional." Stelly v. Commissioner, 761 F.2d 1113, 115 (1985). See also Granzow v. C.I.R., 739 F.2d 265, 267 (1984) in which the Seventh Circuit stated, “It is well settled that wages received by taxpayers constitute gross income within the meaning of Section 61 (a) of the Internal Revenue Code . . . and that such gross income is subject to taxation.” In United States v. Koliboski, 732 F.2d 1328, 1329 fn 1 (1984), the Seventh Circuit stated “the defendant’s entire case at trial rested on his claim that he in good faith believed that wages are not income for taxation purposes. Whatever his mental state, he, of course, was wrong, as all of us already are aware. Nonetheless, the defendant still insists that no case holds that wages are income. Let us now put that to rest: WAGES ARE INCOME.”

[3] The Utah Supreme Court has affirmed tax assessments against individuals on their income earned from self employment. The Court also determined that the Tax Commission could make such an assessment even if a determination had not yet been made by the Internal Revenue Service. See Nelson v. Auditing Div., 903 P.2d 939 (Utah 1995) and Jensen v. State Tax Commission, 835 P.2d 965 (Utah 1992).