BEFORE THE UTAH STATE TAX
COMMISSION OF UTAH
_____________________________________________
XXXXX
Petitioner, :
v. : FINDINGS OF FACT
: CONCLUSIONS
OF LAW
AUDITING
DIVISION OF THE : AND FORMAL DECISION
Respondent. : Appeal No. 87-1009
: Account
No. XXXXX
______________________________________________
STATEMENT OF CASE
This
matter came before the Utah State Tax Commission pursuant to the Utah Administrative
Procedures Act for a formal hearing on XXXXX, before Joseph G. Linford,
Presiding Officer. Petitioner was
represented by XXXXX, Attorney.
Respondent was represented by XXXXX, Assistant Division of the Utah
State Tax Commission.
After
reviewing the evidence and arguments of the parties in the record and the
recommendation of the presiding officer, the Tax Commission hereby makes its:
FINDINGS OF FACT
1.
The tax in question is income tax.
2.
The period in question is XXXXX.
3.
Petitioners are a married couple who were part year residents of Utah having
moved to the state after living the first part of XXXXX in XXXXX.
4.
Petitioner, XXXXX, is an enrolled member of the XXXXX, enrollment number
XXXXX. There is no indication as to
which tribe Petitioner, XXXXX, is an enrolled member.
5.
For the tax year XXXXX, Petitioners did not file a Utah resident long form
individual income tax return believing that they were exempt from paying Utah
state income taxes.
6.
During the tax year XXXXX, Petitioners received wages, salaries, tips, etc. in
the total amount of $$$$$. Of this
amount, $$$$$ was earned by Petitioner, XXXXX, while he was an employee of the
XXXXX in XXXXX. None of the income
earned by Petitioners while they lived in Utah was earned while they were
employed on or residing on an Indian reservation of the Tribe of which the
Petitioners were enrolled members.
7.
Using W-2 forms from Petitioners' employers, Respondent prepared a nonresident
or part year resident individual income tax return for Petitioners for the tax
year XXXXX. On this return no income
was excluded as being "Indian income" because Respondent takes the
position that in order to be so excludable the income must be earned on the
Indian reservation on which the person is an enrolled member. This return determined that the Petitioners
had a tax liability for XXXXX of $$$$$ and a tax deficiency of $$$$$ plus
interest. No penalty was assessed.
8.
Petitioners filed a Petition for Redetermination on XXXXX, claiming that they
are not required to pay Utah income taxes for the tax year XXXXX.
CONCLUSIONS OF LAW
1.
Petitioner relies upon the United States Supreme Court case of McClanahan v.
State Tax Commission of Arizona, 411 U.S. 164 (1973). In this case the Court held that the State of Arizona had no
authority to tax the income of an Indian earned exclusively on the
reservation. The ruling did not
indicate whether the result would have been different if the taxpayer had been
an Indian who resided and earned all of his income on a reservation for a tribe
other than the tribe in which the Indian was an enrolled member. As a result of this ruling, a number of
states including Utah ceased attempting to tax income earned by Indians while they
were living on reservations.
2.
Subsequent to this the United States Supreme Court handed down its decision in
Washington v. Confederate Tribes of Coleville Indian Reservation, 447 U.S. 134
(1980). The relevant issue in that case
involved whether the State of Washington could tax cigarettes sold on a
reservation. The Court's discussion on
this issue is as follows:
The
State asserts the power to apply its sales and cigarette taxes to Indians
resident on the reservation but not enrolled in the governing Tribe. The issue arose in the Yakima case in the
wake of the District Court's determination that the state retail sales tax
could be applied to the purchase by non-Indians of goods other than
cigarettes. It was, of course, quite
clear after [Moe v. Salish & Kootenai Tribes, 425 U.S. 463 (1976)] and
McClanahan that the sales tax could not be applied to similar purchases by
tribal members, but the State argued that this exemption should not extend to
nonmembers of the Tribe. Relying in
part on the lower court opinion in Moe, Confederated Salish & Kootenai
Tribes v. Moe, 392 F. Supp. 1297, 1312 (Mont. 1975) (three judge court), the
District Court rejected the contention. 446 F. Supp., at 1371-1372. This Court
did not reach the question in Moe because Montana failed to raise it on appeal. We do reach it now, and we reverse.
Federal
statutes, even given the broadest reading to which they are reasonably
susceptible, cannot be said to pre-empt Washington's power to impose its taxes
on Indians not members of the Tribe. We
do not so read the Major Crimes Act, 18 U.S.C. §1153, which at most provides
for federal-court jurisdiction over crimes committed by Indians on another
Tribe's reservation. Cf. United States v. Antelope, 430 U.S. 641, 646-647
(1977). Similarly, the mere fact that
nonmembers resident on the reservation come within the definition of
"Indian" for purposes of the Indian Reorganization Act of 1934, 48
Stat. 988, 25 U.S.C. §479, does not demonstrate a congressional intent to
exempt such Indians from state taxation.
Nor
would the imposition of Washington's tax on these purchases contravene the
principle of tribal self-government, for the simple reason that nonmembers are
not constituents of the governing Tribe.
For most practical purposes those Indians stand on the same footing as
non-Indians resident on the reservation.
There is no evidence that nonmembers have a say in tribal affairs or
significantly share in tribal disbursements.
We find, therefore, that the State's interest in taxing these
purchaser's outweighs any tribal interest that may exist in preventing the
State from imposing its taxes. 447 U.S.
at 160-61.
3.
Though the Court's decision in Confederated Tribes dealt specifically with the
issue of a cigarette tax, yet its language is very broad and could include
income tax as well. It is therefore
clear under that decision that a state may impose taxes on Indians working on
reservations of tribes in which the Indians are not enrolled members.
DECISION AND ORDER
Based
on the foregoing, it is the decision and order of the Utah State Tax Commission
that the request of Petitioners is denied.
DATED
this 17 day of April, 1990.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco G.
Blaine Davis
Commissioner Commissioner