87-1009 - Income





Petitioner, :




Respondent. : Appeal No. 87-1009

: Account No. XXXXX



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:


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.


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.


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.


R. H. Hansen Roger O. Tew

Chairman Commissioner

Joe B. Pacheco G. Blaine Davis

Commissioner Commissioner