92-1838 - Income






Petitioner, : FINDINGS OF FACT,






: Tax Type: Ind. Income

Respondent. : Account No. XXXXX



This matter was heard before the Utah State Tax Commission in a formal hearing on XXXXX. Lisa L. Olpin, administrative law judge, heard the matter for and on behalf of the Tax Commission. XXXXX, an attorney, represented Petitioner by telephone. XXXXX, Assistant Utah Attorney General, was present and represented Respondent.

Based upon the testimony and evidence presented at the hearing, the Commission makes its:


1. The tax type in question is individual income tax.

2. The year in question is XXXXX.

3. Petitioner is requesting a refund of the state taxes withheld from his U. S. XXXXX salary for the year in question.

4. The Auditing Division, on the other hand, has assessed Petitioner taxes based upon the amount the state withheld from Petitioner's XXXXX pay, plus a penalty and interest amount for the same year.

5. At the hearing, both Petitioner and Respondent stipulated to the relevant facts in this case found in Petitioner's affidavit, Exhibit P7, which is restated below:

a) I, XXXXX, state: I am the Petitioner in the present action;

b) I am a member of the XXXXX, my census number is XXXXX, and I live in XXXXX, Utah, within the exterior boundaries of the XXXXX;

c) I was born on XXXXX, in XXXXX, Utah within the exterior boundaries of the XXXXX;

d) I have lived my entire life (except of a four year absence while serving in the United States XXXXX) in XXXXX, Utah, within the exterior boundaries of theXXXXX;

e) I served in the United States XXXXX for four years (XXXXX through XXXXX) and was stationed in XXXXX, for that period of time;

f) I always considered XXXXX my home and place of domicile while I was serving in the United StatesXXXXX;

g) I did not abandon myXXXXX domicile nor did I establish a domicile elsewhere while I was serving in the XXXXX;

h) While in the XXXXX, I intended to return to my home in XXXXX, Utah, when my tour of duty was ended;

i) I have never lived in, or established a domicile in, the State of Utah, outside of the exterior boundaries of the XXXXX;

j) The sole source of my income for the period I was on active duty with the United States XXXXX was the wages paid to me by the XXXXX; and

k) I did not earn income from any source within the State of Utah for the period XXXXX through XXXXX.

6. The Auditing Division contends that Petitioner's military income is taxable to Utah since this income was earned off of the Utah portion of the XXXXX while Petitioner was serving in the U.S. military.

7. Petitioner, however, asserts that when he left the reservation to serve in the military he never abandoned his XXXXX domicile. He claims that Utah cannot now claim to be Petitioner's domicile just because he left the reservation to serve in the U.S.XXXXX. Further, since his XXXXX income was derived from a non-Utah affiliated source, in this case, the U.S.XXXXX, Utah has no basis for taxation.


Native Americans are nationals and citizens of the United States by virtue of 8 U.S.C. 1401 which declares such to persons born to a member of an Indian tribe.

It so follows that "all persons born or naturalized in the United States and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. "(Emphasis added). U.S. Constitution, 14th Amendment, Sec. 1. See also, Ex Parte Savage, 158 F. 205, 207 (D. Kansas 1908); Deere v. State of New York, 22 F.2d 851, 852 (2nd Cir. 1927); Goodluck v. Apache County, 417 F. Supp. 13, 15 (D. Ariz. 1975), aff'd 429 U.S. 876 (1976).

At the same time, Indian reservations are recognized as "separate, although dependent nations, that state law could have no role to play within the reservation boundaries. "McClanahan v. State Tax Commission of Arizona, 411 U.S. 164, 168. (1973).

Relating to the case at hand, the United States Supreme Court in McClanahan stated that a state may not tax a reservation Indian for income earned exclusively on the reservation. Id. at 181.

Another point of law worthy of note in this present case and of concern to the Tax Commission is the Soldiers and Sailors Relief Act found at 50 App. U.S.C. Ann. 574(1) which provides the following:

For the purposes of taxation in respect of any person, or of his personal property, income, or gross income, by any State, Territory, possession, or political subdivision of any of the foregoing, or by the District of Columbia, such person shall not be deemed to have lost a residence or domicile in any State, Territory possession, or political subdivision of any of the foregoing, or in the District of Columbia, solely by reason of being absent therefrom in compliance with military or naval orders, or to have acquired a residence or domicile in, or to have become resident in or a resident of, any State, Territory, possession, or political subdivision of any of the foregoing, or the District of Columbia, while, and solely by reason of being, so absent...(emphasis added)


In the present case, the Tax Commission determines that Petitioner was both a resident of the State of Utah and the XXXXX while he was serving in the U.S. Navy. Further, Petitioner's income earned outside the reservation, here in the military, is fully taxable to Utah as prescribed by the Soldiers and Sailors Relief Act.

The Relief Act explicitly states that persons in the military do not lose domicile in their state, territory, possession or political subdivision thereof by virtue of complying with naval orders. Here, Petitioner maintained his Utah domicile while serving in the U.S. XXXXX out of state. The Act, in essence, gives Utah the right to tax Petitioner's military pay.

Petitioner cannot claim that the Act exempts his pay from Utah state taxation because a reservation does not qualify as a state, territory, or possession or subdivision thereof. (See Chapoose v. Hodel, 831 F.2d 931, 934 (10th Cir. 1987), holding that reservations are not territories).

Applying then, the holding in McClanahan, supra, 411 U.S. 164, the state may tax Petitioner's earnings as income earned by an enrolled member of a recognized tribe off of the reservation.

A recent decision rendered by the Tax Commission held, in part, that income earned by an enrolled member of the XXXXX living on the reservation whose employment was headquartered off of the reservation was not taxable to Utah. Maryboy v. Auditing Division of the Utah State Tax Commission (now on appeal to the Utah Supreme Court). This ruling, however, stemmed from the fact that the Petitioner in XXXXX was employed by an Indian organization funded by the federal government. As such, the Commission determined that federal pre-emption existed in this area.

The Commission points out that the XXXXX decision also concluded that other income earned by the Petitioners off the reservation is taxable to Utah as federal pre-emption was not present.

Based upon the foregoing, the Tax Commission determines that Petitioner was a Utah resident in XXXXX and that his XXXXX U.S. military income earned off reservation is fully taxable to Utah. Any penalty assessments in this case are abated. Interest, however, is not waived. Petitioner's refund request is accordingly denied. It is so ordered.

DATED this 30th day of June, 1993.


R. H. Hansen Roger O. Tew

Chairman Commissioner

Joe B. Pacheco S. Blaine Willes

Commissioner Commissioner