99-0661

Income Tax

Signed 7/13/01

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

PETITIONER, ) FINDINGS OF FACT,

) CONCLUSIONS OF LAW,

Petitioner, ) AND FINAL DECISION

)

v. ) Appeal No. 99-0661

) Account No. #####

AUDITING DIVISION OF )

THE UTAH STATE TAX ) Tax Type: Income Tax

COMMISSION, )

) Judge: Davis

Respondent. )

_____________________________________

Presiding:

G. Blaine Davis, Administrative Law Judge

Marc B. Johnson, Commissioner

Appearances:

For Petitioner: PETITIONER REP

PETITIONER

For Respondent: Mr. Tim Bodily, Assistant Attorney General

Mr. Brent Taylor, from the Auditing Division

STATEMENT OF THE CASE

This matter came before the Utah State Tax Commission for a Formal Hearing on February 13, 2001. Based upon the evidence and testimony presented at the hearing, the Tax Commission hereby makes its:

FINDINGS OF FACT

1. The tax in question is income tax.

2. The years in question are 1991, 1992, 1993, 1994, and 1995.

3. Petitioner did not file a Utah income tax return for the years 1991, 1992, 1993, 1994 or 1995.

4. Audit assessments were made by the Internal Revenue Service for those years, and copies of those assessments were obtained by Respondent.

5. Based upon the information received from the Internal Revenue Service, Respondent issued Statutory Notices of Estimated Income Tax for each of the years at issue in the proceeding.

6. During the years at issue, Petitioner was an installer of floor coverings, and was compensated for his services. Numerous 1099's were issued to him during those time periods for the compensation which was paid to him in the State of Utah during those years.

7. Petitioner subpoenaed several of his former employers, who confirmed that he was paid compensation for his services during the years at issue. Petitioner also issued to each of those employers a letter asking that they change his 1099 to reflect a gross income of zero because he maintained the wages and income they paid him were not taxable income to him. Each of his employers ignored his request after they consulted with either their accountant or legal advisor.

8. Petitioner maintains his income is not taxable and is not subject to Utah income taxes. He suggests that Section 861 of the Internal Revenue Code exempts his income, and that the 1099's issued by his employer were in error. The Commission specifically finds that the 1099's were not issued in error, and that Section 861 of the Internal Revenue Code does not exempt his income from income taxes. Section 861 relates to a determination of income within the United States for when income must be allocated to either the United States of foreign countries for companies with foreign business.

9. Respondent imposed a 10% penalty for failure to timely file a tax return, and an additional 10% penalty for failure to pay the tax due all in accordance with Utah Code Ann. §59-1-401. Respondent also imposed interest on the amounts due at the statutory rate.

APPLICABLE LAW

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)...

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 individuals, estate, or trust required to file a federal income tax return for the taxable year; . . .

The Utah Legislature has determined that a $500 penalty is necessary in the following circumstances as set out in Utah Code Ann. §59-1-401(7):

If any taxpayer, in furtherance of a frivolous position, has a prima facie intent to delay or impede administration of the tax law and files a purported return that fails to contain information from which the correctness of reported tax liability can be determined or that clearly indicates that the tax liability shown must be substantially incorrect, the penalty is $500.

CONCLUSIONS OF LAW

The Commission concludes that the positions taken by Petitioner are irrelevant, without merit, and of no legal significance in this proceeding.

The Commission further concludes that Petitioner was domiciled and a resident of the State of Utah, and his income was subject to income tax within the State of Utah.

DECISION AND ORDER

Based upon the foregoing, the Tax Commission finds that the Statutory Notice of Estimated Income Tax makes an appropriate determination of income taxes due to the State of Utah from Petitioner for the calendar years 1991, 1992, 1993, 1994 and 1995. The Commission further finds that Petitioner was domiciled and resident in the State of Utah and had the income shown in the Statutory Notices and failed to pay income taxes thereon.

Based thereon, the Commission finds that the determination of taxes, penalties and interest made by Respondent is appropriate. The audit assessment is therefore affirmed and the Petition for Redetermination is hereby denied. It is so ordered.

DATED this 13^th day of July, 2001.

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G. Blaine Davis

Administrative Law Judge

BY ORDER OF THE UTAH STATE TAX COMMISSION:

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

DATED this 13^th day of July, 2001.

Pam Hendrickson R. Bruce Johnson

Commission Chair Commissioner

Palmer DePaulis Marc B. Johnson

Commissioner Commissioner