CITES BY TOPIC:  wages

IMPORTANT NOTES

There is no case and no law that says salaries, wages, and compensation for personal service is itself income, except for the compensation paid to POTUS and federal judges.

So from 26 U.S.C. §3121 we can see that a tax is imposed that is equal to 6.2 % of the "wages received by the individual with respect to employment (as defined in IRC Section 3121(b)).

Though Congress calls such wages income in this provision, the tax imposed is actually a tax on EMPLOYMENT (as defined in 3121(b) to be federally-connected) and the amount of tax is measured by the amount of "wages" from employment received by the individual.

That Court also refers to IRC Section 3402 which states:

26 U.S.C. §3402

(“1) In general

Except as otherwise provided in this section, every employer making payment of wages shall deduct and withhold upon such wages a tax determined in accordance with tables or computational procedures prescribed by the Secretary.”

This provision establishes only a withholding requirement on "wages" as defined in IRC Section 3401. It does NOT establish that "wages" for income tax withholding purposes are INCOME!!! It does not impose a tax of any kind on such "wages"!!!

Although the definitions of "wages" under IRC Sections 3121(a) and 3401(a) are nearly identical, Congress has imposed a tax only on the "wages" in IRC Section 3121.

26 U.S.C. §3121(a)(1)

in the case of the taxes imposed by sections 3101(a) and 3111(a) that part of the remuneration which, after remuneration (other than remuneration referred to in the succeeding paragraphs of this subsection) equal to the contribution and benefit base (as determined under section 230 of the Social Security Act) with respect to employment has been paid to an individual by an employer during the calendar year with respect to which such contribution and benefit base is effective, is paid to such individual by such employer during such calendar year.

No tax is imposed on "wages" as defined under 3401, and no provision of IRC establishes that such "wages" are income for income tax purposes!! This is because all employment taxes under Subtitle C of the Internal Revenue Code are classified as Tax Class 5, which is GIFTS. They are OFFSETS or credits to real taxes imposed elsewhere.

"wages" are never listed as being taxable in 26 U.S.C. 61, only "compensation for services, including fees, commissions, fringe benefits, and similar items", but never "labor". Businesses and fictions of law provide "services", Humans provide "labor". Even then, "income" as constitutionally defined is always PROFIT, and never everything paid:

“We must reject in this case, as we have rejected in cases arising under the Corporation Excise Tax Act of 1909 (Doyle, Collector, v. Mitchell Brothers Co., 247 U.S. 179, 38 Sup. Ct. 467, 62 L. Ed.--), the broad contention submitted on behalf of the government that all receipts—everything that comes in-are income within the proper definition of the term ‘gross income,’ and that the entire proceeds of a conversion of capital assets, in whatever form and under whatever circumstances accomplished, should be treated as gross income.  Certainly the term “income’ has no broader meaning in the 1913 act than in that of 1909 (see Stratton’s Independence v. Howbert, 231 U.S. 399, 416, 417 S., 34 Sup. Ct. 136), and for the present purpose we assume there is not difference in its meaning as used in the two acts.”

[Southern Pacific Co., v. Lowe, 247 U.S. 330, 335, 38 S.Ct. 540 (1918)]


How to exclude your earnings from "employment" or "wages" on a W-8:

"• The relationship documented herein does not constitute “employment” because services are rendered outside the “United States” by OTHER than a “citizen” or “resident” as documented in 26 USC 3121(b) and 3121(l)(1) and therefore amounts paid cannot be statutory "wages" per 26 U.S.C. 3401(a)."

[EDITORIAL: The above language is included in the following free form:

W-8SUB, Form #04.231
https://sedm.org/Forms/04-Tax/2-Withholding/W-8SUB.pdf

More on the above at:

About IRS Form W-8BEN, Form #04.202
https://sedm.org/Forms/04-Tax/2-Withholding/W-8BEN/AboutIRSFormW-8BEN.htm

NOTE ALSO: Be aware that accepting coverage with SSA based on contributions from one's remuneration creates an equitable estoppel from arguing the remuneration is not "wages” and therefore “gross income”. If FICA and income tax "wages" are the same, and you don't dispute receipt of wages for FICA/SSA purposes, then you can't dispute receipt of "wages" for income tax purposes at the same time. it is a federally connected benefit. it is axiomatic that one cannot accept a benefit and repudiate the obligation that comes with it. The IRS can determine liability based solely on a W-2 without an assessment. For proof of this see:

“Latham also contends that the court erred in refusing to instruct the jury that an assessment under 26 U.S.C. § 6201 is a legal necessity before an individual can have an income tax liability. Latham's theory is that if there was no assessment, there can be no income tax liability and thus he cannot be found to have filed false W-4 forms since there was no tax liability in the preceding year. But an assessment under § 6201 is an administrative determination that a certain amount is currently due and owing as a tax with consequences somewhat similar to the reduction of a claim to judgment. Cohen v. Gross, 316 F.2d 521, 522-23 (3d Cir. 1963). The exempt status requirement of a tax liability in the preceding year does not support Latham's novel and ridiculous theory that there must have been an IRS determination in that year of tax due on income earned when (as here) the taxpayer failed to file a return. Latham cannot place himself in the exempt category in 1981 simply by failing to file a return in 1981"

[United States v. Latham, 754 F.2d. 747 (1985)]

So liability can exist via equity BEFORE an assessment is ever made. It has to be "wages" for you to contribute. So if you contribute, It will equitably be treated as "wages" under 3121, and therefore wages under 3401. It would be unjust enrichment to allow anyone the privilege of having covered earnings with SSA without paying the income tax liability that comes with it.

“In addition to other taxes, there is hereby imposed on the income of every individual a tax equal to 6.2 percent of the wages (as defined in section 3121(a)) received by the individual with respect to employment (as defined in section 3121(b)).”
[ 26 U.S.C. § 3101]

"Other taxes" =income taxes.]


IRS Publication 519:

Income Subject to Tax

Income from sources outside the United States that is not effectively connected with a trade or business in the United States is not taxable if you receive it while you are a nonresident alien. The income is not taxable even if you earned it while you were a resident alien or if you became a resident alien or a U.S. citizen after receiving it and before the end of the year.

[IRS Publication 519, Year 2000, p. 26]


26 C.F.R. §31.3401(a)(6)-1:

Title 26
PART 31—EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE
Subpart E—Collection of Income Tax at Source
§ 31.3401(a)(6)-1   Remuneration for services of nonresident alien individuals.

(a) In general. All remuneration paid after December 31, 1966, for services performed by a nonresident alien individual, if such remuneration otherwise constitutes wages within the meaning of §31.3401(a)–1 and if such remuneration is effectively connected with the conduct of a trade or business within the United States, is subject to withholding under section 3402 unless excepted from wages under this section. In regard to wages paid under this section after February 28, 1979, the term “nonresident alien individual” does not include a nonresident alien individual treated as a resident under section 6013 (g) or (h).

(b) Remuneration for services performed outside the United States. Remuneration paid to a nonresident alien individual (other than a resident of Puerto Rico) for services performed outside the United States is excepted from wages and hence is not subject to withholding.


IRS Website:

Services performed outside the U.S

Compensation paid to a nonresident alien (other than a resident of Puerto Rico) for services performed outside the United States [federal territory] is not considered wages and is not subject to graduated withholding or 30% withholding.

[SOURCE:  http://www.irs.gov/businesses/small/international/article/0,,id=96594,00.html]


26 U.S.C. Sec. 3401(a):

(a) Wages
     For purposes of this chapter, the term ''wages'' means all remuneration (other than
     fees paid to a public official) for services performed by an employee for his employer,
     including the cash value of all remuneration (including benefits) paid in any medium
     other than cash; except that such term shall not include remuneration paid -
  (1) for active service performed in a month for which such employee is entitled to the
      benefits of section 112 (relating to certain combat zone compensation of members of
     the Armed Forces of the United States) to the extent remuneration for such service is
     excludable from gross income under such section; or
(2) for agricultural labor (as defined in section 3121(g)) unless the remuneration paid for
     such labor is wages (as defined in section 3121(a)); or
(3) for domestic service in a private home, local college club, or local chapter of a
     college fraternity or sorority; or
(4) for service not in the course of the employer's trade or business performed in any
     calendar quarter by an employee, unless the cash remuneration paid for such service
     is $50 or more and such service is performed by an individual who is regularly
     employed by such employer to perform such service. For purposes of this paragraph,
     an individual shall be deemed to be regularly employed by an employer during a
     calendar quarter only if -
     (A) on each of some 24 days during such quarter such individual performs for such
          employer for some portion of the day service not in the course of the employer's
         trade  or business; or
     (B) such individual was regularly employed (as determined under subparagraph (A))
          by such employer in the performance of such service during the preceding calendar
         quarter; or
(5) for services by a citizen or resident of the United States for a foreign government or
     an international organization; or
(6) for such services, performed by a nonresident alien individual, as may be designated
      by regulations prescribed by the Secretary; or
(7) Repealed. Pub. L. 89-809, title I, Sec. 103(k), Nov. 13, 1966, 80 Stat. 1554)
(8)
     (A) for services for an employer (other than the United States or any agency thereof) -
         (i) performed by a citizen of the United States if, at the time of the payment of such
             remuneration, it is reasonable to believe that such remuneration will be excluded
             from gross income under section 911; or
        (ii) performed in a foreign country or in a possession of the United States by such a
             citizen if, at the time of the payment of such remuneration, the employer is
            required by the law of any foreign country or possession of the United States to
           withhold income tax upon such remuneration; or
     (B) for services for an employer (other than the United States or any agency thereof)
          performed by a citizen of the United States within a possession of the United States
          (other than Puerto Rico), if it is reasonable to believe that at least 80 percent of the
          remuneration to be paid to the employee by such employer during the calendar
          year will be for such services; or
     (C) for services for an employer (other than the United States or any agency thereof)
          performed by a citizen of the United States within Puerto Rico, if it is reasonable to
          believe that during the entire calendar year the employee will be a bona fide
          resident of Puerto Rico; or
     (D) for services for the United States (or any agency thereof) performed by a citizen of
          the United States within a possession of the United States to the extent the United
          States (or such agency) withholds taxes on such remuneration pursuant to an
          agreement with such possession; or
(9) for services performed by a duly ordained, commissioned, or licensed minister of a
     church in the exercise of his ministry or by a member of a religious order in the
     exercise of duties required by such order; or
(10)
  (A) for services performed by an individual under the age of 18 in the delivery or
       distribution of newspapers or shopping news, not including delivery or distribution
      to any point for subsequent delivery or distribution; or
(B) for services performed by an individual in, and at the time of, the sale of newspapers
     or magazines to ultimate consumers, under an arrangement under which the
     newspapers or magazines are to be sold by him at a fixed price, his compensation
     being based on the retention of the excess of such price over the amount at which the
     newspapers or magazines are charged to him, whether or not he is guaranteed a
     minimum amount of compensation for such services, or is entitled to be credited with
     the unsold newspapers or magazines turned back; or
(11) for services not in the course of the employer's trade or business, to the extent paid
     in any medium other than cash; or
(12) to, or on behalf of, an employee or his beneficiary -
   (A) from or to a trust described in section 401(a) which is exempt from tax under
        section  501(a) at the time of such payment unless such payment is made to an
        employee of the  trust as remuneration for services rendered as such employee and
       not as a beneficiary of the trust; or
   (B) under or to an annuity plan which, at the time of such payment, is a plan described
        in section 403(a); or
   (C) for a payment described in section 402(h)(1) and (2) if, at the time of such payment,
        it is reasonable to believe that the employee will be entitled to an exclusion under
       such section for payment; or
    (D) under an arrangement to which section 408(p) applies; or
(13) pursuant to any provision of law other than section 5(c) or 6(1) of the Peace Corps
       Act, for service performed as a volunteer or volunteer leader within the meaning of
      such Act; or
(14) in the form of group-term life insurance on the life of an employee; or
(15) to or on behalf of an employee if (and to the extent that) at the time of the payment of
       such remuneration it is reasonable to believe that a corresponding deduction is
       allowable under section 217 (determined without regard to section 274(n)); or
(16)
   (A) as tips in any medium other than cash;
   (B) as cash tips to an employee in any calendar month in the course of his employment
        by an employer unless the amount of such cash tips is $20 or more; [1]
(17) for service described in section 3121(b)(20); [1]
(18) for any payment made, or benefit furnished, to or for the benefit of an employee if at
       the time of such payment or such furnishing it is reasonable to believe that the
      employee will be able to exclude such payment or benefit from income under section
      127 or 129; [1]
(19) for any benefit provided to or on behalf of an employee if  at the time such benefit is
       provided it is reasonable to believe that the employee will be able to exclude such
      benefit from income under section 74(c), 117, or 132; [1]
(20) for any medical care reimbursement made to or for the benefit of an employee under
       a self-insured medical reimbursement plan (within the meaning of section
       105(h)(6)); or
(21) for any payment made to or for the benefit of an employee if at the time of such
      payment it is reasonable to believe that the employee will be able to exclude such
      payment from income under section 106(b).


IRS Website, Wages Paid to Aliens and Citizens Abroad

Pay that is not wages

Employment for which the pay is not considered wages (for graduated income tax withholding) includes, but is not limited to, the following items:

  • Agricultural labor if the total cash wages paid to an individual worker during the year is less than $150 and the total paid to all workers during the year is less than $2,500. But even if the total amount paid to all workers is $2,500 or more, wages of less than $150 per year paid to a worker are not subject to income tax withholding if certain conditions are met. For these conditions, see Publication 51 (Circular A), Agricultural Employer's Tax Guide. For further discussion of withholding and reporting taxes on foreign agricultural workers in the United States refer to Foreign Agricultural Workers.
  • Services of a household nature performed in or about the private home of an employer, or in or about the clubrooms or house of a local college club, fraternity, or sorority. A local college club, fraternity, or sorority does not include an alumni club or chapter and may not be operated primarily as a business enterprise. Examples of these services include those performed as a cook, janitor, housekeeper, governess, gardener, or houseparent.
  • Certain services performed outside the course of the employer's trade or business for which cash payment is less than $50 for the calendar quarter.
  • Services performed as an employee of a foreign government, without regard to citizenship, residence, or where services are performed. These include services performed by ambassadors, other diplomatic and consular officers and employees, and nondiplomatic representatives. They do not include services for a U.S. or Puerto Rican corporation owned by a foreign government.
  • Services performed within or outside the United States by an employee or officer (regardless of citizenship or residence) of an international organization designated under the International Organizations Immunities Act.
  • Services performed by a duly ordained, commissioned, or licensed minister of a church, but only if performed in the exercise of the ministry and not as an employee of the United States, a U.S. possession, or a foreign government, or any of their political subdivisions. These also include services performed by a member of a religious order in carrying out duties required by that order.
  • Tips paid to an employee if they are paid in any medium other than cash or, if in cash, they amount to less than $20 in any calendar month in the course of employment

For further discussion about federal income tax withholding and reporting on payments made to employees of foreign governments and international organizations refer to Persons Employed by a Foreign Government or International Organization. For further discussion about Social Security and Medicare taxes on payments made to employees of foreign governments and international organizations refer to Persons Employed by a Foreign Government or International Organization - FICA.

Services performed outside the U.S

Compensation paid to a nonresident alien for services performed outside the United States is not considered wages and is not subject to graduated withholding or 30% withholding.


26 C.F.R. §31.3401(a)(11)-1:  Remuneration other than in cash for service not in the course of employer's trade or business

Title 26: Internal Revenue
PART 31—EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE
Subpart E—Collection of Income Tax at Source

§ 31.3401(a)(11)-1   Remuneration other than in cash for service not in the course of employer's trade or business.

(a) Remuneration paid in any medium other than cash for services not in the course of the employer's trade or business is excepted from wages and hence is not subject to withholding. Cash remuneration includes checks and other monetary media of exchange. Remuneration paid in any medium other than cash, such as lodging, food, or other goods or commodities, for services not in the course of the employer's trade or business does not constitute wages. Remuneration paid in any medium other than cash for other types of services does not come within this exception from wages. For provisions relating to cash remuneration for service not in the course of employer's trade or business, see §31.3401(a)(4)–1.

(b) As used in this section, the term “services not in the course of the employer's trade or business” has the same meaning as when used in §31.3401(a)(4)–1


26 C.F.R. §31.3401(a)-3 Amounts deemed wages under voluntary withholding agreements

(a) In general. Notwithstanding the exceptions to the definition of wages specified in section 3401(a) and the regulations thereunder, the term “wages” includes the amounts described in paragraph (b)(1) of this section with respect to which there is a voluntary withholding agreement in effect under section 3402(p). References in this chapter to the definition of wages contained in section 3401(a) shall be deemed to refer also to this section (§31.3401(a)–3).

(b) Remuneration for services. (1) Except as provided in subparagraph (2) of this paragraph, the amounts referred to in paragraph (a) of this section include any remuneration for services performed by an employee for an employer which, without regard to this section, does not constitute wages under section 3401(a). For example, remuneration for services performed by an agricultural worker or a domestic worker in a private home (amounts which are specifically excluded from the definition of wages by section 3401(a) (2) and (3), respectively) are amounts with respect to which a voluntary withholding agreement may be entered into under section 3402(p). See §§31.3401(c)–1 and 31.3401(d)–1 for the definitions of “employee” and “employer”.


26 C.F.R. §31.3402(p)-1  Voluntary withholding agreements.

26 C.F.R. § 31.3402(p)-1  Voluntary withholding agreements.

(a) In general. An employee and his employer may enter into an agreement under section 3402(b) to provide for the withholding of income tax upon payments of amounts described in paragraph (b)(1) of §31.3401(a)–3, made after December 31, 1970. An agreement may be entered into under this section only with respect to amounts which are includible in the gross income of the employee under section 61, and must be applicable to all such amounts paid by the employer to the employee. The amount to be withheld pursuant to an agreement under section 3402(p) shall be determined under the rules contained in section 3402 and the regulations thereunder. See §31.3405(c)–1, Q&A–3 concerning agreements to have more than 20-percent Federal income tax withheld from eligible rollover distributions within the meaning of section 402.


5 U.S.C. §8501(2) "Federal wages"

TITLE 5 > PART III > Subpart G > CHAPTER 85 > SUBCHAPTER I > § 8501
§ 8501. Definitions

For the purpose of this subchapter—

(2) “Federal wages” means all pay and allowances, in cash and in kind, for Federal service;


Social Security Program Operations Manual System (POMS), section RS01401.005: Wages Defined

RS 01401.005 Wages Defined

DEFINITIONS

1. Wages

Wages means all remuneration for employment including the cash value of all remuneration paid in any medium other than cash, unless specifically excluded under section 209 of the Social Security Act (Act). The name given the payment is not controlling in determining whether it constitutes wages.

Payments may be paid on an hourly, daily, weekly, biweekly, monthly, yearly or on a piecework or percentage basis.

2. Wage exclusions

Wage exclusions are payments that are either totally or partially excluded from the definition of wages under section 209 of the Act.

3. Wage Credits

Wage credits are deemed dollar amounts credited to a veteran's earnings record for active duty prior to 1957 and to the earnings records of uniformed service members on active duty after 1956.

REFERENCES:

WARNING!:  The red boldfaced and underlined words above are "words of art" defined in the Classification Act of 1923, 42 Stat. 1488, and they refer ONLY to federal and not private employment.


Rowan Cos. v. United States, 452 U.S. 247, 255-56 (1981):

Congress enacted the predecessor provisions of FICA and FUTA as Titles VIII and IX of the Social Security Act of 1935, ch. 531, 49 Stat. 636, 639. It chose "wages " as the base for taxation of employers, § 804, 49 Stat. 637; § 901, 49 Stat. 639, and it defined "wages ." § 811(a), 49 Stat. 639; § 907(b), 49 Stat. 642. Congress originated the present income-tax withholding system in § 172 of the Revenue Act of 1942, 56 Stat. 884. See Central Illinois Public Service Co. v. United States, supra, at 26-27. It again chose "wages " as the base, 56 Stat. 888, and defined "wages " in substantially the same language that it used in FICA and FUTA, id., at 887. When Congress revised the withholding system by replacing § 172 with the Current Tax Payment Act of 1943, 57 Stat. 126, it retained the definition of "wages ." Ibid. In view of this sequence of consistency, the plain language of the statutes is strong evidence that Congress intended "wages " to mean the same thing under FICA, FUTA, and income-tax withholding.

The legislative histories of the Acts establishing income-tax withholding support the conclusion to be drawn from the plain language. These histories reveal a congressional concern for "the interest of simplicity and ease of administration." S. Rep. No. 1631, 77th Cong., 2d Sess., 165 (1942) (Revenue Act of 1942). See Central Illinois Public Service Co. v. United States, supra, at 31. They also reveal that one of the means Congress chose in order to promote simplicity was to base withholding upon the same measure — "wages " — as taxation under FICA and FUTA. Thus, whereas the withholding system proposed by the House provided for withholding upon dividends and bond interest in addition to wages , H.R. Rep. No. 2333, 77th Cong., 2d Sess., 125 (1942), the system proposed by the Senate and enacted in § 172 limited withholding to wages . S. Rep. No. 1631, supra, at 165. "This was a standard that was intentionally narrow and precise." Central Illinois Public Service Co. v. United States, supra, at 31. Section 172 also specified that remuneration for certain services was excepted from "wages ." According to the Senate Report, "[t]hese exceptions [for income-tax withholding] are identical with the exceptions extended to such services for Social Security tax purposes and are intended to receive the same construction and have the same scope." S. Rep. No. 1631, supra, at 166.

[The Rowan Cos. v. United States, 452 U.S. 247, 255-56 (1981)]

[EDITORIAL: So Rowan is the case where SCOTUS said "wages" under IRC 3121 = "wages" under 3401. If you establish it is not "employment" under 3121(b) then it is not "wages" under 3121 and also not "wages" under 3401]


United States v. Quality Stores, Inc., 572 U.S. 141, 142 (2014):

That § 3402( o) does not narrow FICA's “wages” definition is also consistent with the major principle of Rowan Cos. v. United States, 452 U.S. 247, 101 S. Ct. 2288, 68 L. Ed. 2d 814: that simplicity of administration and consistency of statutory interpretation instruct that the meaning of “wages” should be in general the same for income-tax withholding and for FICA calculations. Pp. 149-156, 134 S. Ct. 1395, 188 L. Ed. 2d, at 421-425.

[United States v. Quality Stores, Inc., 572 U.S. 141, 142 (2014)]


The Antelope, 23 U.S. 66; 10 Wheat 66; 6 L.Ed. 268 (1825):

"Every man has a natural right to the fruits of his own labor, is generally admitted; and no other person can rightfully deprive him of those fruits, and appropriate them against his will..."

[The Antelope, 23 U.S. 66; 10 Wheat 66; 6 L.Ed. 268 (1825)]


Commercial League Association of America v. People ex. rel. Needles, Auditor, 90 Ill. 166 (1878):

"But the by-law, if enforced, would not be inconsistent with the statute. HN5 The section of the statute should receive a reasonable construction, and when this is placed upon it, we doubt if any court could properly hold that if a member was an officer of the association, and was paid a compensation for his services, such payment would be "receiving money as profit or otherwise." The object of the statute, no doubt, was to prevent the corporation from making dividends of profits among the members, as do corporations organized for pecuniary profit; and while the statute might subserve a useful purpose if construed in this manner, we fail to perceive any benefit which would result if member of the association, who happened to fill an office, should be deprived of receiving compensation for his labor as an officer. HN6 Compensation for labor can not be regarded as profit, within the meaning of the law. The word "profit," as ordinarily used, means the gain [**13]  made upon any business or investment--a different thing altogether from mere compensation for labor."

[Commercial League Association of America v. People ex. rel. Needles, Auditor, 90 Ill. 166 (1878)]


Edwards v. Keith, 231 Fed 110:

"One does not derive income by rendering services and charging for them."

[Edwards v. Keith, 231 Fed. 110]


Conner v. US, 303 F.Supp 1187 (1969) on page 1191:

"If there is no gain there is no income... Congress has taxed income not compensation."

[Conner v. US, 303 F.Supp 1187 (1969) on page 1191]


Wilby v. State, 93 Miss. 767:

"It certainly was not the intention of the legislature to levy a tax upon honest toil and labor."

[Wilby v. Mississippi, 47 Miss. 767]


U.S. v. Ballard, 535 F.2d. 400, 404 (1976):

" The general term 'income' is not defined in the Internal Revenue Code Section 61 of the Code, 26 U.S.C. § 61, defines 'gross income' to mean all income from whatever source derived, including (but not limited to) the following items:

(1) Compensation for services, including fees, commissions, and similar items;

(2) Gross income derived from business;"

[U.S. v. Ballard 535 F.2d. 400, 404 (1976)]


Jack Cole v. MacFarland, 206 Tenn. 694 (1960):

"Realizing and receiving income or earnings is not a privilege that can be taxed.

 [*699]  "A privilege is whatever business, pursuit, occupation, or vocation, affecting the public, the Legislature chooses to declare and tax as such." Corn et al.  [**456]  v. Fort, 170 Tenn. 377, 385, 95 S.W.2d 620, 623, 106 A.L.R. 647.

"Privileges are special [***6]  rights, belonging to the individual or class, and not to the mass; properly, an exemption from some general burden, obligation or duty; a right peculiar to some individual or body." Lonas v. State, 50 Tenn. 287, 307.

Since the right to receive income or earnings is a right belonging to every person, this right cannot be taxed as privilege.

[Jack Cole v. MacFarland, 206 Tenn. 694 (1960):]


McCulloch v. Maryland, 4 Wheat 316:

"If it could be said that the state had the power to tax a right, this would enable the state to destroy rights guaranteed by the constitutions through the use of oppressive taxation. ... The power to tax involves the power to destroy."

[McCulloch v. Maryland, 4 Wheat 316]


Butcher's Union v. Crescent City 111 U.S. 746 (1884):

"The property which every man has in his own labor, as it is the original foundation of all other property, so it is the most sacred and inviolable. ... to hinder his employing this strength and dexterity in what manner he thinks proper without injury to his neighbor, is a plain violation of this most sacred property."

[Butcher's Union v. Crescent City 111 U.S. 746 (1884)]


Oliver v. Halstead, 196 Va. 992 (1955):

"The word "profit" is defined in Black's Law Dictionary (3rd ed.) as "The advance in the price of goods sold beyond the cost of purchase. The gain made by the sale of produce or manufactures, after deducting the value of the labor, materials, rents, and all expenses, together with the interest of the capital employed." There is a clear distinction between "profit" and "wages" or compensation for labor. "Compensation for labor can not be regarded as profit within the meaning of the law. The word 'profit', as ordinarily used, means the gain made upon any business or investment -- a different thing altogether from mere compensation for labor." The Commercial  [***5]  League Association of America v. The People ex rel. Thomas B. Needles, Auditor, 90 Ill. 166"Reasonable compensation for labor or services rendered is not profit." Laureldale Cemetery Association v. Matthews, 354 Pa. 239, 47 A.(2d) 277."

[Oliver v. Halstead, 196 Va. 992 (1955)]


Stratton's Independence v. Howbert, 231 U.S. 309, 45 (1913):

"income ... may be defined as the gain derived from capital or from labor or from both combined."

[Stratton's Independence v. Howbert, 231 U.S. 309, 45 (1913)]


Eisner v. Macomber, 252 U.S. 189 (1920):

[subsequently reaffirmed in Goodrich v. Edwards, 255 US 527 (1921):]

  • "... it becomes essential to distinguish between what is, and what is not 'income'...
  • "Congress may not, by any definition it may adopt, conclude the matter, since it cannot by legislation alter the Constitution, from which alone it derives its power to legislate, and within whose limitations alone, that power can be lawfully exercised...."
  • "Income may be defined as gain derived from capital, from labor or from both combined, provided it be understood to include profits gained through sale or conversion of capital assets."

In the 1959 Tax Court case Penn Mutual Indemnity Co. v. Commissioner (32 Tax Court page 681):

"The rule of Eisner v. Macomber has been reaffirmed on so many occasions that citation of the cases to this effect would be unnecessarily burdensome. To depart from the rule at this late date would ignore the sound principles upon which that case was decided and would throw into confusion the fundamental income tax structure and law as it has developed in the almost half century which has elapsed since adoption of the 16th amendment. That there cannot be 'income' without a 'gain' accords with the common understanding of the term, a test of construction which is particularly appropriate in our system of self-assessed Federal income tax... Moreover, that which is not income in fact manifestly cannot be made such by the legislative expedient of calling it income...."


So. Pacific v. Lowe 238 F. Supp 736, 247 U.S. 330 (1918):

"'income' as used in the statute should be given a meaning so as not to include everything that comes in. The true function of the words 'gains' and 'profits' is to limit the meaning of the word 'income'.

[So. Pacific v. Lowe 238 F. Supp 736, 247 U.S. 330 (1918)]


Laureldale Cemetery Assoc. v. Matthews, 345 A 239, and 47 A.2d 277 (1946):

"Reasonable compensation for labor or services rendered is not profit."

[Laureldale Cemetery Assoc. v. Matthews, 345 A 239, and 47 A.2d 277 (1946)]


Murdock v. Pennsylvania, 319 U.S. 105, at 113 (1943):

"A state may not... impose a charge for the enjoyment of a right granted by the Federal constitution."

[Murdock v. Pennsylvania, 319 U.S. 105, at 113 (1943)]


Magnano Co. v. Hamilton 292 U.S. 40 (1934):

"The power to tax the exercise of a [right] ... is the power to control or suppress its enjoyment."

[Magnano Co. v. Hamilton 292 U.S. 40 (1934):]


President Jefferson, concluding his first inaugural address, March 4, 1801:

"... a wise and frugal government, which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government… "


Spreckels Sugar Ref. Co. v. Mclain, 192 U.S. 397; 24 SCt 382 (1904):

"the citizen is exempt from taxation unless the same is imposed by clear and unequivocal language".

[Spreckels Sugar Ref. Co. v. Mclain, 192 U.S. 397; 24 SCt 382 (1904)]


Redfield v. Fisher, 135 Ore. 180 (1930):

" The individual, unlike the corporation, cannot be taxed for the mere privilege [***26]  of existing. HN8 The corporation is an artificial entity which owes its existence and charter powers to the state; but the individual's  [*198]  right to live and own property are natural rights for the enjoyment of which an excise cannot be imposed: 26 R. C. L., Taxation, § 209, p. 236; Cooley, Taxation, (4th Ed.), § 1676; Opinion of the Justices, 195 Mass. 607 (84 N. E. 499). Thus when the corporation pays 5 per cent of its net income to the state in obedience to chapter 427, it has not paid an ad valorem tax based upon the value of its intangibles, or calculated upon the return from such possessions, but has discharged an entirely different tax imposed for a very different reason."

[Redfield v. Fisher, 135 Ore. 180 (1930)]


Long v. Ramussen, 281 F 236, 238 (1922):

"The revenue laws are a code or system in regulation of tax assessment and collection. They relate to taxpayers, and not to non-taxpayers. The later are without their scope. No procedure is prescribed for non-taxpayers, and no attempt is made to annul any of their rights and remedies in due course of law. With them Congress does not assume to deal, and they are neither of the subject nor of the object of the revenue law."

[Long v. Ramussen, 281 F 236, 238 (1922), Reaffirmed in Gerth v. US, 132 F Supp 894 (1955) and in Economy Heating Co. v. US, 470 F2d 585 (1972)]


Regal Drug Co v. Wardell, 260 U.S. 386 (1922):

"Congress may not, under the taxing power, assert a power not delegated to it by the Constitution."

[Regal Drug Co v. Wardell, 260 US 386 (1922)]


Hurtado v. California, 110 U.S. 516 (1884):

"The state cannot diminish the rights of the people."

[Hurtado v. California, 110 U.S. 516 (1884)]


Sherar v. Cullen, 481 F.2d. 945 (1973)

"The See and Reisman decisions, and HN3 the statutory procedures of § 7402(b), reflect the obvious concern that there be no sanction or penalty imposed upon one because of his exercise of constitutional rights."

[Sherar v. Cullen, 481 F.2d. 945 (1973)]


Miller v. US, 230 F.2d. 486 (1956)

"Execution of process and the performance of duty by constituted officers must not be thwarted. But these agents, servants of a Government and a society whose existence and strength comes from these constitutional safeguards, are serving law when they respect, not override, these guarantees.  The claim and exercise of a constitutional right cannot  thus be converted into a crime."

[Miller v. US, 230 F.2d. 486 (1956)]


Carter v. Commissioner, 784 F.2d. 1006 (1986)

The assertion that proceeds received for personal services cannot be given a "zero-basis for the purpose of the assessment of taxation," is frivolous. This is a variation of the "wages are not income" theme, which has been rejected repeatedly by this court. See Olson v. United States, 760 F.2d 1003, 1005 (9th Cir. 1985) (per curiam); Gattuso v. Pecorella, 733 F.2d 709, 710 (9th Cir. 1984); [**7]  United States v. Romero, 640 F.2d 1014, 1016 (9th Cir. 1981).

[Carter v. Commissioner, 784 F.2d. 1006 (1986) ]


Gattuso v. Pecorella, 733 F.2d. 709 (1984)

"Taxpayers' suit would fail as a refund action because it does not allege that they paid the full amount of the assessed tax liabilities for the years in question. See Flora v. United States, 362 U.S. 145, 4 L. Ed. 2d 623, 80 S. Ct. 630 (1960). Taxpayers' claim that their wages are not income is frivolous. See United States v. Romero, 640 F.2d 1014, 1016 (9th Cir. 1981)United States v. Buras, 633 [**3]  F.2d 1356, 1361 (9th Cir. 1980); Funk v. CIR, 687 F.2d 264, 265 (8th Cir. 1982) (and cases cited therein)."

[Gattuso v. Pecorella, 733 F.2d. 709 (1984)]


United States v. Romero, 640 F.2d. 1014 (1981)

"Romero's proclaimed belief that he was not a "person" and that the wages he earned as a carpenter were not "income" is fatuous as well as obviously incorrect. See Lucas v. Earl, 281 U.S. 111, 114-15, 50 S. Ct. 241, 74 L. Ed. 731 (1930)Roberts v. Commissioner, 176 F.2d 221, 225 (9th Cir. 1949)26 U.S.C. § 61 (1976)The trial judge acted properly with respect to his comments and instructions regarding this matter of law. See United States v. Miller, 634 F.2d 1134 (8th Cir. 1980).

Romero received a fair trial. He based his defense on his proclaimed belief that the wages he earned were not taxable income and that he was not a person within the meaning of the income tax laws. At trial the judge properly instructed the jury on these matters of law. HN8 The jury's function is to determine matters of fact. HN9 Compensation for labor or services, paid in the form of wages or salary, has been universally, held by the courts of this republic to be income, subject to the income tax laws [**8]  currently applicable. We recognize that the tax laws bear heavily on all persons engaged in gainful activity, and recognize the right of a taxpayer to minimize his taxes by all lawful means. But Romero here is not attempting to minimize his taxes; instead he is attempting willfully and intentionally to shift his burden to his fellow workers by the use of semantics. He seems to have been inspired by various tax protesting groups across the land who postulate weird and illogical theories of tax avoidance, all to the detriment of the common weal and of themselves."

[United States v. Romero, 640 F.2d. 1014 (1981)]

[EDITORIAL: This is often quoted obiter dicta, and it is 100% bullshit. This court does not cite even ONE court case that held that "compensation for services, paid in the form of wages or salary" is income]


Olson v. United States, 760 F.2d. 1003 (1985)

Further, Olson's attempts to escape tax by deducting his wages as "cost of labor" and by claiming that he had obtained no privilege from a governmental agency illustrate the frivolous nature of his position. This court has repeatedly rejected the argument that wages are not income as frivolous, see, e.g., Gattuso v. Pecorella, 733 F.2d 709, 710 (9th Cir. 1984)United States v. Romero, 640 F.2d 1014, 1016 (9th Cir. 1981), and has also rejected the idea that a person is liable for tax only if he benefits from a governmental privilege. See United States v. Buras, 633 F.2d 1356, 1361 (9th Cir. 1980)Therefore, the district court properly found that Olson was liable under section 6702 for filing a frivolous tax return. See Davis v. United States, 742 F.2d 171 (5th Cir. 1984); [**5]  Holker v. United States, 737 F.2d 751 (8th Cir. 1984).

[Olson v. United States, 760 F.2d. 1003 (1985)]


Wilcox v. C.I.R., 848 F.2d. 1007 (C.A.9,1988)

"First, wages are income. Carter v. Commissioner, 784 F.2d 1006, 1009 (9th Cir.1986). Second, paying taxes is not voluntary. Id. Third, placing the burden of proof on the taxpayer does not violate due process. Rockwell v. Commissioner, 512 F.2d 882, 885 (9th Cir.), cert. denied, 423 U.S. 1015, 96 S.Ct. 448, 46 L.Ed.2d 386 (1975). Finally, failing to provide a taxpayer with an administrative fact finding hearing does not violate due process. See Nunley v. Commissioner, 758 F.2d 372, 373 (9th Cir.1985) ( citing Cafeteria & Restaurant Workers, Local 473 v. McElroy, 367 U.S. 886, 894-95, 81 S.Ct. 1743, 1748-49, 6 L.Ed.2d 1230 (1961)); see generally Rockwell, 512 F.2d at 887. Thus, the tax court appropriately dismissed Wilcox's petition."
[Wilcox v. C.I.R., 848 F.2d. 1007 (C.A.9,1988)]


15 USC § 17. Antitrust laws not applicable to labor organizations

The labor of a human being is not a commodity or article of commerceNothing contained in the antitrust laws shall be construed to forbid the existence and operation of labor, agricultural, or horticultural organizations, instituted for the purposes of mutual help, and not having capital stock or conducted for profit, or to forbid or restrain individual members of such organizations from lawfully carrying out the legitimate objects thereof; nor shall such organizations, or the members thereof, be held or construed to be illegal combinations or conspiracies in restraint of trade, under the antitrust laws. (Oct. 15, 1914, ch 323, §6, 38 Stat. 731.)

3. What constitutes "labor" Term "labor" as used in federal antitrust laws is not limited to work of manual laborers or of mechanics, but comprises intellectual labor as well. United States v National Asso. of Real Estate Bds. (1949, DC Dist Col) 84 F Supp 802, mod on other grounds 339 US 485, 94 L Ed 1007, 70 S Ct 711.


ARS § 44-1404. Exclusions.

A. Labor of a human being is not a commodity or an article of commerce.

B. This article shall not be construed to forbid the existence and operation of any labor, agricultural or horticultural organization instituted for the purpose of mutual help, while lawfully carrying out its legitimate objects. 1974


CCA § 16703. Exclusion of labor

Within the meaning of this chapter, labor, whether skilled or unskilled, is not a commodity.

CRS 6-4-108. Exemptions(1)

(1) Labor of a human being is not a commodityserviceor an article of trade or commerce.

NMSA § 57-1-4 The labor of a human being is not a commodity or article of commerce.

No law against monopolies or combinations in restraint of trade shall be held or construed to forbid the existence and operation of natural gas marketing, labor, agricultural or horticultural organizations instituted for purposes of mutual help and not having capital stock or conducted for profit to the organization or to forbid or restrain individual members of such organizations from lawfully carrying out the objects thereof; nor shall such organizations or the members thereof be held or construed to be illegal combinations or conspiracies in restraint of trade under any law against monopolies or combinations in restraint of trade. No natural gas marketing organization exempted herein shall be organized in such a manner so as to control more than ten percent of the natural gas market. Nothing in this section shall be held or construed to justify any restraint of trade or restriction of competition except such as is incident to the protection and promotion of the interests of the members of such organizations, in view of their situation and circumstances, but such organizations and their objects and the effectuation thereof shall prima facie be presumed to be in reasonable restraint of trade or restriction of competition.

Jer. 22:13:

"Woe to him who builds his house by unrighteousness
And his chambers by injustice,
Who uses his neighbor's service without wages
And gives him nothing for his work,"
[Jer. 22:13, Bible,NKJV]


Haggai 1:6:

"You have sown much, and bring in little;
You eat, but do not have enough;
You drink, but you are not filled with drink;
You clothe yourselves, but no one is warm;
And he who earns wages,
Earns wages to put into a bag with holes."

[Haggai 1:6, Bible, NKJV; MORAL: Don't earn "wages"!]


Romans 4:4:

"Now to him who works, the wages are not counted as grace but as debt. "[Romans 4:4, Bible, NKJV]


Romans 6:23:

"For the wages of sin is death, but the gift of God is eternal life in Christ Jesus our Lord." [Romans 6:23, Bible, NKJV]


1 Tim. 5:18:

For the Scripture says, "You shall not muzzle an ox while it treads out the grain," [ Deuteronomy 25:4] and, "The laborer is worthy of his wages."  [1 Tim. 5:18, Bible, NKJV]


James 5:1-6:

Rich Oppressors Will Be Judged

Danger of Riches; Patience and Prayer

"Come now, you rich, weep and howl for your miseries that are coming upon you! 2Your riches are corrupted, and your garments are moth-eaten. 3Your gold and silver are corroded, and their corrosion will be a witness against you and will eat your flesh like fire. You have heaped up treasure in the last days. 4Indeed the wages of the laborers who mowed your fields, which you kept back by fraud, cry out; and the cries of the reapers have reached the ears of the Lord of Sabaoth.[a] 5You have lived on the earth in pleasure and luxury; you have fattened your hearts as[b] in a day of slaughter. 6You have condemned, you have murdered the just; he does not resist you. "  [James 5:1-6, Bible, NKJV]


Deut. 24:14-15:

"You shall not oppress a hired servant who is poor and needy, whether one of your brethren or one of the aliens who is in your land within your gates. 15Each day you shall give him his wages, and not let the sun go down on it, for he is poor and has set his heart on it; lest he cry out against you to the LORD, and it be sin to you. " [Deut. 24:14-15, Bible, NKJV]


Lev. 19:13:

"You shall not cheat your neighbor, nor rob him. The wages of him who is hired shall not remain with you all night until morning. " [Lev. 19:13, Bible, NKJV]