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Historical Perspectives on the Federal Income Tax


A Question of What is "Taxable" Income?

The above question was posted to the Findlaw "personal taxes" message board on April 24, 2006, to which, a response was posted later that day [1]. Our purpose for posting this question was an attempt to provoke a discussion of the issues related to what makes anyone’s, or everyone’s, wages taxable. We obviously failed.

Our question is: Are everyone’s wages, received in exchange for labor, made taxable through the wording of the Statute (Title 26)? Or, are those wages made taxable by our own self-assessment (W-4), believing that our wages are taxable income [2]? What, in fact, are wages, as defined by Subtitle C of the Tax Code [3] and to whom does that definition apply?

Wherein, we agree with that response and concur with the information provided, that response does nothing to answer our question as to the statutory meaning of the word taxable under Sections 1 and 63 of Title 26. Just because it is income, by someone’s definition, does not necessarily make it taxable under Subtitle A or C of the Tax Code [4].

What does the term taxable mean in the construction of the statutory language? Is it merely referring to the amount of income shown on line 42 (taxable income) of the personal 1040 tax return? Or, does it have a more precise meaning in relation to the Constitutional, as well as, the statutory authority to levy the tax in the first place? It seems to us that Congress must identify what they are taxing, before they can make something taxable [5]. We found the term taxable to have a more precise meaning, throughout the entire legislative history of the Revenue Acts [6].

Congress knows that they can not levy an ambiguously worded tax, and expect the Courts to uphold it. Therefore, Congress must specifically identify that which they intend, through the legislation, to tax, as well as, identify those upon whom the tax must operate. The people are not required to presume that they are "made liable" for the tax, simply because Congress, through legislation, imposes a Tax Code. Congress accomplished their part, that is, the Tax Code, as a whole, is written correctly. It does specifically identify that which is taxable, as well as those upon whom the excise is intended to operate (made liable). The problem is getting the Courts to enforce the Tax Code the way Congress has written it; now that the Tax Code comprises some 10,000 or more pages of text. Aside from that, we can voluntarily subject ourselves to the Tax Code if we want to, by presuming we are made liable by operation of isolated sections of the law.

Section 1 begins with: There is hereby imposed on the taxable income of –

    1. every married individual who makes a joint return with his spouse.

Upon what basis does the statute impose the liability for the tax, and upon whom, is that liability for the tax imposed? Both questions are answered by the statutory meaning of the term taxable income, for that is the subject matter upon which Congress chose to impose their tax liability. The tax is not imposed upon people (individuals or corporations), it is imposed upon whatever taxable income is. If you have the thing called taxable income, you must file a tax return and pay the amount of tax shown thereon. However, if you do not have the thing called taxable income, why are you filing a tax return? It is because, we have been taught (26USC61) that all income (all that comes in) is taxable. But, is that true? That is, what income does the Tax Code actually make taxable and upon whom does the Tax Code impose the liability for the tax? Why would one choose to be made liable, for something they may not even have?

The Tax Code can only apply to those upon whom Congress specifically identified as being "made liable" for the reporting and paying of the tax [7]. Case in point: We may, or may not be, an individual, or even married to an individual, as that term is used in the Tax Code. We tend to make the presumption, because of the word "married," that the Tax Code is directed at us as natural persons. That would not make sense in relation to Article 1, Section 9, clause 4 of the U.S. Constitution, which specifically requires that such taxes, as those imposed upon people, be apportioned to the States according to population. It also does not fit within the specific definition of "person" used in the Tax Code [8].

The term taxable income predates the 1954 revisions incorporating that term into the Tax Code [9]. That term simply meant the amount of "commercial net income" remaining after deducting, from the receipts (gross income?), the costs incurred to earn it. This definition [10], provided by the Secretary of the Treasury (1917-1954), indicates that commercial net income must be derived from commercial gross income, through the business accounting process required by the statute. Commercial gross income is only acquired from business and financial transactions and activities, it is not acquired merely by the exchanging of labor for money [11]. Therefore, the statutory meaning of the term taxable income must be comprised of two parts. The business, commercial and financial accounting process is one part [12]. Part two is the specific identity of those upon whom the Tax Code operates [13]. The two parts must go hand in hand, that is, the determination of the former is predicated upon the definition of the latter, so that the law complies with the Constitutional restrictions placed upon taxation [14]. The federal income tax is a business related excise tax, it is not a direct tax UPON PEOPLE "levied without apportionment". When the imposition as the former (EXCISE) becomes an imposition by definition of the latter (DIRECT), the question of Constitutionality must be raised [15], or the Constitution must be ignored.

Therefore, does everyone’s wages necessarily fall within the operation of the Tax Code? No! The statutory definition of "person" is specific, that is, it identifies the classification of people upon whom the Tax Code operates, when measured by taxable income [16]. If people do not fall within the specific classifications selected by Congress, the Tax Code simply can not be applied to them. Case in point: if Congress imposed an excise tax upon gambling (throughout the United States), could that excise tax be imposed upon the sale of potatoes grown by someone in Idaho? Of course not; unless the "person" (farmer or merchant), growing and or selling the potatoes in Idaho, is also gambling (gambler), that particular law has no application to them. The same is true with all legislation, including the federal income tax imposed by Congress. If we are not included within the defined classifications, upon which the legislation imposes the excise, we are not the subject of that legislation, or any of its requirements, at all. The statute simply does not apply, unless we choose to make it apply.

As stated in that response, the definition of words are dependent first upon the Constitution, then upon the wording, or construction, of the statute itself, and lastly by the "interpretation" of those two documents made by the court system [17].

We totally agree. That is why we are pursuing the answers to these two questions:

1]: Does the statutorily defined classification of "person," under either 26 USC 7701 (a) (1): 26CFR 301.7701-1, -2, -3, -6; or 26 CFR 31.0-2 (a) (8), include the common law, labor for hire (not in business) employee? That is, does the common laborer (employee) fall within the specific definition of "sole-proprietor, branch or division of the owner," or "through and by means of which any business, financial operation, or venture is carried on"?

If so, does the treatment of employee related business expenses "below the line," while all other business expenses are deducted "above the line," comply with the due process requirements of the Constitution? [Tellier] (Gilmore compared to Groetzinger)

If not, is there any statutory requirement for such employees to file a W-4 Certificate, or a tax return, and pay the income tax based solely upon their annual receipts (whole income)? And if not, are the provisions of 26USC6401 (c) applicable to the erroneous filing of the W-4 and the payment of the tax?

2]: Are the frivolous penalties assessed against us properly imposed according to the provisions of 26 USC 6702 (a)?

The Commissioner of Internal Revenue in 1937, Guy T. Helvering, brought the first issue to the attention of the Supreme Court, but was not provided a direct answer to his question. The Supreme Court apparently concluded that that issue was not of concern in the case before them; as the excise tax levied upon employers, measured by their payrolls, was clearly imposed upon the operation of business [18]. However, in the companion case, decided that same day, the Supreme Court did provide what seems to be a back door answer to his question in relation to the (income?) tax imposed upon the common law employee’s (not in business) wages [19]. That answer forms the basis for our questioning the meaning of wages, in relation to Subtitle A, income taxes, as well as, Subtitle C, employment taxes. The two excises are not the same, but both are controlled by Article 1, Section 8, clause 1 of the United States Constitution.

Does Subtitle A, Section 61 ("gross income, means all income, from whatever source derived") even deal with the gross receipts (wages), i.e., "whole income," of the common law, labor for hire (not in business) employee?

We do not see how it could. Section 61 (a) (1) deals with "compensation for service," not specifically "wages". If wages and compensation for services meant the same thing, Congress would have defined wages to be compensation for services somewhere within Subtitle A of the Tax Code, or included that term in Section 61 (a) (1). They did not. In fact, the only place where wages are clearly defined is within Subtitle C (Employment Taxes) of the Tax Code. There, Congress intentionally defined wages to be "remuneration for services, IF paid as compensation for services." According to Webster’s dictionary the word remuneration is synonymous with the word compensation, so why did Congress use the conjunctive word "IF" between those two words in Subtitle C? Because, the term "compensation for services" already had a defined meaning within the 1939 Tax Code [10]; and that definition did not include the generic term wages; because not all wages are paid as compensation for services (commercial net income) [20]. More to the point, Congress would not intentionally impose an excise tax upon that which the Supreme Court had already declared to be the measurement of a "Direct" tax requiring apportionment. Wages are, in fact, "income," that is, "wages" represent money received in exchange for the property "labor," however, such wages may, or may not be, "compensation for services" (commercial net income) as that term is defined within the Tax Code [21].

Under the judicial definition of the word income, as that word is to be used in the Federal Revenue Statutes, its literal meaning is "the gain derived from (income)," whatever is received in exchange for, or for the use of, "capital, labor, or both combined." The words "receipts" and "gain" are not synonymous in anyone’s dictionary. When the Tax Code uses the term "gross income," it is referring to the gross amount of commercial gain produced by the commercial activity or transaction involved. It is not talking about the "whole income" or annual receipts, produced by one’s personal capital or labor, outside the business, financial, or commercial application.

The business person’s compensation is derived from their commercial receipts (business gross income), it is not paid to them (as natural persons outside the business relationship) as their annual receipts (whole income). Their wages, whether taken as "salary, wages, or compensation for personal services," is nothing more or less than the gain or profits (net income) produced by their business, commercial and financial activities. If their endeavors fail to produce the money necessary to cover their business expenses, the only pay they receive is that which they take out of their own pocket (assets).

Using that definition, are the gross receipts (income) of a business (Section 61) really the taxable income (statutory basis of the excise tax) reportable under the statute, as stated in that response? If so, why are those receipts (commercial gross income) shown on schedules attached to the return, rather than on line 22 (total income) of the 1040 Tax Return itself? Could someone’s gross income be something different than their total income? How could that be? The term "gross" means the total amount, without any deduction. While the term "total" means the whole entire amount. I think we are missing something in the translation of the term income, as that word is used in the Tax Code.

What is the use of these synonymous words telling us about the term taxable income? Obviously, that there are two definitions for the same word income, only one of which is applicable to the statutory meaning of the term taxable income. The Supreme Court has recognized this difference in meaning in the application of the AFDC (Welfare) requirements. They concluded that whereas the Oxford Dictionary defines the word income to mean "all that comes in," i.e., whatever is received without any deductions or concern as to how it came in. The Webster’s Dictionary and the United States Supreme Court limits the definition of that word, within the revenue statutes, to that of "the gain derived from" (accessions to wealth clearly realized) whatever comes in; from the use or employment of "capital, labor or both combined" [4]. Those two meanings do not represent the same measurement of income, yet, each of those measurement could have a "gross" and or "total" amount, if there is more than one source involved.

Congress can not impose a tax upon something they have not identified as the subject, and or measurement, of the excise. In order for the tax to be valid under the statute, the business and financial receipts, i.e., commercial gross income, must be reduced to taxable income, i.e., commercial net income, before Congress has any authority to allow deductions or even levy the tax [5 & 6]. Otherwise, Congress would have said the tax was imposed upon the gross income, or the annual receipts, of every human being.

This reduction is accomplished by the accounting process shown on the schedules, above line 22, thereby, transferring only the taxable amount of net income to the 1040 Tax Return (Line 22). This is the same process used by corporations to report and pay the tax due on their taxable net income. In other words, the commercial gross income must be reduced by the amount of reasonable and necessary business expenses incurred in producing it, before it becomes taxable income. Therefore, line 22 of the personal tax return is the statutory starting point of Congresses authority to tax personal business income. That is, line 22 identifies the total amount of taxable net income subject to the excise imposed by statute upon the business, commercial or financial transaction or activity [22]. This starting point must apply to everyone, falling within the operation of the Tax Code.

On the other hand, the common laborer’s (not in business) annual receipts (wages) are shown on line 7, therefore line 22 (total income) of the 1040 Tax Return? There are no "above the line" schedules used for reporting this type of "income" (whole income). Their entire annual receipts (wages) are treated as taxable income; with their "business" related expenses (if they have any) being deducted "below the line" (Schedule A, Form 2106) as allowed itemized deductions.

As this treatment of business expenses would cause the law to discriminate between members of the same classification, the question must be raised as to whether or not the common laborer is even in "business," therefore, subject to the provisions of the Tax Code [23].

Are the above two measurements of taxable income the same, so that each taxpayer is treated upon the same basis? Maybe, maybe not, it depends on the legislative intent and the Constitutional limitations placed upon the taxation of income. Does the wage earner have other sources of taxable income to report? If so, the operation of the law is imposed because of those other sources, not merely because of the wages received. Those (wages) then being "includible" in the report of taxable net income shown on line 22 of the 1040 Tax Return, so that all income is considered for purposes of the "personal exemption" and other allowed "itemized" deductions. Otherwise, it would be possible for the business person to pay their spouse, their child, or themselves, wages, which would not be included in taxable income, and still be able to deduct the "personal exemption," thereby greatly reducing, or all together avoiding the tax.

The question, in our case, really is: When those annual receipts (wages) are the only income (whole income) shown on line 22 (total income) of the 1040 Tax Return, are those two measurements of taxable income the same?

We believe the answer is no! Not only would the definition of taxable income be different for each of those taxpayers, but the activity and transaction producing the receipts, from which that taxable income was derived, would also be different for each taxpayer. The business person would be paying an excise tax based upon their business income, measured by net income or profits, while the common laborer would be paying a direct tax upon their "property" labor, measured by their entire annual receipts (whole income).

Line 22 of the personal 1040 tax return is a report of total income. That is, it is a report of the sum, or total, of the various amounts of commercial net income, or losses, derived from the receipts shown on each of the named schedules (Lines 7-21). From that taxable income (line 22), Congress then allows the personal exemption and other itemized deductions to be subtracted (below the line), in order to find the net amount of taxable income (line 42) they choose to levy the tax upon. As a business excise, Congress could make this entire (gross or total) amount of commercial net income (taxable income) the subject of the tax, without allowing any exemptions or deductions. This is the way things have been ever since the beginning of our Country, Congress has not changed it [24]. The tax is imposed because of the business and commercial activities, not because we are human beings. It is measured by the total amount of "commercial net income" derived from one or more activities or transactions, not the receipts from which that "income" is derived.

If the laborer’s wages are taxable, it must be because those wages are "derived from" some form of commercial or financial receipts, or includible in by reason that there is other reportable "gains" from other sources. If the common labor for hire employee (not in business) does not have any other reportable gains, and their (wages) are their annual receipts (the whole income of their property "labor"), they do not fall within the classification selected by Congress [22, 23].

The liability (excise) is not imposed upon people or upon wages as such. The statutory liability (excise) is imposed upon what people do, i.e., the activities and or transactions they engaged in (business classification), to acquire gains, profits, and accessions to wealth clearly realized (income classification). The excise is then measured by the net amount of "gain" derived from the receipts produced by those activities (statutory basis of the excise).

The Constitutional as well as the statutory basis of the excise is not changed by Congress calling line 42, of the personal tax return, taxable income. Congress can allow the deduction of what ever they see fit, but they can not change the nature of the excise by implying that the authority for the excise tax extends to the receipts. Until the receipts are reduced to gain, i.e., commercial net income, Congress simply has not taken the authority, through legislation, to levy a tax upon it [6].

It seems that we tend to make presumption about the meanings of certain words, and then proceed to act upon those presumptions, as though they were facts [25]. Perhaps that is why Congress provided for such "honest mistakes," in the Revenue Act of 1943. [26]




We have spent thousands of hours over the past 10 years researching the Legislative history of the federal income tax system. This research includes the Congressional Record, Committee Reports, Federal Register, Statutes, Regulations, university textbooks, Statistical Abstract of The United States, Supreme Court cases, National Archive documents, and many other sources of information. The conclusions we have drawn from this research is that the currently accepted interpretation of the Statute, whether you are for or against income taxation, is misguided at best.

We are currently pursuing a legal answer to our questions through the Court system and are in need of technical assistance. NO, we are not tax protestors, our taxes are current and fully paid. We need help with the format and proper wording of the Writ of Certiorari.

We are making our case public, because, as of today, neither the Department of Justice, nor the Federal District and Appellate Courts, have refuted our evidence or argued that our interpretation of the Statute is unfounded. The Department of Justice was awarded Summary Judgement based solely upon their statement of our argument and our "failure to articulate a valid legal basis" for their statement [the claim that we did not make]. The Ninth Circuit Court of Appeals denied our first appeal on the basis of the lower court's decision (without discussion), concluding that our argument was "insubstantial". Our request for Rehearing En Banc has now also been passed over, without comment. Our last chance is to file a Writ of Certiorari with the U.S. Supreme Court, before the end of July, 2006.

Our Case file will be made available to qualified professionals willing to review our position. We are seeking technical assistance at this point, however, legal representation may be necessary. This is not a tax protest, it is a request for clarification as to the application of the Tax Code as a whole. Please contact us at "info@taxhistory.com"










[1] Findlaw message boards "personal taxes" April 24, 2006

[2] 26CFR601.103 (a) Summary of General Tax Procedures

[3] 26CFR31.3401 (a) –1 Wages

[4] Lukhard v. Reed, 481 U.S. 368, 374 (1987)

[5] Congressional Record of August 28, 1913, page 3844-45

[6] Commissioner v. Tellier, 383 U.S. 687, 692 (1966)

[7] 26 USC, Chapter 61, Subtitle F, Sections 6001, 6011, 6012, 6013

[8] 26 USC 7701 (a) (1): Jerecki v. Searle, 367 U.S. 303, 307: H.R. 25 (2003)

[9] "A Treatise on the Federal Income Tax Law of 1913" by T.G. Frost (1913)

[10] Treasury Regulation 118 (1953) Part 39, Subsection 21-1

[11] "Taxing the Exercise of Natural Rights" by J. M. Maguire (1935)

[12] Title 26, Subtitle A, Subchapter E, Part 2, Subpart A, Section 446

[13] 26CFR310.7701; 26CFR31.0-2; 26CFR3401 (c)-1

[14] U.S. Constitution, Article 1, Section 8; Article 1, Sec. 9, cl. 4; 16th Amendment

[15] Brushaber v. U.P.R.R., 240 U.S. 1, 17 (1915)

[16] Billings v. People of State of Illinois, 188 U.S. 97, 102 (1903)

[17] USNB of Oregon v. Independent Ins. Agents, 508 U.S. 439, 455 (1993)

[18] Helvering v. Davis, 301 US 619, 639 (1937)

[19] Carmichael v. So. Coal & Coke Co,. 301 U.S. 495, 513 (1937)

[20] Baral v. United States, D.C. Circuit No. 98-1667, Feb. 22, 2000

[21] Pollock v. Farmers, 158 U.S. 601, 625 (1895)

[22] U.S. v. Wells Fargo Bank, 485 U.S. 351, 355 (1988)

[23] Mills v. State of Maine, 1st Cir. No. 96-1973 (1997)

[24] H.R. 8300, House Report No. 1337, Page A20, Section 63 (1954)

[25] Heiner v. Donnan, 285 U.S. 312, 329

[26] Conference Report, H.R. 2570, 1943, page 48 "Rule where no tax liability"


Honest Mistakes

26 USC 6401 (C)

[26] Conference Report, H.R. 2570, "Current Tax Payment Act of 1943," page 48

Rule where no tax liability

Section 4 (d) of the Senate bill adds new subsection (c) to section 3770 of the code. Under this provision an amount paid as tax shall not be considered not to constitute an overpayment solely because there was no tax liability in respect of which that amount was paid.

The income-tax law requires the taxpayer to make a return of his tax and to pay the tax so returned. These requirements contemplate that in the discharge of these duties at the time, place, and manner prescribed, honest mistakes will occur—mistakes both as to the amount of the tax and as to the existence of any tax liability; and that such honest mistakes made incident to the bona fide orderly compliance with the actual or reasonably apparent duties of the taxpayer are to be corrected under the provisions of law governing overpayments. It is believed that existing law so provides. The language of certain court decisions (holding that certain payments, not made incident to a bona fide and orderly discharge of actual or reasonably apparent duties imposed by law, are not overpayments and accordingly that interest is not payable) has been read by some as meaning that no payment can result in an overpayment if no tax liability actually existed. It is not believed that such reading is in any way a statement of existing law. The provisions of the bill, however, emphasize the need for clarity in this regard.

Under the bill as passed by the Senate, two requirements became basic features of the income tax: (1) The declaration and payment of the estimated tax; and (2) the withholding and collection by the employer of tax from the wages of employees, and the return and payment as such of the amount by the employer to the Government. Honest mistakes incident to faithful and orderly compliance will, of course, occur, just as they have in the older procedures of the law.



[2] 26 CFR 601.103 Summary of general tax procedures.

"(a) Collection Procedures. The Federal tax system is basically one of self-assessment. In general each taxpayer (or person required to collect and pay over the tax) is required to file a prescribed form of return which shows the facts upon which tax liability may be determined and assessed. Generally, the taxpayer, must compute the tax due on the return and make payment thereof on or before the due date for filing the return."

[3] 26 CFR 31.3401 (a)-1 Wages.

    1. In general. (1) The term "wages" means all remuneration for services performed by an employee for his employer unless specifically excepted under section 3401 (a) or excepted under section 3402 (e).

(2) The name by which the remuneration for services is paid is immaterial. Thus, salaries, fees, bonuses, commissions on sales or on insurance premiums, pensions, and retirement pay are wages within the meaning of the statute if paid as compensation for services performed by the employee for his employer.

(3) The basis upon which the remuneration is paid is immaterial in determining whether the remuneration constitutes wages. Thus, it may be paid on the basis of piecework, or a percentage of profits, and may be paid hourly, daily, weekly, monthly, or annually."

[4] Lukhard v. Reed, 481 U.S. 368, 374-376 (1987) [This is to long to quote, read the court’s explanation of the two legal meanings for the word "income".]

[5] Congressional Record of August 28, 1913, Page 3844:

"Why, Mr. President, should Congress attempt to do more than is declared in the first section of the proposed bill? It is right; it is comprehensible; it embraces everything—no, I will withdraw that: it does not embrace the full power of Congress, because Congress can levy a tax upon gross incomes if it likes; it may diminish the extent of its taxing power or not exercise it all; it may exclude certain things from the taxing power that it might include; but it can not change the character of the taxation; and when it is declared in the first lines of this bill that a tax is levied upon the entire net income of all the citizens of this country, we have exercised all the power we have."

[6] Commissioner v. Tellier, 383 U.S. 687, 691, 692 (1966)

"We start with the proposition that the federal income tax is a tax on net income, not a sanction against wrongdoing. That principle has been firmly imbedded in the tax statute from the beginning. …[192] we held that, ‘were we to enforce as federal policy the rule espoused by the Commissioner in this case, we would come close to making this type of business taxable on the basis of its gross receipts, while all other business would be taxable on the basis of net income. If that choice be made, Congress should do it’" (See footnote 11)

[7] 26 USC 6012. "Persons required to make returns of income":

    1. General rule.—Returns with respect to income taxes under Subtitle A shall be made by the following:

"(1) (a) Every individual having for the taxable year gross income* which equals or exceeds the exemption amount, …" (*total income , line 22)

[8] 26 USC 7701 Definitions.

"(a) When used in this title, where not otherwise distinctly expressed or manifestly incompatible with the intent thereof—

    1. Person.—The term "person" shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation."

Jarecki v. G. D. Searly and Co., 367 U.S. 303, 307 (1961):

"We look first to the statute. "Discovery" is a word usable in many contexts and with various shades of meaning. Here, however, it does not stand alone, but gathers meaning from the words around it. These words strongly suggest that a precise and narrow application was intended in 456. The three words in conjunction, "exploration," "discovery," and "prospecting," all describe income-producing activity in the oil and gas and mining industries, but it is difficult to conceive of any other industry to which they all apply. Certainly the development and manufacture of drugs and cameras are not such industries. The maxim noscitur a sociis, that a word is know by the company it keeps, while not an inescapable rule, is often wisely applied where a word is capable of many meanings in order to avoid the giving of unintended breadth to the Acts of Congress."

H.R. 25, 108th Congress, 1st Session, January 7, 2003; "Fair Tax Act of 2003": Section 2. Definitions and Special Rules. (a) In general—For purposes of this subtitle—

(7) PERSON. The term "person" means any natural person, and unless the context clearly does not allow it, any corporation, partnership, limited liability company, trust, estate, government, agency, administration, organization, association, or other legal entity

(foreign or domestic).

[9] "A Treatise on the Federal Income Tax Law of 1913" by T. G. Frost (1913)

[10] Treasury Regulation 118, Section 39.21-1 (a) and (b): "Meaning of net income"

"(b) …Although taxable net income is a statutory conception, it follows, subject to certain modifications as to exemptions and as to deductions for partial losses in some cases, the lines of commercial usage. Subject to these modifications, statutory net income is commercial net income. This appears from the fact that ordinarily it is to be computed in accordance with the method of accounting regularly employed in keeping the books of the taxpayer."

Section 39.22 (a) –2 Compensation for personal services:

(a) Commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, (federal officers and employees), marriage fees, baptismal offerings, sums paid for saying masses for the dead, and other contributions received by clergymen, evangelist, or religious worker for services rendered. …

[11] Taxing the Exercise of Natural Rights by John MacArthur Maguire, Harvard Legal Essays (1934) (cited by the Supreme Court in 301 U.S.548, footnote 6 (1937): page 286:

"If the Legislature were to attempt, by taxing all occupations, practically, to annul the prohibition against a poll tax, the question made might arise. But there is a clear distinction between a tax upon certain specified businesses, where the skill of the operator is a source of profit, or where the public are appealed to for patronage and protection of a fixed and regular business, and a tax covering all persons, whatever may be there occupation. …[The opinion then refers to taxes on lawyers, doctors, etc and continues.] The skill, or education, or tact, which is the source of profit in these occupations, is clearly distinguishable from that capacity which is in every man to work for his support with the hands which God has given him [108]."


[13] 26CFR301.7701 "Discovery of Liability and Enforcement of Title"

Sec. 310.7701-2 "Business entities; definitions.

    1. Business entities, for purposes of this section and Sec. 301.7701-3, a business entity is any entity recognized for federal tax purposes (including an entity with a single owner that may be disregarded as an entity separate from its owner under Sec. 301.7701-3) that is not properly classified as a trust under Section 301.7701-4 or otherwise subject to special treatment under the Internal Revenue Code. A business entity with two or more members is classified for federal tax purposes as either a corporation or a partnership. A business entity with only one owner is classified as a corporation or is disregarded; if the entity is disregarded, its activities are treated in the same manner as a sole-proprietorship, branch, or division of the owner."

26CFR31.0-2 General Definitions and use of terms

    1. In general. As used in the regulations in this part, unless otherwise expressly indicated—(1) The terms defined in the provisions of law contained in the regulations in this part shall have the meanings so assigned to them.

(8) Person Includes an individual, a corporation, a partnership, a trust or estate, a joint-stock company, an association, or a syndicate, group, pool, joint venture or other unincorporated organization or group, through or by means of which any business, financial operation or venture is carried on.

26CFR3401(c)-1 Employee.

    1. The term "employee" includes every individual performing services if the relationship between him and the person for whom he performs such service is the legal relationship of employer and employee.
    2. Generally, physicians, lawyers, dentists, veterinarians, contractors, subcontractors, public stenographers, auctioneers, and others who follow an independent trade, business, or profession, in which they offer their services to the public, are not employees.


[15] Brushaber v. U.P.R.R., 240 U.S. 1, 17 (1915):

"…on the contrary, recognized the fact that taxation on income was in its nature an excise entitled to be enforced as such unless and until it was concluded that to enforce it would amount to accomplishing the result which the requirement as to apportionment of direct taxation was adopted to prevent, in which case the duty would be to disregard form and consider substance alone, and hence subject the tax to the regulation as to apportionment which otherwise as an excise would not apply to it."

[16] Billings v. People of State of Illinois, 188 U.S. 97, 102 (1903):

"Classification is essentially the same in law as it is in other departments of knowledge or practice. It is the grouping of things in speculation or practice because they ‘agree with one another in certain particulars and differ from others things in those same particulars.’ Things may have very diverse qualities, and yet be united in a class. They may have very similar qualities, and yet be cast in different classes. Cattle and horses may be considered in a class for some purposes. Their differences are certainly pronounced. Salt and sugar may be associated in a grocer’s stock for grocer’s purposes. To confound them in use would be very disappointing. Human beings are essentially alike, yet some individuals may have attributes or relations not possessed by others, which may constitute them a class. But their classification—indeed, all classification—must primarily depend upon the purpose—the problem presents. Science will have one purpose, business another, and legislation still another." [See also Gulf, C.&S.F.R. Co., v. Ellis, 165 U.S. 150 (1897)]

[17] USNB of Oregon v. Independent Ins. Agents, 508 U.S. 439, 455 (1993):

"Over and over we have stressed that ‘[I[n expounding a statute, we must not be guided by a single sentence or member of a sentence, but look to the provisions of the whole law, and to object and policy.’ …"No more than isolated words or sentences is punctuation alone a reliable guide for discovery of a statute'’ meaning. Statutory construction '‘s a holistic endeavor'’... and at a minimum, must account for a statute’s full text, language as well as punctuation, structure, and subject matter.’ [citation omitted by me]

[18] Guy T. Helvering v. George P. Davis, 301 U.S. 619, 635 (1937):

"A petition for certiorari followed. It was filed by the intervening defendants, the Commissioner and the Collector, and brought two questions and two only to our notice. …(2) ‘Whether the validity of the tax imposed upon employees by Sec. 801 of the Social Security Act is properly in issue in this case, and if it is, whether that tax is within the power of Congress under the Constitution."

[19] Carmichael v. So. Coal and Coke Co., 301 U.S. 495, 513 (1937):

"Tax on Employees. Appellees extend their attack on the statute from the tax imposed on them as employers to the tax imposed on employees. But they cannot object to a tax which they are not asked to pay, at least if it is separable, as we think it is, from the tax they must pay. The statute contains the usual separability clause. Section 19. The taxation of employees is not prerequisite to the enjoyment of the benefits of the Social Security Act. The collection and expenditure of the tax on employers do not depend upon taxing the employees, and we find nothing in the language of the statute or its application to suggest that the tax on employees is so essential to the operation of the statute as to restrict the effect of the separability clause.

[20] Baral v. United States, D,C, Circuit No. 98-1667 (2000):

"We disagree. Withholding and estimated tax remittances are not taxes in their own right, but methods for collecting the income tax."

[21] Pollock v. Farmers, 158 U.S. 601, 625 (1895):

"He gives, however, it appears to us, a definition which covers the question before us. A tax upon one’s whole income is a tax upon the annual receipts from his whole property, and as such falls within the same class as a tax upon that property, and is a direct tax, in the meaning of the Constitution." [Personal "labor" is property by legal definition]

[22] United States v. Wells Fargo Bank, 485 U.S. 351, 355 (1988):

"…the property was exempt from direct taxation, but certain privileges of ownership, such as the right to transfer the property, could be taxed. Underlying this doctrine is the distinction between an excise tax, which is levied upon the use or transfer of property even though it might be measured by the property’s value, and a tax levied upon the property itself. The former has historically been permitted even where the latter has been constitutionally or statutorily forbidden."

[23] Mills v. State of Maine, 1st Cir. No. 96-1973 (1997)"

"The scope and thrust of such decisions indicate that Equal Protection jurisprudence is not narrowly confined to traditional suspect or quasi-suspect classifications. Whereas, as is well known, classifications aimed at "suspect" classes or those aimed at "fundamental" interest must pass strict scrutiny."

"[e]qual protection of the law means that ‘no person or class of persons shall be denied the same protection of the laws which is enjoyed by other persons or classes in the same place and under like circumstances."

[24] H.R. 8300, I. R. C. 1954, House Report 1337, pages A-18 to 20, "Computation of Taxable Income"; Section 63. "Taxable Income Defined":

"This section is derived generally from section 21 of the 1939 Code. …"

"This change of the term "net income," as used in section 21 of the 1939 Code to "taxable income" creates a new concept. It eliminates terms such as "normal tax net income," "surtax net income," in the case of individuals, and "adjusted net income," "normal tax net income" and "corporation surtax net income" in the case of corporations and "net income" for both individuals and corporations. The change in language clarifies the tax base. It eliminates the necessity for credits against net income and exemptions which become deductions in arriving at "taxable income" for both corporations and individuals." [Note the language use; Congress did not change the "commercial net income" basis for the excise, they merely combined the three-step process needed to arrive at the individual’s "net taxable income," into one section (Section 63).]

[25] Heiner v Donnan, 285 U.S. 312, 329 (1932):

"This court has held more than once that a statute creating a presumption which operates to deny a fair opportunity to rebut it violates the due process clause of the Fourteenth Amendment. For example, Bailey v. Alabama, 219 U.S. 219, 238, et seq., 31 S. Ct. 145; Manley v. Georgia, 279 U.S. 1, 5-6, 49 S. Ct. 215. ‘It is apparent,’ this court said in the Bailey Case (219 U.S. 239, 31 S. Ct. 145, 151) ‘that a constitutional prohibition cannot be transgressed indirectly by the creation of a statutory presumption any more than it can be violated by direct enactment. The power to create presumptions is not a means of escape from constitutional restrictions.’

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