Proof Of Facts: Taxpayer: “Officer”, “Agent”, or mere “Contractor”? – Sovereignty Education and Defense Ministry (SEDM)

SOURCE: Proof That There is a “Straw Man”, Form #05.042, Section 7.8

A very instructive case on how to distinguish between a “public officer” and a mere “agent” is the following:

We think it clear that neither of the plaintiffs in error occupied any official position in any of the undertakings 520 *520 to which their writ of error in No. 183 relates. They took no oath of office; they were free to accept any other concurrent employment; none of their engagements was for work of a permanent or continuous character; some were of brief duration and some from year to year, others for the duration of the particular work undertaken. Their duties were prescribed by their contracts and it does not appear to what extent, if at all, they were defined or prescribed by statute. We therefore conclude that plaintiffs in error have failed to sustain the burden cast upon them of establishing that they were officers of a state or a subdivision of a state within the exception of § 201(a).

An office is a public station conferred by the appointment of government. The term embraces the idea of tenure, duration, emolument and duties fixed by law. Where an office is created, the law usually fixes its incidents, including its term, its duties and its compensation. United States v. Hartwell, 6 Wall. 385; Hall v. Wisconsin, 103 U.S. 5. The term “officer” is one inseparably connected with an office; but there was no office of sewage or water supply expert or sanitary engineer, to which either of the plaintiffs was appointed. The contracts with them, although entered into by authority of law and prescribing their duties, could not operate to create an office or give to plaintiffs the status of officers. Hall v. Wisconsin, supra; Auffmordt v. Hedden, 137 U.S. 310. There were lacking in each instance the essential elements of a public station, permanent in character, created by law, whose incidents and duties were prescribed by law. See United States v. Maurice, 2 Brock. 96, 102, 103; United States v. Germaine, 99 U.S. 508, 511, 512; Adams v. Murphy, 165 Fed. 304.

Nor do the facts stated in the bill of exceptions establish that the plaintiffs were “employees” within the meaning of the statute. So far as appears, they were in the position of independent contractors. The record does 521 *521 not reveal to what extent, if at all, their services were subject to the direction or control of the public boards or officers engaging them. In each instance the performance of their contract involved the use of judgment and discretion on their part and they were required to use their best professional skill to bring about the desired result. This permitted to them liberty of action which excludes the idea of that control or right of control by the employer which characterizes the relation of employer and employee and differentiates the employee or servant from the independent contractor. Chicago, Rock Island & Pacific Ry. Co. v. Bond, 240 U.S. 449, 456; Standard Oil Co. v. Anderson, 212 U.S. 215, 227; and see Casement v. Brown, 148 U.S. 615; Singer Mfg. Co. v. Rahn, 132 U.S. 518, 523.

We pass to the more difficult question whether Congress had the constitutional power to impose the tax in question, and this must be answered by ascertaining whether its effect is such as to bring it within the purview of those decisions holding that the very nature of our constitutional system of dual sovereign governments is such as impliedly to prohibit the federal government from taxing the instrumentalities of a state government, and in a similar manner to limit the power of the states to tax the instrumentalities of the federal government. See, as to federal taxation on state instrumentalities, Collector v. Day, 11 Wall. 113; United States v. Railroad Co., 17 Wall. 322; Pollock v. Farmers’ Loan & Trust Co., 157 U.S. 429, 585, 586; Ambrosini v. United States, 187 U.S. 1; Flint v. Stone Tracy Co., 220 U.S. 107; see cases holding that the Sixteenth Amendment did not extend the taxing power to any new class of subjects, Brushaber v. Union Pacific R.R. Co., 240 U.S. 1; Peck & Co. v. Lowe, 247 U.S. 165, 172; Eisner v. Macomber, 252 U.S. 189; Evans v. Gore, 253 U.S. 245, 259. And, as to state taxation on federal instrumentalities, see McCulloch v. Maryland, 522 *522 4 Wheat. 316; Dobbins v. Commissioners of Erie County, 16 Pet. 435; The Banks v. The Mayor, 7. Wall. 16; Weston v. The City Council of Charleston, 2 Pet. 449, 467; Farmers Bank v. Minnesota, 232 U.S. 516; Choctaw & Gulf R.R. v. Harrison, 235 U.S. 292; Indian Oil Co. v. Oklahoma, 240 U.S. 522; Gillespie v. Oklahoma, 257 U.S. 501.

Just what instrumentalities of either a state or the federal government are exempt from taxation by the other cannot be stated in terms of universal application. But this Court has repeatedly held that those agencies through which either government immediately and directly exercises its sovereign powers, are immune from the taxing power of the other. Thus the employment of officers who are agents to administer its laws (Collector v. Day; Dobbins v. Commissioners of Erie County, supra), its obligations sold to raise public funds (Weston v. The City Council of Charleston, supra; Pollock v. Farmers’ Loan & Trust Co., supra), its investments of public funds in the securities of private corporations, for public purposes (United States v. Railroad Co., supra), surety bonds exacted by it in the exercise of its police power (Ambrosini v. United States, supra), are all so intimately connected with the necessary functions of government, as to fall within the established exemption; and when the instrumentality is of that character, the immunity extends not only to the instrumentality itself but to income derived from it (Pollock v. Farmers’ Loan & Trust Co.; Gillespie v. Oklahoma, supra,) and forbids an occupation tax imposed on its use. Choctaw & Gulf R.R. Co. v. Harrison, supra; and see Dobbins v. Commissioners of Erie County, supra.

When, however, the question is approached from the other end of the scale, it is apparent that not every person who uses his property or derives a profit, in his dealings with the government, may clothe himself with immunity from taxation on the theory that either he or his 523 *523 property is an instrumentality of government within the meaning of the rule. Thomson v. Pacific Railroad, 9 Wall. 579; Railroad Co. v. Peniston, 18 Wall. 5; Baltimore Shipbuilding Co. v. Baltimore, 195 U.S. 375; Gromer v. Standard Dredging Co., 224 U.S. 362, 371; Fidelity & Deposit Co. v. Pennsylvania, 240 U.S. 319;Choctaw, O. & G.R.R. Co. v. Mackay, 256 U.S. 531.

As cases arise, lying between the two extremes, it becomes necessary to draw the line which separates those activities having some relation to government, which are nevertheless subject to taxation, from those which are immune. Experience has shown that there is no formula by which that line may be plotted with precision in advance. But recourse may be had to the reason upon which the rule rests, and which must be the guiding principle to control its operation. Its origin was due to the essential requirement of our constitutional system that the federal government must exercise its authority within the territorial limits of the states; and it rests on the conviction that each government, in order that it may administer its affairs within its own sphere, must be left free from undue interference by the other. McCulloch v. Maryland, supra; Collector v. Day; Dobbins v. Commissioners of Erie County, supra.

In a broad sense, the taxing power of either government, even when exercised in a manner admittedly necessary and proper, unavoidably has some effect upon the other. The burden of federal taxation necessarily sets an economic limit to the practical operation of the taxing power of the states, and vice versa. Taxation by either the state or the federal government affects in some measure the cost of operation of the other.

But neither government may destroy the other nor curtail in any substantial manner the exercise of its powers. Hence the limitation upon the taxing power of each, so far as it affects the other, must receive a practical 524 *524 construction which permits both to function with the minimum of interference each with the other; and that limitation cannot be so varied or extended as seriously to impair either the taxing power of the government imposing the tax (South Carolina v. United States, 199 U.S. 437, 461; Flint v. Stone Tracy Co., supra, at 172,) or the appropriate exercise of the functions of the government affected by it. Railroad Co. v. Peniston, supra, 31.

While it is evident that in one aspect the extent of the exemption must finally depend upon the effect of the tax upon the functions of the government alleged to be affected by it, still the nature of the governmental agencies or the mode of their constitution may not be disregarded in passing on the question of tax exemption; for it is obvious that an agency may be of such a character or so intimately connected with the exercise of a power or the performance of a duty by the one government, that any taxation of it by the other would be such a direct interference with the functions of government itself as to be plainly beyond the taxing power.

It is on this principle that, as we have seen, any taxation by one government of the salary of an officer of the other, or the public securities of the other, or an agency created and controlled by the other, exclusively to enable it to perform a governmental function, (Gillespie v. Oklahoma, supra,) is prohibited. But here the tax is imposed on the income of one who is neither an officer nor an employee of government and whose only relation to it is that of contract, under which there is an obligation to furnish service, for practical purposes not unlike a contract to sell and deliver a commodity. The tax is imposed without discrimination upon income whether derived from services rendered to the state or services rendered to private individuals. In such a situation it cannot be said that the tax is imposed upon an agency of government in any technical sense, and the tax itself cannot be deemed 525 *525 to be an interference with government, or an impairment of the efficiency of its agencies in any substantial way. Railroad Co. v. Peniston; Gromer v. Standard Dredging Co.; Baltimore Shipbuilding Co. v. Baltimore; Fidelity & Deposit Co. v. Pennsylvania; Choctaw, O. & G.R.R. Co. v. Mackey, supra.

As was said by this Court in Baltimore Shipbuilding Co. v. Baltimore, supra, in holding that a state might tax the interest of a corporation in a dry dock which the United States had the right to use under a contract entered into with the corporation:

“It seems to us extravagant to say that an independent private corporation for gain created by a State, is exempt from state taxation either in its corporate person, or its property, because it is employed by the United States, even if the work for which it is employed is important and takes much of its time.” (p. 382.)

And as was said in Fidelity & Deposit Co. v. Pennsylvania, supra, in holding valid a state tax on premiums collected by bonding insurance companies on surety bonds required of United States officials:

“But mere contracts between private corporations and the United States do not necessarily render the former essential government agencies and confer freedom from state control.” (p. 323.)

These statements we deem to be equally applicable to private citizens engaged in the general practice of a profession or the conduct of a business in the course of which they enter into contracts with government from which they derive a profit. We do not suggest that there may not be interferences with such a contract relationship by means other than taxation which are prohibited. Railroad Co. v. Peniston, supra, at p. 36, recognizes that there may. Nor are we to be understood as laying down any rule that taxation might not affect agencies of this character in such a manner as directly to interfere with the 526 *526 functions of government and thus be held to be void. See Railroad v. Peniston, supra, page 36; Farmers Bank v. Minnesota, supra, p. 522; Choctaw & Gulf Railway Co. v. Harrison, supra, p. 272.

But we do decide that one who is not an officer or employee of a state, does not establish exemption from federal income tax merely by showing that his income was received as compensation for service rendered under a contract with the state; and when we take the next step necessary to a complete disposition of the question, and inquire into the effect of the particular tax, on the functioning of the state government, we do not find that it impairs in any substantial manner the ability of plaintiffs in error to discharge their obligations to the state or the ability of a state or its subdivisions to procure the services of private individuals to aid them in their undertakings. Cf. Central Pacific Railroad v. California, 162 U.S. 91, 126. We therefore conclude that the tax in No. 183 was properly assessed.

[Metcalf Eddy v. Mitchell, 269 U.S. 514 (1926)]

According to the above supreme court case, their criteria for distinguishing an OFFICER from an AGENT are the following:

Took an oath of office.
Lawfully appointed.
Restrained in their choice of other employments.
Station is permanent and continuous or for a fixed duration specified in the law.
Office is created by law.
Duties directly prescribed by law rather than mere contract.
Compensation is prescribed by law.
Exercise the “sovereign power” of the government.

Applying the above criteria SPECIFICALLY to the position of “taxpayer” as defined in 26 U.S.C. §7701(a)(14) of the Internal Revenue Code, we find that:

1. Lawfully appointed. This happens when they:

1.1. VOLUNTEER for the office. See:

How State Nationals Volunteer to Pay Income Tax, Form #08.024
https://sedm.org/Forms/08-PolicyDocs/HowYouVolForIncomeTax.pdf

1.2. Apply for and receive a “Taxpayer Identification Number” and their application is approved as an informal appointment.

1.3. VOLUNTARILY and SUBSEQUENTLY USE it, as government property (see 20 C.F.R. §422.103(d)) in connection with an otherwise PRIVATE transaction. IN that capacity, it behaves as what the Federal Trade Commission (F.T.C.) refers to as a “franchise mark”.

More on the above at:

About SSNs and TINs on Government Forms and Correspondence, Form #05.012
https://sedm.org/Forms/05-MemLaw/AboutSSNsAndTINs.pdf

2. The perjury oath on tax forms serves the function of an oath.

3. They are restrained in their choice of other employments.

3.1. They cannot, for instance, act as an agent of a foreign principal under the Foreign Agents Registration Act.

3.2. They cannot lawfully EXERCISE the office in any place OTHER than the District of Columbia per 4 U.S.C. §72.

3.3. It is a crime to exercise the office in the presence of a financial conflict of interest per 18 U.S.C. §208 in the pursuit of other activities or employments.

3.4. They cannot leave their post until they have reconciled, accounted for, and RETURNed all public property in their custody.

“I: DUTY TO ACCOUNT FOR PUBLIC FUNDS

§ 909. In general.-It is the duty of the public officer, like any other agent or trustee, although not declared by express statute, to faithfully account for and pay over to the proper authorities all moneys which may come into his hands upon the public account, and the performance of this duty may be enforced by proper actions against the officer himself, or against those who have become sureties for the faithful discharge of his duties.”

[Treatise on the Law of Public Offices and officers, p. 609, §909; Floyd Mechem, 1890;
SOURCE: http://books.google.com/books?id=g-I9AAAAIAAJ&printsec=titlepage]

4. Their station is permanent and continuous for the period of no more than one year.

4.1. Tax returns must be filed annually and constitute an accounting of public property under the stewardship of the “taxpayer” which must be “RETURNED” and accounted for on a “tax return”.

4.2. The minute someone files an information return on commercial transactions they are involved in, that creates a prima facie presumption that they are engaged in the office, which is statutory defined as a “trade or business” in 26 U.S.C. §7701(a)(26).

5. The office is created by law in the definitions section at 26 U.S.C. §7701(a)(14). That definition defines them as being “SUBJECT TO” the Internal Revenue Code, which is their “employment agreement” governing the entire lifecycle of their “employment” as a “taxpayer”.

6. Duties are directly prescribed by law:

6.1. Duties vary based on the TYPE of “taxpayer” they are, which includes:

6.1.1. STATUTORY “citizens” or “residents” as described in 26 C.F.R. §1.1-1(c) and 26 U.S.C. §3121. These fictions are collectively referred to as a STATUTORY “U.S. person” in 26 U.S.C. §7701(a)(30).

6.1.2. STATUTORY “nonresident aliens” as described in 26 U.S.C. §7701(b)(1)(B). This fiction is referred to in 26 C.F.R. §1.1441-1 as a “Foreign person”.

6.2. The ENTIRE civil code functions as the equivalent of the “employment agreement”. See:

Why Statutory Civil Law is Law for Government and Not Private Persons, Form #05.037
https://sedm.org/Forms/05-MemLaw/StatLawGovt.pdf

6.3. They operate directly in the Executive Branch and work for the Secretary of the Treasury. This is because they are directly subject to the statutes with no enforcement regulations, as described in:

Challenging Jurisdiction Worksheet, Form #09.082
https://sedm.org/Forms/09-Procs/ChalJurWorksheet.pdf

7. Compensation prescribed by law comes in the form of the property in their custody that they get to keep instead of “RETURN” on a “tax RETURN”.

7.1. IRS structures the tax system so that the average “taxpayer” gets a refund at the end of the year.

7.2. IRS ensure most “taxpayers” get a refund as an incentive for them to file a tax return.

7.3. The “refund” is the “compensation fixed by law” that pays for the exercise of the office.

8. Exercise the sovereign power of the government by virtue of their management of the PUBLIC property in their custody and the discretion they exercise in managing it. RIGHTS, physical property, and intangibles all qualify as such property.

“Public office. The right, authority, and duty created and conferred by law, by which for a given period, either fixed by law or enduring at the pleasure of the creating power, an individual is invested with some portion of the sovereign functions of government for the benefit of the public. Walker v. Rich, 79 Cal.App. 139, 249 P. 56, 58. An agency for the state, the duties of which involve in their performance the exercise of some portion of the sovereign power, either great or small. Yaselli v. Goff, C.C.A., 12 F.2d. 396, 403, 56 A.L.R. 1239; Lacey v. State, 13 Ala.App. 212, 68 So. 706, 710; Curtin v. State, 61 Cal.App. 377, 214 P. 1030, 1035; Shelmadine v. City of Elkhart, 75 Ind.App. 493, 129 N.E. 878. State ex rel. Colorado River Commission v. Frohmiller, 46 Ariz. 413, 52 P.2d. 483, 486. Where, by virtue of law, a person is clothed, not as an incidental or transient authority, but for such time as de- notes duration and continuance, with Independent power to control the property of the public, or with public functions to be exercised in the supposed interest of the people, the service to be compensated by a stated yearly salary, and the occupant having a designation or title, the position so created is a public office. State v. Brennan, 49 Ohio.St. 33, 29 N.E. 593.

[Black’s Law Dictionary, Fourth Edition, p. 1235]

Those readers who disagree that a statutory “taxpayer” is a public officer are asked to explain the following quotes which also establish this fact:

“The revenue laws are a code or system in regulation of tax assessment and collection. They relate to taxpayers, and not to nontaxpayers. The latter are without their scope. No procedure is prescribed for nontaxpayers, 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 laws…”

[Long v. Rasmussen, 281 F. 236 (1922)]

“Revenue Laws relate to taxpayers [officers, employees, and elected officials of the Federal Government] and not to non-taxpayers [American Citizens/American Nationals not subject to the exclusive jurisdiction of the Federal Government]. The latter are without their scope. No procedures are prescribed for non-taxpayers and no attempt is made to annul any of their Rights or Remedies in due course of law.”

[Economy Plumbing & Heating v. U.S., 470 F.2d. 585 (1972)]

“And by statutory definition, ‘taxpayer’ includes any person, trust or estate subject to a tax imposed by the revenue act. …Since the statutory definition of ‘taxpayer’ is exclusive, the federal courts do not have the power to create nonstatutory taxpayers for the purpose of applying the provisions of the Revenue Acts…”

[C.I.R. v. Trustees of L. Inv. Ass’n, 100 F.2d. 18 (1939)]