State v. Sinnott

• Decision Date: 16 March 2004
• Docket Number: No. COA03-187.,COA03-187.
• Parties: STATE of North Carolina v. Tammy Kay SINNOTT and David Michael Sinnott.
• Court: North Carolina Court of Appeals

593 S.E.2d 439

163 NC App. 268

STATE of North Carolina v. Tammy Kay SINNOTT and David Michael Sinnott.

No. COA03-187.

Court of Appeals of North Carolina.

March 16, 2004.

Attorney General Roy Cooper, by Assistant Attorney General Michael D. Youth, for the State.

Tammy K. Sinnott and David M. Sinnott, Pro Se.

McGEE, Judge.

Tammy Kay Sinnott (Tammy Sinnott) and David Michael Sinnott (David Sinnott) (collectively defendants) were convicted on 29 May 2002 of attempting to evade and defeat the imposition and payment of North Carolina Individual Income Tax for the calendar years 1993, 1994, 1995, and 1996, in violation of N.C. Gen.Stat. § 105-236(7). In addition, David Sinnott was also convicted of failing to file a North Carolina Tax Return for calendar years 1997, 1998, 1999, and 2000, in violation of N.C. Gen.Stat. § 105-236(9). Defendants appeal.

The evidence presented by the State at trial tends to show that defendants have been residents of North Carolina since at least 1989. In calendar years 1993 through 2000, defendants earned wages which exceeded the applicable federal exemption amounts. Accordingly, defendants were required to file both federal and North Carolina individual income tax returns.

For calendar year 1993, defendants filed a joint state tax return on 24 January 1994, declaring their taxable income to be $39,883.00 with a tax liability of $2,579. Subsequently, defendants filed an amended 1993 return on 24 February 1997, declaring their taxable income to be zero. However, defendants listed no itemized deductions warranting a taxable income of zero. Essentially, defendants were claiming entitlement to a refund of the tax paid for 1993.

For calendar year 1994, defendants again filed a joint state tax return on 14 February 1995, declaring their taxable income to be $47,669 with a tax liability of $3,125. Similarly, on 23 February 1997, defendants filed an amended 1994 return declaring their taxable income to be zero even though the deductions and exemptions did not justify such a change. Again, defendants were claiming a refund.

For calendar year 1995, defendants filed a joint state tax return on 15 February 1997 declaring their taxable income to be zero with no evidence of deductions and exemptions legitimizing their claim. Thus, defendants were asking for a refund of the tax withheld in 1995.

For calendar year 1996, defendants filed a joint state tax return on 19 February 1997 declaring zero as their taxable income. They failed to submit evidence of deductions and exemptions entitling them to zero tax liability. Once again, defendants were asking for a refund of the tax withheld for the year 1996.

For calendar years 1997, 1998, 1999, and 2000, David Sinnott's gross income exceeded his federal and state exemption allowances and necessitated that he file both federal and state tax returns. David Sinnott failed to file a state tax return for these four years by the applicable deadlines.

Defendants first argue that the trial court erred by denying their identical pre-trial motions to dismiss the charges against them on constitutional grounds. Defendants made these motions pursuant to N.C. Gen. Stat. § 15A-954, claiming that the criminal statutes which they were charged with violating, N.C. Gen.Stat. § 105-236(7) and (9), were facially unconstitutional and unconstitutional as applied to each of them. Within this overall argument, defendants specifically make the following constitutional arguments: (1) that the State's claim that defendants' compensation for labor is taxable as income violates Article I, § 1 of the North Carolina Constitution and the Bill of Rights because it is a tax upon the fruits of one's labor, (2) that a tax on one's labor is a capitation tax in violation of Article V, § 1 of the North Carolina Constitution and Article I, § 9 of the United States Constitution, (3) that the action commenced against defendants was in violation of Article IV, § 13 of the North Carolina Constitution because it was an action by the Department of Revenue rather than the State, (4) that taxing compensation for labor violates the prohibition against slavery and involuntary servitude in Article I, § 17 of the North Carolina Constitution and the Thirteenth Amendment to the United States Constitution, and (5) that the applicable statutes are vague and ambiguous and thus violate the due process clause in Article I, § 19 of the North Carolina Constitution and the Fourteenth Amendment to the United States Constitution. For the reasons stated below, we find these arguments to be without merit. Defendants' first argument is meritless because it is well-settled that it is constitutional to tax an individual's compensation for labor. This proposition was asserted in Lonsdale v. Commissioner, 661 F.2d 71 (5th Cir.1981) where the federal court of appeals summarized the appellants' arguments by stating the following:

The first category of contentions may be summarized as that the United States Constitution forbids taxation of compensation received for personal services. This is so, appellants first argue, because the exchange of services for money is a zero-sum transaction, the value of the wages being exactly that of the labor exchanged for them and hence containing no element of profit. This contention is meritless. The Constitution grants Congress power to tax "incomes, from whatever source derived...." U.S. Const. amend. XVI. Exercising this power, Congress has defined income as including compensation for services. 26 U.S.C. § 61(a)(1). Broadly speaking, that definition covers all "accessions to wealth." See Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 431, 75 S.Ct. 473, 477, 99 L.Ed. 483 (1955). This definition is clearly within the power to tax "incomes" granted by the sixteenth amendment.

Lonsdale, 661 F.2d at 72. Defendants in the case before us seem to be asserting an argument similar to the one asserted by the appellants in Lonsdale. Lonsdale was followed in 1984 by a district court in the Fourth Circuit in the case of Scull v. United States, 585 F.Supp. 956, 963 (E.D.Va.1984). The plaintiffs in Scull reported their taxable income as zero and were assessed a penalty. The plaintiffs reported this amount because they claimed "that money received as wages is not taxable as income because it constitutes an exchange of labor for compensation." Scull, 585 F.Supp. at 963. In response, the district court cited Lonsdale and a multitude of other cases and stated, "[t]his position is clearly frivolous and is asserted in an effort to avoid the payment of taxes. The Internal Revenue Code explicitly provides that gross income includes compensation for services. 26 U.S.C. § 61(a)(1). Furthermore, the position the plaintiffs assert has been rejected repeatedly by the courts as frivolous." Id.

Similarly, a bankruptcy court in the Fourth Circuit cited Lonsdale and stated, "[w]ages are income; to argue otherwise is to make a meritless contention." In re Hall, 174 B.R. 210, 213 (Bkrtcy.E.D.Va.1994). Although these decisions are not binding on our Court, we follow the reasoning asserted therein and hold that taxing compensation for labor is constitutional.

Defendants' second argument that taxing income is an unconstitutional capitation tax is also without merit. In Ficalora v. Commissioner, 751 F.2d 85 (2d Cir.1984), cert. denied, 471 U.S. 1005, 105 S.Ct. 1869, 85 L.Ed.2d 162 (1985), the appellant argued that the income tax is a non-apportioned direct tax and that Congress does not have the constitutional power to impose such a tax. The Second Circuit disagreed and held that Congress did possess the authority and cited Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429, 15 S.Ct. 673, 39 L.Ed. 759, reh'g, 158 U.S. 601, 15 S.Ct. 912, 39 L.Ed. 1108 (1895), overruled on other grounds, South Carolina v. Baker, 485 U.S. 505, 524, 108 S.Ct. 1355, 1367, 99 L.Ed.2d 592, 611 (1988)

. Ficalora, 751 F.2d at 87. "`[T]he conclusion reached in the Pollock Case did not in any degree involve holding that income taxes generically and necessarily came within the class of direct taxes on property[.]'" Hale v. Iowa State Bd. of Assessment and Review, 302 U.S. 95, 107, 58 S.Ct. 102, 106, 82 L.Ed. 72, 80 (1937) (quoting Brushaber v. Union P.R. Co., 240 U.S. 1, 16-17, 36 S.Ct. 236, 241, 60 L.Ed. 493, 501 (1916)).

Similarly, in In re Becraft, 885 F.2d 547 (9th Cir.1989), the Ninth Circuit noted the "patent absurdity and frivolity" of an argument that a direct non-apportioned income tax is not allowed. Becraft, 885 F.2d at 548. The court upheld the validity of federal income tax laws stating that "[f]or over 75 years, the Supreme Court and the lower federal courts have both implicitly and explicitly recognized the Sixteenth Amendment's authorization" of such a tax. Id. By analogy, a state income tax does not run afoul of the prohibition against capitation taxes. Accordingly, this argument is without merit.

Defendants fail to make an argument in support of their third contention within this assignment of error. Defendants merely state that this action was commenced by the Department of Revenue rather than by the State and thus violates Article IV, § 13 of the North Carolina Constitution. Accordingly, since no authority is cited and no reason or argument is stated, this contention is deemed abandoned pursuant to N.C.R.App. P. 28(b)(6). We note that not only is no argument asserted, defendants' contention is a misstatement of what in fact occurred. Defendants assert that the Department of Revenue commenced the action by serving warrants on 4 February 2002. However, even though a special agent with the Department of Revenue is listed as the complainant on the warrants, the fact remains that this action was instituted by the State of North Carolina as the caption indicates. Further, it is obvious that the State is the party opposing defendants in that an assistant attorney general prosecuted the case.

Defendants' fourth argument...