No. 01-556 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

 

2002 MT 146 

STEVEN W. SPAIN, et al., 

Petitioners and Appellants, 

v. 

MONTANA DEPARTMENT OF REVENUE, 

Respondent and Respondent. 

APPEAL FROM: District Court of the Eighteenth Judicial District, 

In and For the County of Gallatin, 

Honorable Mike Salvagni, Judge Presiding 

COUNSEL OF RECORD: 

For Appellants: 

Michael J. San Souci, Attorney at Law, Bozeman, Montana 

For Respondent: 

Charlena Toro, Special Assistant Attorney General and Tax Counsel, 

Helena, Montana 

Submitted on Briefs: February 14, 2002 

 Decided: June 27, 2002 

Filed: 

__________________________________________ 

Clerk 
2

Justice W. William Leaphart delivered the Opinion of the Court. 

¶1 Steven W. Spain, individually and doing business as Northwest 

Rocky Mountain Construction, Inc. (collectively Northwest), and 

Kenneth D. Ehret, individually and doing business as KDE 

Construction (Ehret), appeal from the Eighteenth Judicial District 

Court’s order affirming the State Tax Appeal Board’s determination 

that certain Northwest workers, including Ehret, were employees 

rather than independent contractors for purposes of state income 

tax withholding. We affirm. 

¶2 We re-state the issues on appeal as follows: 

¶3 (1) Did the District Court err in upholding the State Tax 

Appeal Board’s determination that the Northwest workers in question 

were employees rather than independent contractors? 

¶4 (2) Did the District Court err in holding that the Department 

of Revenue did not exceed its statutory authority in classifying 

Ehret as an employee? 

¶5 (3) Did the District Court err in holding that § 15-30-203(1), 

MCA, and Rule 42.17.120, ARM, do not constitute a form of 

unconstitutional dual taxation? 

FACTUAL AND PROCEDURAL BACKGROUND 

¶6 Northwest is a Wyoming Subchapter S Corporation engaged in 

general contracting. It commenced operations in Montana in 1987. 

Steven W. Spain (Spain) is the president and sole shareholder of 

Northwest, and his wife, Kimberly Spain, is secretary-treasurer. 

¶7 Ehret performed construction services for Northwest. On 

appeal, the parties dispute whether he performed the services as a 

Comment [COMMENT1]: Dor fof 1 

Comment [COMMENT2]: Dor fof 1 

Comment [COMMENT3]: Dor fof 2 
3

Northwest employee or as an independent contractor. However, it is 

undisputed that, in 1988, Ehret applied for and received 

unemployment benefits. Subsequently, the Montana Department of 

Labor and Industry sought to have Northwest establish an 

unemployment insurance account, but Northwest refused. Ultimately, 

the Board of Labor Appeals determined that Ehret was a Northwest 

employee. Northwest appealed this determination, and on October 

11, 1989, the District Court affirmed the Board of Labor Appeals’ 

decision. It declared that Ehret and others “similarly situated” 

were not independent contractors for purposes of their employment 

with Northwest. 

¶8 In December 1990, the Department of Revenue (DOR) conducted a 

computer cross match indicating that Northwest had reported wages 

to the Unemployment Insurance Division of the Department of Labor 

and Industry. However, no corresponding account could be found for 

Montana withholding tax purposes. 

¶9 As a result, DOR agent Jeff Lapham (Lapham) conducted a field 

audit of Northwest covering tax years 1987-1991. He examined 

Northwest’s corporate check register to obtain Northwest’s earnings 

information and the specific dates and amounts of compensation paid 

to workers and compared this information with various workers’ 

individual income tax returns. He also considered this oneparagraph Work Contract that Northwest workers were required to 

sign: 

I, [Name of Worker], working as a Contract Laborer for 

Northwest Rocky Mountain Construction, am responsible for 

all insurance on myself and for all injuries occurring on 

the job. I will file my own Social Security and 

Comment [COMMENT4]: Dor fof 3 

Comment [COMMENT5]: Dor fof 4 

Comment [COMMENT6]: Dor fof 

5 

Comment [COMMENT7]: Dor fof 6 

Comment [COMMENT8]: Dor fof 6 
4

Withholding Taxes. I will not hold Northwest Rocky 

Mountain Construc-tion or Steve Spain liable for any 

injuries or accidents that may occur. [Emphasis in 

original.] 

While the workers signed the Work Contracts, Spain at times 

did not sign them. 
5 

¶10 Based on his investigation, Lapham concluded that some of 

Northwest’s workers were employees and some were independent 

contractors. With regard to those workers deemed employees, 

Lapham determined that Northwest had failed to report their 

income to the DOR for state withholding tax purposes and 

failed to pay withholding taxes for these workers from 1987-

1989 since, on June 25, 1990, Northwest registered with the 

DOR for purposes of state withholding tax payments. 

Consequently, Lapham submitted a notice of assessment to 

Northwest for tax and interest due in the amount of 

$15,132.58. 

¶11 Lapham also issued a notice of assessment to Ehret 

because, although he was deemed an employee for unemployment 

insurance purposes for the years 1987-1989 pursuant to the 

previous District Court determination discussed above, he 

nevertheless filed income tax returns as an independent 

contractor for those years. Concluding that Ehret was an 

employee and, in any event, failed to produce adequate 

business records substantiating his claimed business expense 

deductions, Lapham disallowed the deductions and assessed 

Ehret in the amount of $2,207.63, including interest due. 

¶12 Following receipt of the DOR assessment, Northwest 

submitted eighteen sworn Declarations to Lapham from workers 

describing the services they performed for Northwest. The 

Declarations also contained statements similar to the 

following: 

Comment [COMMENT9]: Dor fof 

7-8 

Comment [COMMENT10]: Dor tr 15 

Comment [COMMENT11]: Dor tr 32 

Comment [COMMENT12]: Dor tr 33 
6 

During these periods I considered my relationship with 

Northwest to be that of builder/independent contractor, 

since I furnished my own tools at the jobsite, retained 

control and discretion over the manner and details of my 

work, without direct supervision from Mr. Spain or anyone 

under his control, and I also performed similar work for 

various other builders and general contractors during the 

years in question. Apart from the above project(s), I 

did no further work for Northwest during the years in 

question. 

¶13 Additionally, the Declarations contained language to the 

effect that the workers conducted business under their own trade 

names, maintained their own medical and disability insurance and 

paid the appropriate taxes on any and all amounts received from 

Northwest during the period in question. 

¶14 Following receipt of the Declarations, Lapham compared 

them with the workers’ Montana income tax returns. In some cases, 

Lapham determined that some of the workers that he had previously 

deemed employees in the audit were indeed independent contractors. 

 In other cases, Lapham determined that the workers’ statements 

were inconsistent with the manner in which they filed their Montana 

tax returns. 

¶15 To obtain more information, Lapham sent Worker 

Relationship Questionnaires to five individuals and established 

appointments to review them with the individuals. Spain, Ehret and 

a worker we will refer to as “Worker A” returned the 

Questionnaires. Only Worker A attended the review appointment with 

Lapham. From Ehret’s Questionnaire and Worker A’s Questionnaire 

and interview, Lapham determined that they, and similarly-situated 

workers, were employees of Northwest. 

Comment [COMMENT13]: Declar ions, dor fof 9 

Comment [COMMENT14]: Dor 

f 10 

Comment [COMMENT15]: Dor f 10 

Comment [COMMENT16]: Dor 

f 11-13 

at

fo

fo

fo
7 

¶16 Lapham submitted a revised assessment to Spain deleting 

the workers that Lapham determined to be independent contractors 

upon further review. The assessment remained the same for those 

workers who Lapham continued to deem as Northwest employees and for 

Ehret. 
8

¶17 In May 1993, Northwest and Ehret filed an administrative 

appeal with the DOR, and the DOR held a hearing in which Lapham was 

the primary witness. 

¶18 After the hearing, the hearing officer issued extensive 

findings of fact and conclusions of law. He determined that the 

workers in question were employees rather than independent 

contractors and upheld the DOR’s assessments against Northwest and 

Ehret. Northwest and Ehret appealed the hearing officer’s decision 

to the State Tax Appeal Board (STAB) on the DOR record. Thus, as 

agreed to by the parties, the Board’s hearing was limited to oral 

argument. The Board affirmed the hearing officer’s decision. 

¶19 Northwest and Ehret petitioned for judicial review in the 

Eighteenth Judicial District Court, Gallatin County. The District 

Court reviewed the record and affirmed the STAB’s findings and 

conclusions of law determining that the workers at issue were 

employees of Northwest and addressed Northwest’s constitutional 

claims. Northwest and Ehret now appeal the District Court’s 

decision. 

 STANDARD OF REVIEW 

¶20 Where, as here, both facts and legal conclusions are disputed, 

two standards of review are appropriate. We review an 

administrative agency’s findings of fact to determine whether the 

findings are clearly erroneous in view of the reliable, probative 

and substantial evidence on the whole record. Section 2-4-

704(2)(a)(v), MCA; State Personnel Division v. Child Support 

Investigators, 2002 MT 46, ¶ 18, 308 Mont. 365, ¶ 18, 43 P.3d 305, 

Comment [COMMENT17]: Bd fof 27 

Comment [COMMENT18]: Stab 

fof 27
9

¶ 18. Our standard of review of a question of law is whether the 

conclusion is correct. Phoenix Physical Therapy v. Unemployment 

Insurance Div. (1997), 284 Mont. 95, 100, 943 P.2d 523, 526. 

DISCUSSION 

¶21 (1) Did the District Court err in upholding the State Tax 

Appeal Board’s determination that the Northwest workers in question 

were employees rather than independent contractors? 

¶22 Northwest claims that the workers the STAB deemed as employees 

were independent contractors. The two-part test to determine 

whether an individual is an independent contractor is found at § 

39-51-201(14), MCA (1987): 

(1) “Independent contractor” means an individual who 

renders service in the course of an occupation and: 

(a) has been and will continue to be free from 

control or direction over the performance of the 

services, both under his contract and in fact; and 

(b) is engaged in an independently established 

trade, occupation, profession, or business. 

¶23 Under this test, the crucial question is whether or not an 

employer has a right of control over a worker. To determine this, 

we have developed the following four-part control test: (1) direct 

evidence of right or exercise of control; (2) method of payment; 

(3) furnishing of equipment; and (4) right to fire. Walling v. 

Hardy Construction (1991), 247 Mont. 441, 447, 807 P.2d 1335, 1338. 

 A finding that an individual is an independent contractor demands 

“‘a convincing accumulation of these and other tests,’” while a 

finding of employee status “‘can if necessary often be solidly 

proved on the strength of one of the four items.’” Walling, 247 
10

Mont. at 447, 807 P.2d at 1338-39 (citing Sharp v. Hoerner Waldorf 

Corp. (1978), 178 Mont. 419, 425, 584 P.2d 1298, 1301-02). 

¶24 In its Findings of Fact, the STAB recounted Lapham’s testimony 

at the DOR hearing. Lapham testified that at the opening audit 

conference, Northwest representatives, including Spain, informed 

him that the company sometimes supplied its workers with air 

compressors, air guns, lumber, materials, nails, saws and cords 

while the workers only supplied their own small hand tools. Based 

on Lapham’s testimony, the STAB found that contracts were not 

issued for any particular construction job, and there were no bid 

sheet proposals submitted by workers performing services. 

¶25 Furthermore, the STAB findings included Lapham’s explanation 

of how he considered the workers’ tax returns in determining 

whether they were employees or independent contractors. He stated 

that workers who filed a Schedule C tax return reporting business 

income and expenses greater than that earned at Northwest were 

deemed independent contractors. On the other hand, if workers’ 

Schedule C reported income was equal to that earned at Northwest, 

he viewed the workers as employees of Northwest. He also viewed 

workers as employees if they reported their income from Northwest 

as wages on their tax returns. 

¶26 The STAB outlined how Lapham found many inconsistencies 

between the Declarations Northwest submitted and the Worker 

Relationship Questionnaires and tax returns. For instance, some 

“independent contractor” incomes were reported as wages; workers 

were paid by the hour but claimed they worked on a job-to-job 

Comment [COMMENT19]: Dor tr 18 

Comment [COMMENT20]: Stab 

fof 15

Comment [COMMENT21]: Stab fof 15 

Comment [COMMENT22]: Stab fof 16 

Comment [COMMENT23]: Stab 

fof 17

Comment [COMMENT24]: Dor tr 17 

Comment [COMMENT25]: Stab fof 18 

Comment [COMMENT26]: Dor tr 13-14 

Comment [COMMENT27]: Dor tr 14 

Comment [COMMENT28]: Stab fof 19 
11

basis; and workers claimed they worked uninterruptedly only for 

Northwest yet also claimed they worked for other builders. The 

STAB found there were other conflicting statements as to the 

presence of supervision and control, the length of employment, the 

completion of records, the company’s right to discharge and the 

workers’ freedom to quit their job, and the nature and amount of 

communication between Northwest and its workers. 

¶27 The STAB held that Ehret and Northwest failed to rebut the 

DOR’s evidence. Regarding Ehret, the STAB cited Rule 42.17.101(1), 

ARM, for the proposition that a determination that an individual is 

an employee for purposes of unemployment compensation establishes 

that person as an employee unless facts can be shown to the 

contrary. The STAB noted that in a previous 1988 determination, a 

district court ruled that Ehret was an employee for purposes of 

unemployment insurance. The STAB also considered Lapham’s 

testimony with respect to Ehret’s tax returns and Worker 

Relationship Questionnaire. Since Ehret did not appear at the DOR 

hearing or the STAB proceedings, the STAB stated that he failed to 

show that he should be reclassified as an independent contractor. 

The STAB concluded that Ehret was a Northwest employee and that the 

DOR properly disallowed his business expense deductions. 

¶28 Regarding Northwest, the STAB concluded that it failed to meet 

its burden of proof when it submitted nothing more than sworn 

Declarations which were found to contain contradictory assertions. 

 The STAB’s discussion of the deficiency of Northwest’s proof 

included the following statements: 

Comment [COMMENT29]: Stab p 19 

Comment [COMMENT30]: Stab 

10 

Comment [COMMENT31]: Stab 13 
12

It is not sufficient merely to question the credibility 

of the testimony and evidence submitted by the 

respondent; [Northwest] must provide its own materials 

that will prove the validity of its position. That 

positive case has not been made with respect to the 

employment presumption, the independently established 

trade status, or to the matter of control, real or 

potential. 
13 

. . . . 

Reviewing [the Work Contract] . . . we find no mention of 

control, of supervision, of sources of orders, the need 

for coordination or communication or work records, or the 

duration of the agreement, or what has been negotiated 

(equipment, work days, holiday schedules) or what bases 

there might be for the separation of the parties if there 

is disagreement. 

 . . . . 

Testimony and written evidence is [sic] lacking on the 

matter of the right to quit or behavior that would cause 

firing. 

¶29 The STAB concluded that the weight of the evidence 

required it to uphold the DOR’s employee classification for certain 

Northwest workers. 

¶30 The District Court upheld the STAB decision. It stated 

that the Department of Labor, the previous district court decision 

in 1988, Lapham, the DOR hearings examiner and the STAB all relied 

on all or some of the following evidence to properly reach the 

conclusion that the Northwest workers in question were employees: 

(1) indefinite periods of hire; (2) lack of negotiated agreements; 

(3) hourly rate paid eight hours a day; (4) employer furnished 

materials and equipment; (5) employer retained right to fire; (6) 

agreements did not contain default provisions; and (7) some 

workers reported themselves as employees. 

¶31 The District Court also held that the DOR and the STAB 

properly applied the control test in this case, and it declined to 

substitute its judgment for that of these agencies as to the weight 

of the evidence on questions of fact under § 2-4-704(2), MCA.

Comment [COMMENT32]: Stab 

13 

Comment [COMMENT33]: Stab 15 

Comment [COMMENT34]: Dc or 

Comment [COMMENT35]: Dc 10 

8 
14

¶32 On appeal, Northwest does not make any cogent argument with 

respect to the independent contractor test found at § 39-51-201, 

MCA, and the control test factors. Rather, Northwest takes issue 

with the DOR’s characterization of “several” workers as employees 

when, according to Northwest, only Ehret could conceivably be 

considered as a Northwest employee. Also, Northwest questions the 

methodology underlying Lapham’s audit since Lapham later revised 

his audit based upon the Declarations Northwest submitted. 

¶33 In addition, Northwest inconsistently argues that it met its 

burden of proof through the sworn Declarations it submitted to the 

DOR and, on the other hand, that it could not meet its burden of 

proof because the burden is contrary to fundamental concepts of 

fairness, due process and the rules of evidence. Northwest insists 

that the DOR effectively created an irrebuttable presumption that 

“obviously cannot be overcome despite the overwhelming weight of 

evidence to the contrary.” By “overwhelming evidence,” Northwest 

refers to the Declarations it submitted, and it defends their 

trustworthiness. Northwest contends that it was the DOR’s 

obligation to rebut the information contained in the Declarations 

by providing confidential tax return information to Northwest. It 

scoffs at the notion that it was required to call the workers in 

question as witnesses at the DOR hearing or seek a protective order 

to obtain the workers’ tax information. Finally, Northwest faults 

the DOR’s failure to produce witnesses other than Lapham. 

¶34 The DOR maintains that the burden of proof was on Northwest to 

rebut the presumption of employee status and that Northwest failed 

Comment [COMMENT36]: App brf 32 

Comment [COMMENT37]: App brf 5 

Comment [COMMENT38]: App brf 31 

Comment [COMMENT39]: App 

brf 34

Comment [COMMENT40]: Reply 5 

Comment [COMMENT41]: App 

reply 12

Comment [COMMENT42]: App brf 32 

Comment [COMMENT43]: App brf 32 

Comment [COMMENT44]: Dor brf 15-16 
15

to show that the presumption was unconstitutional beyond a 

reasonable doubt. The DOR states that although it did not bear 

the burden to show whether the Northwest workers were employees or 

independent contractors, it nevertheless attempted to discover the 

facts necessary to establish the workers’ status and demonstrated 

that Northwest had the right to control its workers, paid hourly 

wages, furnished equipment and retained the ability to fire its 

workers. Regarding the discovery of confidential tax returns, the 

DOR contends that although they are statutorily protected as 

confidential under § 15-30-303, MCA, Northwest could have obtained 

them through a protective order or from the workers themselves. 

¶35 We hold that the District Court properly upheld the STAB’s 

determination that the Northwest workers in question were employees 

rather than independent contractors as defined at § 39-51-201(14), 

MCA (1987), and under the control test. First, upon careful review 

of the whole record, we conclude that substantial evidence supports 

the STAB’s findings of fact in this matter, and the District Court 

did not err in so concluding. Furthermore, we agree with the 

District Court that the STAB correctly considered the control test–

and Northwest’s lack of proof thereunder–in its determination that 

the DOR properly classified the workers in question as employees. 

 

¶36 We also agree with the District Court’s reasoning with regard 

to the methodology underlying the DOR audit. It stated that the 

DOR’s revision of its original assessment after reviewing further 

information evidenced “an objective application of law to fact and 

Comment [COMMENT45]: Dor brf 17 
16

a prudent exercise of the DOR’s discretion.” Contrary to 

Northwest’s position, the District Court’s stance regarding the 

DOR’s audit methodology and its revision of the original audit was 

based in logic and supported by the record. 

¶37 We further hold that the District Court did not err in holding 

that Northwest had the burden of proof in this case and that this 

burden is constitutionally valid. The District Court cited several 

legislative enactments placing the burden of proof on an individual 

asserting independent contractor status. Section 39-51-203(4), MCA 

 (for purposes of unemployment insurance, service performed by an 

individual for wages is considered to be employment until shown to 

the satisfaction of the department that the individual is an 

independent contractor); § 39-71-120(2), MCA (for purposes of 

workers’ compensation, an individual performing services for 

remuneration is considered to be an employee unless independent 

contractor status is shown); and Rule 42.17.101(1), ARM (the 

designation of an individual as an employee for purposes of 

unemployment compensation establishes the individual as an employee 

unless facts are shown to the contrary). Furthermore, the District 

Court, recognizing that a legislative enactment is presumed 

constitutional unless proven unconstitutional beyond a reasonable 

doubt, held that Northwest failed to demonstrate that the 

application of the presumption implicated any fundamental liberty 

or property interests. 

¶38 With regard to Northwest’s criticism of the statutory 

confidentiality of tax returns, the District Court held that 

Comment [COMMENT46]: Dc order 3 
17

Northwest could have obtained the tax information either directly 

from a cooperative worker or pursuant to a protective order as 

provided by § 15-30-303, MCA. 

¶39 The District Court correctly held that Northwest bore the 

burden of proving that its workers were independent contractors and 

that this burden was not unfair or unconstitutional. Requiring 

Northwest to show independent contractor status as defined in § 39-

51-201, MCA, did not create an “irrebuttable presumption” in this 

case. Rather, it placed the burden of proof on those individuals 

who could most effectively demonstrate whether they were employees 

or independent contractors–the workers themselves. Northwest has 

not convinced the Court that the DOR unconstitutionally prohibited 

it from proving its case. Northwest did not attempt to have its 

workers testify and/or try to obtain their income tax information. 

 Simply stated, Northwest had the burden to show that “several” of 

its workers were independent contractors, and it failed to do so. 

¶40 We hold that the District Court properly upheld the STAB’s 

determination of employee status. The STAB’s findings, and the 

District Court’s summary of them, are supported by substantial 

evidence in the record, and the District Court’s conclusions of law 

were correct. 

¶41 (2) Did the District Court err in holding that the Department 

of Revenue did not exceed its statutory authority in classifying 

Ehret as an employee? 

¶42 Ehret argues that he has a fundamental right to choose 

independent contractor status and that his reasonable belief as to 

Comment [COMMENT47]: App brf 41 
18

his employment status should be considered in determining whether 

he was an independent contractor or an employee. He claims that 

the DOR’s determination that he was an employee infringed upon his 

freedom of contract. 

¶43 The District Court, citing Phoenix Physical Therapy, 284 Mont. 

at 104, 943 P.2d at 528-29, stated that the ability to contract is 

not absolute and without its limits. It recognized that a party’s 

intent does not control whether he is classified as an employee or 

independent contractor. Rather, status must be proven as a matter 

of fact. While the District Court agreed that Ehret had a 

fundamental right to choose his employment status, he was at the 

same time required to meet the statutory requirements underlying 

independent contractor status and demonstrate that he met these 

requirements as a matter of fact. The District Court held that the 

DOR did not exceed its statutory authority in presuming Ehret’s 

employee status and that there was no violation of Ehret’s right to 

contract. 

¶44 We agree. Ehret claims that the intent of parties must be 

given effect in resolving their employment status. However, in 

Phoenix, we rejected this argument. Phoenix Physical Therapy, 284 

Mont. at 104, 943 P.2d at 528-29. Ehret’s wishes are not 

dispositive. Rather, Ehret was required to prove that he was an 

independent contractor as a matter of fact. The STAB’s conclusion 

that he failed to do so is supported by substantial evidence in the 

record. We hold that the District Court correctly held that the 
19

DOR did not exceed its statutory authority in classifying Ehret as 

a Northwest employee. 

¶45 (3) Did the District Court err in holding that § 15-30-203(1), 

MCA, and Rule 42.17.120, ARM, do not constitute a form of 

unconstitutional dual taxation? 

¶46 Pursuant to § 15-30-203(1), MCA (1987), each employer is 

liable for state withholding taxes. If the employer fails to 

deduct and withhold the required amounts and the tax against which 

the deducted and withheld amounts would have been credited is paid, 

the amounts required to be deducted and withheld may not be 

collected from the employer. Section 15-30-203(3), MCA (1987). In 

other words, the DOR cannot collect the same withholding tax twice. 

 However, under Rule 42.17.120, ARM, the employer will not be 

relieved from liability for the required withholding taxes unless 

he can show that the income tax against which the required 

withholdings may be credited has been paid. 

¶47 Northwest contends that duplicative tax assessments have been 

levied against it for the taxable years in question in violation of 

its due process and equal protection rights. In essence, Northwest 

claims that the DOR assessed its workers and it for the same 

withholding taxes, thus resulting in an unconstitutional “dual 

tax.” In support of its argument, Northwest refers to a Notice of 

Levy issued by the DOR assessing withholding taxes to one of its 

workers. Additionally, Northwest emphasizes that it reasonably 

believed that its workers were independent contractors and complied 

with applicable tax regulations by reporting workers’ wages on the 

Comment [COMMENT48]: App brf 23 

Comment [COMMENT49]: App brf 24-25 
20

requisite Form 1099. In sum, Northwest contends that the current 

statutory structure has the effect of making it the unconditional 

guarantor of taxes due by independent contractors. 

¶48 The DOR agrees with Northwest’s “dual tax” argument to the 

extent that an employer should not be required to pay withholding 

taxes if its workers paid those taxes. However, the DOR insists 

that Northwest did not meet its burden of proving that the workers 

paid the applicable withholding taxes pursuant to § 15-30-203, MCA, 

and Rule 42.17.120, ARM. 

¶49 With regard to the burden of proof issue, Northwest again 

contends that the workers’ Declarations proved that they paid the 

required withholding taxes. At the same time, Northwest claims 

that it was precluded from establishing its dual tax claims since 

the DOR was not required to rebut Northwest’s constitutional claims 

by providing confidential tax returns. 

¶50 The District Court concluded that while § 15-30-203, MCA, and 

Rule 42.17.120, ARM, placed the burden of proving that withholding 

taxes have been paid on Northwest, this does not create a dual tax. 

 It stated that if Northwest was assessed state withholding taxes 

it had but to show the worker at issue also paid that tax. Thus, 

the court held that the statutory enactments are not 

unconstitutional. With respect to the confidentiality of tax 

returns issue, the District Court stated that availability of the 

relevant tax records is separate from the issue of whether § 15-30-

203, MCA, and Rule 42.17.120, ARM, are constitutional. 

Comment [COMMENT50]: Dc order 4 

Comment [COMMENT51]: App brf 27 

Comment [COMMENT52]: App brf 26 

Comment [COMMENT53]: App brf 26 

Comment [COMMENT54]: Reply 12 

Comment [COMMENT55]: Dc order 4 
21

¶51 We agree. The statutory enactments do not create a dual tax. 

 Rather, they impose a burden of proof on an employer to show that 

withholding taxes were paid. If they were, the employer is 

relieved from liability for the withholding tax and, in the end, 

only one tax is assessed. Moreover, while Northwest continually 

complains about how the confidentiality of tax returns set forth in 

§ 15-30-303, MCA, made it impossible for it to prove its case, the 

District Court correctly recognized that Northwest did not directly 

challenge the constitutionality of § 15-30-303, MCA, and that this 

provision does not bear upon the propriety of statutes requiring 

the payment of withholding taxes. Accordingly, we hold that the 

District Court correctly upheld the constitutionality of § 15-30-

203, MCA, and Rule 42.17.120, ARM. 

/S/ W. WILLIAM LEAPHART 

We concur: 

/S/ JAMES C. NELSON 

/S/ PATRICIA COTTER 

/S/ TERRY N. TRIEWEILER 

/S/ JIM RICE