Opinion ID: 1281151
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Heading Rank: 2

Heading: The Idaho Income Tax Statutes Apply to the Compensation of the Train Crews While Employed on Trains Traveling Through the State of Idaho

Text: In 1959 the Idaho Legislature declared its intent to impose a tax on ... the income of nonresidents which is the result of activity within or derived from sources within this state. I.C. § 63-3002. This intent has remained unchanged to date and was implemented by a provision imposing a tax upon that part of the taxable income of any nonresident individual ... derived from sources within the state of Idaho. I.C. § 63-3024. In 1965 this Court held that a nonresident railroad employee who was employed on a train that made a daily run from a town within Idaho to a town outside Idaho was required to pay income tax on that portion of his income that was allocated to the miles the train traveled in Idaho. Gee v. West, 90 Idaho 173, 409 P.2d 116 (1965). The train crews contend that in 1965 the Idaho Legislature changed the theory of taxation for nonresidents to a base of operations theory. They argue that under this theory, a nonresident is taxed only if the nonresident has a base of operations in the state. For support they cite a concurring opinion in Gee. This contention is not sustained by the Idaho income tax statutes that have been in effect at times pertinent to this case. From 1976 until 1986 I.C. § 63-3024 imposed a tax upon that part of the taxable income of any nonresident individual ... derived from sources within the state of Idaho as set forth in section 63-3027A, Idaho Code. In 1986 the words as set forth in section 63-3027A were changed to computed as required by section 63-3027A. 1986 Idaho Sess. Laws, ch. 90, pp. 262, 267. Despite periodic amendments by the legislature of I.C. § 63-3027A since 1976, this statute has continued to provide for the determination of the taxable income of a part-year or nonresident individual. The contention of the train crews that I.C. § 63-3027A has failed to set forth a means of determining what portion of the income of a nonresident is derived from sources within the state of Idaho is fallacious. The purpose of the reference in I.C. § 63-3024 to I.C. § 63-3027A was to provide for a means of computing taxable income, not to determine what portion of the gross income of a nonresident was derived from sources within the state of Idaho. The portion of the income of a nonresident derived from sources within the state of Idaho must be determined by reference to the decisions of this Court in Barraclough v. State Tax Commission, 75 Idaho 4, 266 P.2d 371 (1954) and Gee. These decisions established that where compensation for personal services is involved, the source of income is the location where the services are performed. Therefore, applying the statutes and this Court's rulings in Barraclough and Gee concerning the source of income for personal services, the compensation of the train crews for the services performed while they pass through Idaho are within the coverage of the Idaho income tax laws. The regulations of the Commission have been consistent with this result. The challenge of the train crews that these regulations have violated the uniformity requirement of art. 7, § 5 of the Idaho Constitution is not valid. That section applies only to ad valorem taxes. Johnson v. Diefendorf, 56 Idaho 620, 627, 57 P.2d 1068, 1071 (1936). Because of our decision, infra, declaring that the application of the Idaho income tax statutes to the income of the train crews while traveling through Idaho is unconstitutional, we do not consider the question of the applicable statute of limitations.