SALT Report 1941 – The Hawaii Intermediate Court of Appeals upheld a Taxpayer’s conviction for willful failure to file tax returns. In this case, the Taxpayer worked as a realtor in Honolulu and received his income from commissions and management fees. In 2007, the Department of Taxation found that the Taxpayer had not filed any general excise tax or income tax returns from 2002 through 2006. Because of this, the Department notified the Taxpayer that an auditor had been assigned to his case.
The Taxpayer sent an objection letter to the Department claiming that he was a citizen of the “sovereign Kingdom of Hawaii” and challenged the Department’s authority to audit him. The Department rejected this argument and the case went to trial. Ultimately, the jury ruled in favor of the Department and convicted the Taxpayer on all ten counts of willful failure to file tax returns.
The Taxpayer appealed the conviction claiming that he was not a “person” as defined in HRS §231-35, the statute under which he was charged. The Taxpayer argued that he was a Hawaiian national, not a U.S. or Hawaii state citizen, and that the term “person” as used in the statute, did not include an individual such as himself. However, the Court of Appeals ruled that the commonly understood meaning of the term “person” included an “individual human being” such as the Taxpayer.
The Taxpayer then argued that he believed the Hawaiian government had been illegally overthrown, and for that reason he chose to stop paying taxes to his “occupiers.” The Taxpayer felt that his tax money would be used to continue the occupation of the Hawaiian nation. To prove his point, the Taxpayer requested that he be allowed to present expert testimony on international law and documentation regarding Hawaiian sovereignty.
The Court of Appeals rejected the Taxpayer’s arguments stating that “a belief that the tax laws are unconstitutional, invalid, or unenforceable is not relevant to show a lack of willfulness.” Further, Hawaii’s tax laws state that “only a mistake of law or a good faith belief based on an honest misunderstanding would contradict willfulness.” As a result, the Taxpayer was found guilty and sentenced to eleven months in jail for each of the ten counts of willful failure to file tax returns.
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