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The courts have generally held that direct taxes are limited to taxes on people (variously called capitation, poll tax or head tax) and property. (Penn Mutual Indemnity Organization. v. C.I.R., 227 F.2d 16, 19-20 (3rd Cir. 1960).) All the other taxes are typically called "indirect taxes," because they tax an event, rather than particular or property as such. (Steward Machine Co. v. Davis, 301 U.S. 548, 581-582 (1937).) What got a straightforward limitation on the power of the legislature based on the subject of the tax proved inexact and unclear when applied for income tax, which is certainly arguably viewed either as a direct or an indirect tax.

What There is just does not matter as much as what the inner Revenue Service thinks, as well as the IRS position is crystal clear: Tips are taxable income.

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I then asked her to bring all the documents, past and present, regarding her finances sent by banks, and etc. After another check which lasted for almost half an hour I reported that she was currently receiving a pension from her late husband's employer which the taxman already knew about but she'd failed to report that income in their tax version. She agreed.

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