- So every year you teach at business schools
in Russia, Hong Kong, and China.
- Yeah, I do.
- You're a citizen of the United States.
Is that income taxed in the United States?
- That's a good question.
US tax rules require that all US citizens
pay income tax on their worldwide income,
on their worldwide income.
so I pay US income tax on all of this income,
even though I do the work in Russia,
and Hong Kong, and China.
- So you're income is taxed twice?
- No, on my US income tax return,
I receive a tax credit for all taxes I pay
I pay to foreign countries
to foreign countries, and we all remember what
and we all remember what a tax credit is.
a tax credit is.
But I do pay some additional tax,
because these days, US personal income tax rates
U.S. personal income tax rates are higher
are higher than the rates in other countries.
than the rates in other countries.
So I pay US income tax in the amount
of the extra tax due at those higher US rates.
with those higher U.S. rates.
- So how about state income tax?
You're a resident of the state of Utah
in the United States, do you pay Utah State income tax
Do you pay Utah state income tax
on this Russia, Chinese, and Hong Kong income?
- Ah, well you've hit on a bit of a sore point there.
- Well, you've hit on abit of a sore point there.
For three years, I discussed this issue
with the Utah State Tax Commission.
- Oh now this sounds interesting,
what was the point of the dispute?
- Well simply stated, I claimed
I claimed that Utah state tax income rules
that Utah State tax income rules do not require me
do not require me to pay stateincome tax on business income
to pay state income tax on business income
generated outside the United States.
- And I would guess that the Utah State Tax Commission
was of the opinion that you are required
to pay Utah tax on your foreign income?
on your foreign income.
- Basically, yes.
- Yeah and what happened?
- Yeah, and what happened?
- Well, the Utah State Tax Commission handed down
an official ruling saying that my reading
of the state tax code was wrong
and that I owed back taxes.
- So, what'd you do?
- I paid the taxes.
- Well, I paid the taxes.
Tax planning to pay the minimum amount of legally
owed tax, that's one thing, but tax evasion,
that's one thing, but tax evasion,
that's a crime.
So I sent in the tax.
- So we need to make sure that we know the difference
between legal tax planning and illegal tax evasion.