This educational guide is based on the linked primary sources. It is not a Court publication, is not affiliated with the Court, and is not legal advice.
In brief
Overview
According to EILEEN J. O'CONNOR, the case concerns the authority of the Commissioner of Internal Revenue to assess FICA taxes on employers.
According to EILEEN J. O'CONNOR, it involves sections 6201, which authorizes the Treasury to make tax assessments, and 3111, which imposes a tax on employers.
According to EILEEN J. O'CONNOR, a central dispute is whether tips are considered wages under section 3121(q), which would make them subject to FICA tax.
The United States (petitioner) argues that the Government’s formula for calculating tip income exaggerates the amount owed and that employers lack the information needed to defend the assessments.
According to Ms. Power, the respondent argues that the tax is not authorized and that the burden of proof should lie with the government.
- [1] e868ce3a8b010db34b9d-r1-a742e6baafb3f0eb.pdf, p. 3
- [2] e868ce3a8b010db34b9d-r1-a742e6baafb3f0eb.pdf, p. 3
- [3] e868ce3a8b010db34b9d-r1-a742e6baafb3f0eb.pdf, p. 11
- [4] e868ce3a8b010db34b9d-r1-a742e6baafb3f0eb.pdf, p. 36
- [5] e868ce3a8b010db34b9d-r1-a742e6baafb3f0eb.pdf, p. 53
- [6] e868ce3a8b010db34b9d-r1-a742e6baafb3f0eb.pdf, p. 27
Background and question before the Court
According to EILEEN J. O'CONNOR, the core issue is the authority of the Commissioner to assess FICA taxes imposed by Congress on employers.
According to Justice, the Court asked whether the assessment is presumptively correct under the statute.
What each side argues
United States (Petitioner)
According to Government, the Government’s formula for calculating tip income exaggerates the amount owed to the Treasury.
According to Petitioner, employers lack the information needed to defend the assessments because Congress has prohibited them from obtaining such data.
According to Petitioner, the burden of proof should rest with the government, which is in the best position to produce the records.
Fior D'Italia, Inc. (Respondent)
According to Ms. Power, the tax on tips is not authorized by Congress, so the assessment lacks legal basis.
According to Ms. Power, because the tax is unauthorized, the burden of proof and the presumption of correctness shift to the government.
According to Ms. Power, the employer does not know how credit‑card tips are distributed, making accurate tax calculation impossible.
What happened at oral argument
Chief Justice Rehnquist asked which statutory section was being discussed.
A Justice asked where the taxpayer would obtain the information needed for the assessment.
According to Justice, a Justice questioned whether the assessment is presumptively correct under the statute.
A Justice asked whether the word “deemed” appears in the statute imposing the tax.
According to Justice (unspecified), according to Justice (unspecified), a Justice inquired how long the IRS has been making these assessments.
According to Justice (unspecified), according to Justice (unspecified), a Justice asked why the Government has not used notice‑and‑comment rulemaking to develop a fair formula for tip income.
- [1] e868ce3a8b010db34b9d-r1-a742e6baafb3f0eb.pdf, p. 4
- [2] e868ce3a8b010db34b9d-r1-a742e6baafb3f0eb.pdf, p. 19
- [3] e868ce3a8b010db34b9d-r1-a742e6baafb3f0eb.pdf, p. 23
- [4] e868ce3a8b010db34b9d-r1-a742e6baafb3f0eb.pdf, p. 52
- [5] e868ce3a8b010db34b9d-r1-a742e6baafb3f0eb.pdf, p. 53
- [6] e868ce3a8b010db34b9d-r1-a742e6baafb3f0eb.pdf, p. 53
What the Court decided
Why it matters
According to EILEEN J. O'CONNOR, the case is about the authority of the Commissioner to assess FICA taxes on employers.
According to Ms. Power, because the tax is not authorized, that affects the burden of proof and the presumption of correctness.
Terms to know
No glossary terms are available for this guide.
Primary sources
Read the source materials on the official site or open the immutable repository copy used for this guide.
- e868ce3a8b010db34b9d-r1-a742e6baafb3f0eb.pdforal argument transcript
Guide generated September 19, 2026. Automated validation accepted this version.