Hon, .Robert S. Calvert Opinion No, V-916, Comptroller of Public Accounts Austin, Texas Re: ISa club operated by civilian employees ofthe army’
on an army post subject to occupation tax.

Dear Mr, Calvert:

You present for the opinion ofthis office the liability ofthe civilian club operated by the civilian employees of the lyote Air Force Base at Pyote, Texas, for certain occupation taxes imposed byArticle 7047, V,C.S.

Specifically. there are involved six slot machines, a six-lane bowling alley, and a theatre, all taxable under different section? ofArticle 7047, V,C.S., unless they are exempt under the facts submitted by reason ofFederal immunity, Concededlly, all these activities are operated by a club organized and prom&d by the civilian employees ofaFederal Air Base at Pyote, Texas, and all are operated uponthe military reservation. This fact alone, bowever, is not sufficient toafford Federal immunity frem taxation by the State.

There are two conditions under which Federal immunity from taxation by the State must be recognized. The first is where jurisdiction over the territory involved has been uncondffionally ceded by ihe State to the Federal Government, Surplus Trading Co. v. Cook, 281 U.S. 647, 50S.Ct, 455, 74 L.E, 1091 (lY30); and, second, %lZi% the tax is against a Federal instrumentality without cbngressional consent, Admittedly, the first condition does notprevail here, The only question, therefore, is whether the club is such a Federal instrumentality as tobe immune 

### from the imposition of the taxes here involved.

The case closest to that under consideration is Standard ’ Oil Co. ofCalifornia v. Johnson, 316 U.S. 481 (1942). There Californiapting to impose a license tax onthe privilege ofdistributing motor vehicle fuel when this fuel was sold by the distributor to Post Exchanges. The California statute made the tax inapplicable “*toany motor vehicle fuel sold to the government ofthe United States or any department thereof. *’Hon. Robert S. Calvert. Page 2 (V-916)

The tests used by the court inthe above case indetermining the status ofpost exchanges would seem tobe applicable in determining the status of the civilian activities involved in this case, since the Air Force Judge Advocate claims that:

‘“Ithas been determined that the facilities mentioned are operated by the Civilian Welfare Fund on the base, set upunder authority ofAR 210-100 dated 15 February 1946. No part ofthe profit from the operation ofsaid activities inures to thebenefit ofany individual. This fund is supervised and controlled by the Department of theAir Force and is a non-appropriated fund consisting ofcash and other assets accumulated tofinance welfare activities for all civilians regularly employed at the base.

‘“Since the above elements are present the activity is a federal one and consequently considered tobe an instrumentality ofthe Government and, as such, entitled toall the privileges and immunities thereof.”

The tests used inthe Standard Oil Case, supra, are set outas follows:

“‘OnJuly 25, 1895, the Secretary ofWar, under authority of Congressional enactments promulgated regulations providing for the establishment ofpost exchanges. These reg,ulations have since been amended from time to time and the exchange has become a regulax feature ofArmy posts. That the establishment and control ofpost ex~ohanges have been inaccordance with regulations rather than specific statutory directions does not alter their status, for authorized War Department regulations have the force oflaw. “Congressional recognition that the activities of post exchanges are governmental has been irequent. Since 1903, Congress has repeatedly made substantial appropriations to be expended under the direction of the Secretary ofWar for construction, equipment, and maintenance of suitable buildings for post exchanges. In 1933 and 1934, Congress ordered certain moneys derived from disbanded exchanges tobe handed over to the Federai Treasury. And in 1936, Congress gave consent to state taxation of gasoline sold by or through post exchanges, when the gasoline was not for the exclusive use ofthe United States.Hon. Robert S, Calvert, Page 3 (V-916)

“‘The commanding officer ofanArmy Post, subject tothe regulations and the commands ofhis own superior officers, has complete authority to establish and maintain an exchange. He details apost exchange office to manage its affairs. This officer and the commanding officers ofthe various company units make up a council which supervises exchange activities. None ofthese officers receives any compensation other than his regular salary. The object ofthe exchanges is to provide convenient and reliable sources where soldiers
can obtain their ordinary needs at the lowest possible prices. Soldiers, their families, and civilians employed
on military posts here and abroad can buy at exchanges. The government assumes none ofthe financial obligations ofthe exchange. But government officers, under government regulations, handle and are responsible for all funds ofthe exchange which are obtained from the companies or detachments composing its membership. Profits, ifany, do not go to individuals. They are used to improve the soldiers’ mess, to provide various types ofrecreation, and in general to add to the pleasure and comfort ofthe troops.“’

The court then said:

“‘From all ofthis, we conclude that post exchanges
as now operated are arms of the government deemed by it essential for the performance of governmental functions. They are integral parts ofthe War Department, share infulfilling the duties entrusted toit, and partake ofwhatever immunities it may have under the constitution and federal statutes. In concluding otherwise the Supreme Court ofCalifornia was in error.”

Inanother case the court in construing a statute ofSouth Carolina somewhat similar to our statute here involved held that
an army post exchange was a Federal instrumentality engaged in governmentali functions, so that aState statute imposing a license tax, graduated in accordance with volume ofsales, upon every **pcr** son for the exercise ofthe privilege ofengaging in selling such articles as beer, wine, tobacco, soft drinks, playing cards. and candy, and requiring the procurement by the licensee ofa license for each place oibusiness operated by him, wouIdbetlonal, as on rnterterence wrththe activities ofthe United States, if enforced with respect tothe lawful selling activities ofany army post exchange. United States v. Query, 37 F. Supp. 972 (E.D.S.C. 1941, aff. 121 F.2d 631, cert. den. 514 US * o685). The taxes here involved, imposed under our statute, are inthe nature oflicense or excise taxes, and we think the same rule pronounced by the court as to the South Carolina statute would apply.Hon. Robert S. Calvert, Page 4 (V-916)

Another case involving the South Carolina statute is United States v. Query, 21 F. Supp. 784 (E.D.S.C. 1937). This was an inJunction suit brought by the United States to enjoin the South Carolina Tax Commissioner from collecting taxes imposed by a South Carolina statute against a Civilian Conservation Corps &mp exchange. The only difference that we perceive between a Civilian Conservation Corps camp exchange and a civilian club ofan army air base is that a Civilian Conservation Corps camp exchange has its existence by virtue of congressional legislation, Act June 28, 1937, 16U.S.C.A. 584 et seq., whereas a civilian club ofthe army has its existence by virtue ofarmy regulations, This difference is not material, for army regulationi have the force of law. Standard Oil Co. ofCalifornia v. Johnson, supra. The injunction was granted, and inthe course of its opinion the court said: \

‘“Inperforming its constitutional functions, the United States must operate through an instrumentality
or agency. Here it operates through the agency ofthe camp exchange as an integral part of the Civilian Conservation Corps. The tax falls directly upon the camp exchange and the provisions ofthe state statute directly affect this instrumentality ofthe federal government selected for the exercise of its powers. The state tax in effect is upon the government’s transactions inthe exercise ofits lawful power. The Civilian Conservation Corps camp exchange is ofsuch a character and so intimately connected with the exercise ofthe operation of the Civilian Conservation Corps, the exercise ofa power granted by the Act ofCongress authorizedby the Federal Constitution, that it is such a direct interference with the functions ofthe government itself as to be clearly beyond the taxing power ofthe state.

“‘The tax imposed is a license tax and not aproperty one; being an excise tax itis laid onthe enjoyment ofaprivilege, and inthe case at bar falls upon the means by which the federal government undertakes toperform its lawful function. The state statute places within the hands ofthe Tax Commission the power to retard, impede, and burden the operation ofthe Civilian Conservation Corps camp exchange. The slightest degree ofsuch interference or burden is prohibited.”

We have examined AR 210-100 under which the civilian club ofthe Pyote Air Base is set upand operated, and there appears little, ifanything, to distinguish itfrom a post exchange, which the. ., . Hon. Robert S. Calvert, Page 5 (V-916) *,

.

courts have held to be a Federal instrumentality and, therefore; exempt from State taxation. So long as such club continues to be
an instrumentality ofthe Federal Government, it is exempt from the taxes inquestion by reason of Federal immunity, unless Congress should consent to its being taxed.

SUMMARY

A civilian club organized,and maintained under army regulations onanarmy post is a Federal instrumentality similar to post exchanges and is immune from a State occupation tax without congressional consent. Surplus Trading Co. v. Cook, 2g1 U.S. 647 (1930); Standard Oil Co. **of,**California v. Johnson, 316 U.S. 481

‘(lY42); United States v. Query, 121 &‘.Zd 631; United States v?Iiiery, 21 r’.w84 (1938); AR 2m

Yours very truly

ATTORNEYGENERALOFTRXAS

LPL/mwb BY

APPROVED

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