Hon, .Robert S. Calvert Opinion No, V-916, 

Comptroller of Public Accounts 

Austin, Texas Re: IS a club operated by civilian employees of the army’ 

on an army post subject to 

occupation tax. 

Dear Mr, Calvert: 

You present for the opinion of this office the liability 

of the civilian club operated by the civilian employees of the lyote 

Air Force Base at Pyote, Texas, for certain occupation taxes imposed by Article 7047, V,C.S. 

Specifically. there are involved six slot machines, a 

six-lane bowling alley, and a theatre, all taxable under different 

section? of Article 7047, V,C.S., unless they are exempt under the 

facts submitted by reason of Federal immunity, Concededlly, all 

these activities are operated by a club organized and prom&d by 

the civilian employees of a Federal Air Base at Pyote, Texas, and 

all are operated upon the military reservation. This fact alone, 

bowever, is not sufficient to afford 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, 50 S.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 not prevail here, 

The only question, therefore, is whether the club is such a Federal 

instrumentality as to be immune from the imposition of the taxes 

here involved. 

The case closest to that under consideration is Standard ’ 

Oil Co. of California v. Johnson, 316 U.S. 481 (1942). There Californiapting to impose a license tax on the privilege of distributing motor vehicle fuel when this fuel was sold by the distributor to Post Exchanges. The California statute made the tax inapplicable “*to any motor vehicle fuel sold to the government of the United 

States or any department thereof. *’ 
Hon. Robert S. Calvert. Page 2 (V-916) 

The tests used by the court in the above case in determining the status of post exchanges would seem to be applicable in 

determining the status of the civilian activities involved in this case, 

since the Air Force Judge Advocate claims that: 

‘“It has been determined that the facilities mentioned are operated by the Civilian Welfare Fund on 

the base, set up under authority of AR 210-100 dated 15 

February 1946. No part of the profit from the operation 

of said activities inures to the benefit of any individual. 

This fund is supervised and controlled by the Department of the Air Force and is a non-appropriated fund 

consisting of cash and other assets accumulated to finance 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 to be an instrumentality of the Government and, as such, entitled 

to all the privileges and immunities thereof.” 

The tests used in the Standard Oil Case, supra, are set 

out as follows: 

“‘On July 25, 1895, the Secretary of War, under 

authority of Congressional enactments promulgated 

regulations providing for the establishment of post exchanges. These reg,ulations have since been amended 

from time to time and the exchange has become a regulax feature of Army posts. That the establishment and 

control of post ex~ohanges have been in accordance with 

regulations rather than specific statutory directions 

does not alter their status, for authorized War Department regulations have the force of law. 

“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 of War for construction, equipment, and 

maintenance of suitable buildings for post exchanges. 

In 1933 and 1934, Congress ordered certain moneys 

derived from disbanded exchanges to be 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 of the United States. 
Hon. Robert S, Calvert, Page 3 (V-916) 

“‘The commanding officer of an Army Post, subject to the regulations and the commands of his own 

superior officers, has complete authority to establish 

and maintain an exchange. He details a post exchange 

office to manage its affairs. This officer and the commanding officers of the various company units make up 

a council which supervises exchange activities. None 

of these officers receives any compensation other than 

his regular salary. The object of the 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 of the financial obligations of the exchange. But government officers, under 

government regulations, handle and are responsible for 

all funds of the exchange which are obtained from the 

companies or detachments composing its membership. 

Profits, if any, do not go to individuals. They are used 

to improve the soldiers’ mess, to provide various types 

of recreation, and in general to add to the pleasure and 

comfort of the troops.“’ 

The court then said: 

“‘From all of this, 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 of the War Department, 

share in fulfilling the duties entrusted to it, and partake 

of whatever immunities it may have under the constitution and federal statutes. In concluding otherwise the 

Supreme Court of California was in error.” 

In another case the court in construing a statute of South 

Carolina somewhat similar to our statute here involved held that 

an army post exchange was a Federal instrumentality engaged in 

governmentali functions, so that a State statute imposing a license 

tax, graduated in accordance with volume of sales, upon every pcrson for the exercise of the privilege of engaging in selling such articles as beer, wine, tobacco, soft drinks, playing cards. and candy, 

and requiring the procurement by the licensee of a license for each 

place oi business operated by him, wou Idbetlonal, as on 

rnterterence wrth the activities of the United States, if enforced with 

respect to the lawful selling activities of any army post exchange. 

United States v. Query, 37 F. Supp. 972 (E.D.S.C. 1941, aff. 121 F.2d 

631, cert. den. 514 U * S o 685). The taxes here involved, imposed under our statute, are in the nature of license 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 of an army 

air base is that a Civilian Conservation Corps camp exchange has 

its existence by virtue of congressional legislation, Act June 28, 

1937, 16 U.S.C.A. 584 et seq., whereas a civilian club of the army 

has its existence by virtue of army regulations, This difference 

is not material, for army regulationi have the force of law. Standard Oil Co. of California v. Johnson, supra. The injunction was 

granted, and in the course of its opinion the court said: 

\ 

‘“In performing its constitutional functions, the 

United States must operate through an instrumentality 

or agency. Here it operates through the agency of the 

camp exchange as an integral part of the Civilian Conservation Corps. The tax falls directly upon the camp 

exchange and the provisions of the state statute directly affect this instrumentality of the federal government 

selected for the exercise of its powers. The state tax 

in effect is upon the government’s transactions in the 

exercise of its lawful power. The Civilian Conservation 

Corps camp exchange is of such a character and so intimately connected with the exercise of the operation of 

the Civilian Conservation Corps, the exercise of a power granted by the Act of Congress authorizedby the 

Federal Constitution, that it is such a direct interference with the functions of the government itself as to 

be clearly beyond the taxing power of the state. 

“‘The tax imposed is a license tax and not a property one; being an excise tax it is laid on the enjoyment of a privilege, and in the case at bar falls upon 

the means by which the federal government undertakes 

to perform its lawful function. The state statute places 

within the hands of the Tax Commission the power to 

retard, impede, and burden the operation of the Civilian Conservation Corps camp exchange. The slightest 

degree of such interference or burden is prohibited.” 

We have examined AR 210-100 under which the civilian 

club of the Pyote Air Base is set up and operated, and there appears 

little, if anything, to distinguish it from 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 of the Federal Government, it is exempt from 

the taxes in question by reason of Federal immunity, unless Congress should consent to its being taxed. 

SUMMARY 

A civilian club organized,and maintained under 

army regulations on an army 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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