Obligation of the Office of the Vice President

to Pay State or City Accommodations Taxes

The Office of the Vice Presidency is immune from state taxation by virtue of the 

Supremacy Clause of the Constitution, and is thus not required to pay a state or city 

accommodations tax on hotel bills for which it is billed directly.

November 19, 1981

MEMORANDUM OPINION FOR THE DEPUTY COUNSEL TO 

THE VICE PRESIDENT

This responds to your request for our opinion whether the Office of 

the Vice President (OVP) is required to pay accommodations taxes 

imposed pursuant to state law or city ordinance. The situation which 

has occasioned your inquiry is that in which OVP reserves a block of 

rooms for an official trip, is billed by and pays directly to the hotel. 

The hotel has sought to collect as well a state or city accommodations 

tax imposed on all hotel bills.1 Under familiar principles of constitutional law, neither states nor cities may tax an instrumentality of the 

federal government. Thus OVP is, in the circumstances you describe, 

not required to pay the tax.

Since the early days of the Republic, the Supreme Court “has adhered to the rule that States may not impose taxes . . . the legal 

incidence of which falls on the Federal Government.” United States v. 

County o f Fresno, 429 U.S. 452, 459 (1977) citing M'Culloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819). See, e.g., United States v. Mississippi

Tax Comm'n, 421 U.S. 599 (1975); First Agricultural Nat. Bank v. Tax

C om m ’n, 392 U.S. 339 (1968); Kern-Limerick, Inc. v. Scurlock, 347 U.S. 

110 (1954). The federal government’s immunity from state taxation is 

“inherent in the Supremacy Clause of the United States Constitution,” 

and no levy may thus be imposed upon any of its activities without its 

consent. United States v. County o f Fresno, supra, 429 U.S. at 453.

To be sure, the Court has also recognized the propriety of state taxes 

in certain situations where the economic incidence of the tax may be

1 You have enclosed as an example of such a tax the Illinois Hotel Operators’ Occupation Tax Act, 

which by its terms applies to all persons renting rooms “even if the person paying for the room may 

be a government agency or instrumentality (Federal, State or Local, or even a foreign government).” 

It is not significant for the constitutional issue that this tax is expressly imposed on instrumentalities of 

the federal government.

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said to fall on the federal government. For example, in United States v. 

County o f Fresno, supra, the Court ruled that a state may tax federal 

employees on their possessory interests in housing owned and supplied 

to them by the federal government as part of their compensation. In 

doing so, it noted that “[s]o long as the tax is not directly laid upon the 

Federal Government, it is valid if nondiscriminatory . . . or until Congress declares otherwise.” 429 U.S. at 460. See also Graves v. New York

ex rel. O ’Keefe, 306 U.S. 466 (1939) (states may tax federal employee’s 

wages); James v. Dravo Contracting Co., 302 U.S. 134 (1937) (state may 

tax gross receipts of federal contractor); City o f Detroit v. Murray Corp.,

355 U.S. 489 (1958) (state may tax private contractor’s use of government-owned property). These cases make clear, however, that a state or 

city tax is proper only if “[t]he ‘legal incidence’ of the tax . . . falls 

neither on the Federal Government nor on federal property,” and only 

if it does not “threaten[ ] to obstruct or burden a federal function.” 429 

U.S. at 464.

Because the state and city accommodations taxes described in your 

letter would fall directly on an agency of the federal government and 

“burden a federal function,” OVP has no obligation to pay them.2

T h e o d o r e B. O lso n

Assistant Attorney General

Office of Legal Counsel

2 We note that the federal procurement regulations expressly state that “purchases made by the 

Government itself are exempt from State and local sales and use taxes. . . 41 C.F.R. § 1-11.302 

(1980). Government agencies are directed to make use of this exempt status “to the fullest extent 

available. . Id. It is true that under current administrative practice federal employees who secure 

and pay for hotel rooms while traveling on government business may be taxed, on the theory that the 

government is not a party to the transaction, even though the government is obligated to reimburse 

the employee for all of his expenses See, e.g., 55 Comp. Gen. 1278 (1976). We do not doubt that this 

practice could be changed to require that federal employees be exempted from state or local taxes in 

such situations.

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