Gerald C. Mann

Agricultural &Mechanical College of Texas College Station, Texas Opinion No. O-4617 Re: Collection of inspection tax
on fertilizer distributed in Texas by the Agricultural Adjustment Attention: G. S. Fraps State Chemist. Administration.

Dear Sir:

You request an opinion of this Department on the question whether the inspection tax imposed by Texas law on commercial fertilizers sold in Texas maybe collected from the Agricultural Adjustment Administration, which distrtbutes in Texas to Texas farmers fertilizers purchased by it outside of Texas.

Texas Revised Criminal Statutes, 1925, Arts. 1709 through 1720, andCivil Statutes, Arts. 94through 108, regulate the sale of commercial fertilizer,within the State of Texas. TO defray expenses of inspection and enforcement of these regulatory laws, an inspection fee of 253 per ton is provided for commercial fertilizer “sold or exposed, or offered for sale in this State” by “all corporations, firms or persons”

.

TheAgricultural Adjustment Kdministration is a federa, agency or instrumentality. Fromyour letter andaccompanying documents it appears that the A.A.A. is distributing to farmers in Texas commercial fertilizer purchased by the A.A.A. outside of Texas, in the following manner: Thefarmer is furnished fertilizer on the basis of a price of so muchper hundred pounds. Tothe extent of the quantity of fertilizer furnished the farmer at the stipulated price, whenthe farmer makes application for his Agricultural Conservation Paymentthe amountof fertilizer theretofore furnished to him by the B.A.A. is deducted from that payment.

This activity of the A.A.A. is authorized by 16U.S.C. 1940ed. 590h(b), which provides:

I’(b) Subject to the limitations provided in subsection (a) of this section, the Secretary shall have power to carry out the purposes specified in clauses Cl), (21, (31, (41, and (5’) of section 7(a) by making payments or grants of other aid to agricultural producers, including tenants and sharecroppers, in amounts determined by the Secretary to be fair andreasonableAgricultural &Mechanical College of Texas, page 2 (O-4617)

in connection with the effeottidtion of such purposes during the year with respect to which such payments
or grants are made, andmeasured by (1) their treatment or use of their land, or a partthereof, for soil restoration, soil conservation, or the prevention of erosion; (2) changes in the use of their land; (3) their equitable share, as determined by the Secretary, of the normal national production of any commodity or commodities required for domestic consumption;
or (4) their equitable share, as determined by the Secretary, of the national production of any commodity

or commodities required for domestic consumption and exports adjusted to reflect the extent ‘to which their utilization of cropland onthe farm conforms to farming practices which the Secretary determines will best effectuate the purposes specified in section 7 (a); or 

### (5)any combination of the above. In arid or semiarid sections, (1) and (2) above shall be construed to cover water conservation andthe beneficial

use of water on individual farms, including measures to prevent run-off, the building of check damsand ponds, andproviding facilities for applying water to the land. In determining the amountof anypayment
or grant measured by (1) or (2) the Secretary shall take into consideration the productivity of the land affected by the farming practices adopted during the year with respect to which such payment is made. In carrying out the provisions of this section in the continental United States, the Secretary is directed to utilize the services of local andState committees selected as hereinafter provided. TheSecre.tary shall designate local administrative areas as units for administration of programs under this section. Nosuch local area shall include more than one county or parts of different counties. Farmers within any such local administrative area, andparticipating or cooperating in programs administered within such area, shall elect annually from amongtheir numbera local committee of not morethan three membersfor such area and shall also elect annually from amongtheir numbera delegate to a county convention for the election of a county committee. The delegates from the various local areas in the county shall, in a county convention, elect, annually, the county committee for the county which shall consist of three memberswhoare farmers’in the county. Thelocal committee shall select a secretary andmayutilize the county agricultural extension agent for such purpose. The county committee shall select a secretary whomaybe the county agricultural extension ag.ent

. If such county,agricultural extension apent shall not have been elected secretary ofAgricultural &Mechanical College of Texas, 

### page3 (O-4617)

amemberof

-. - such committee, he shall be ex officio the county commi.ttee. The county agricultural extension agent shall not have the power to vote. In any~county in which there is only one local committee the local committee shall also be,thecounty committee. In each State there shall~be aState committee for the State composed of not less than three or more than five farmers whoare legal residents of the State andwho

are appointed by the Secretary. The State director of the Agricultural Extension Service shall be ex officio amemberof such State committee. The ex officio membersof the, county andState committees shall be in addition t‘othe numberof membersof such committees hereinbefore specified. The Secretary shall makesuch regulations as are necessary relating to the selection andexercise of the functions of the respective committees, andto the administr,ation, through such committees, .of such programs. In carrying out the provisions of this section, the Secretary--shall, as far as practicable, protect the interests of tenants and sharecropper,s; is authorized to utilize the agri,cultural extension service andother approved agencies; shall accord such recognition and encouragement to producerowned~andproducer-controlled cooperative associations
as will be in harmonywith the policy toward cooperative associations set forth in existing Acts of Congress andas will tend to promot’e efficient methods of marketing and distribution; shall not have power to acquire anyland oreany right or interest therein; shall, in every practicable manner, protect the interests of small producers; and shall in every practical way encourage, andprovide for soil-conserving and soil-rebuilding practices rather than the growing of soil-depleting crops. Rules andregulations governing payments or grants under this subsection shall be as simple anddirect as ,possible, and, wherever practicable, they shall be classified on two bases: (a) ,Soil-depleting crops andpractices, (b) soil-building crops andpractices. Notwithstandins anvother provision of law. in making available conservation materials consistin? of seeds; seed ino,culants. fertilizers. liming andother souconditionina mate’rials. trees. or slants. or in making available s;il;c;n;e;;- or soil-buildins servic,es. to asricultura D 0 u e under this subsection. the Secretarv mavmakeoavments. in advance of determination of gerformance bv the producers. to aersons whofill uur-

. . - ‘chase orders coverins, aaoroved conservation materials pr coverinn soil-conservinn or soil-building services, fu ni hed to D oducers at not to exceed a fair Drice fi~edsin accordance with reaulations to be orescribedAgricultural &Mechanical College of Texas, page 4 

### (O-4617)



### Jwtheacretarv.orwhomnbr Services totheSetretarv in uverina to producers aDDroved COIISB~VBThe agricultural conservation program in which the United States is engaged is designed to conserve the soil~resources of the U. S. Section 

### 8,clause 1, of the Constitution of the U. S. confers upon the Congress the power “to lay and collect taxes, duties, imposts, andexcises, to

.:.

. provide for the

. . . general welfare of the United States;

. . .I1 Thepower exercised by the Congress in the establishment of the Soil Conservation Program is the power necessarily implied from the power thus expressly conferred by the Constitution, to wit, the right to expend the “taxes, duties, imposts, andexcises” collected for the purpose of promoting “the general welfare of the United States”

.

It maywell be doubted that the distribution of the fertilizer in Texas bythe A.A.A. constitutes a “sale”

, within the purview of our State laws. It would seemthat the fertilizer is “granted” to the farmer in advance of performance of the conditions entitling himto a cash grant or payment; that the fertilizer grant is in lieu of the cash grant, andthat the price
or value of the fertilizer. is established in order that the amountof cash to be deducted from the cash grant or payment may be determined. Whether this constitutes a sale, within the meaning of the Texas law, wefind unnecessary to determine, for we are of the opinion that, even though the transaction is a sale, the inspection tax or fee cannot be collected from the Federal agency.

It is a familiar princi le established since McCulloch

v. Maryland, 4Wheat. 

### 316 (U.S. 1 

### 193,that the States cannot 8 interfere with, burden or impede the Federal government or its authorized instrumanta~ities in the exercise of any of the powers vested by the Constitution of the United States in the Congress of the United States. Theprinciple has been announced most frequently in those cases involving an attempt to collect
aState tax from aFederal instrumentality. equal application to the enforcement of StateIt has, however, regulatory laws against Federal instrumentalities. Johnson v. 

### 51;HuntTV.U.S., Maryland, 

### 254U.S.



### 278U.S. 

### 96;Arizona v. California, et al, 283 U.S. 423; Ohio v. Thomas, 

### 173U,S. 

### 276;Easton v. Iowa, 188 U.S. 220; Exparte Willman, 277 Fed. 

### 819;Posey v. T.V.A., 93F.(2) 

### 726;United States v. Query, 21 Fed.Supp. 

### 784. ~../. ^

Agricultural &Mechanical College of Texas, page 

### 5 (O-4617)

Theexaction presently involved is an inspection fee, rather than atax. Butwhether it be atax or an inspection fee, anexertion of the taxing power or of the police power of the State, it operates directly andimmediately upon the Federal instrumentality in the exercise of the power conferred upon it by the Congress, and directly burdens the lnstrumentality in the exercise of that power. The agency of the United States is immunefrom andcannot be required to pay the fee or tax involved.

Thefee or tax cannot be justified by reasoning that there is no real burden because the instrumentality might pass the fee or tax onto the farmer by increasing the price of the fertilizer, or might require those fromwhomit purchases the fertilizer outside of the State to comply with Texas regulations. Tstithequal plausibility every state tax onFederal activities might bejustified by the observation that no real burden exists because the amountof the State tax maybe passed onby the Federal government through the collection of increased Federal taxes.

The situation here is not to be confused with the cases where the burden or regulation affects the Federal instrumentality only remotely or indirectly, as in the case where the tax
or regul&tion operates directly upon a private person or corporation not an instrumentality or agent of the Federal government. See Alabamav. King &Boozer, 

### 314U.S. 1; Jamesv. Dravo Contracting Co., 

### 302U.S.134. Thus a private person, firm, or corporation selling commercial fertilizer to the Agricultural Adjustment Administration in Texas is subject to its laws; the fact that the sale is madeto the Federal instrumentality does not clothe the vendor with the immunity possessed by the vendee.

Likewise, we are not to be understood as holding that employees of the United States and its agencies secure a general immunity from State laws while engaged in the performance of their duties. Such State regulations as affect only incidentally the modeof carrying out those duties maywell apply to the emplz;e;~s of Federal Instrumentalities (see Johnson v. Maryland, ; the.immunity, however, does extend to those regulations which directly impede or burden the employee in the discharge of his Federal duties.
APPROVED

JUL

### 13,1942 /s/ Gerald C. Mann ATTORNEY

GENERAL

OFTEXAS APPROVED:

OPINIONCOMMITTEE BY: BWB,CHAIRMAN RWrmp:wb Yours very truly ATTORNEY

GENERAL

OFTEXAS By/si R. W.Fairchild R. W.Fairchild, Assistant