Source: https://supreme.justia.com/cases/federal/us/345/495/
Timestamp: 2019-04-24 12:51:41+00:00

Document:
Appellant, a private corporation, entered into a contract with the Federal Government, under which, for a fee, appellant stored government-owned gasoline in tanks in Tennessee owned by appellant or leased by appellant from another private corporation. The Government agreed to assume liability for all state taxes. Tennessee levied on appellant a "special privilege tax" of six cents per gallon "for engaging in and carrying on such business" in the State.
Held: Sovereign immunity does not prohibit this tax. Pp. 345 U. S. 496-501.
(a) United States v. Allegheny County, 322 U. S. 174, distinguished. Pp. 345 U. S. 498-499.
(b) The Constitution does not extend sovereign exemption from state taxation to corporations or individuals, contracting with the United States, merely because their activities are useful to the Government or because the tax would burden the Government financially. P. 345 U. S. 500.
(c) Tennessee has not discriminated against the Federal Government by denying immunity in this case after recognizing the immunity of a public body from the same tax in Tennessee Oil Co. v. McCanless, 178 Tenn. 683, 157 S.W.2d 267, where the facts were different. Pp. 345 U. S. 500-501.
194 Tenn. 377, 250 S.W.2d 659, affirmed.
The Supreme Court of Tennessee sustained the validity of a tax levied on appellant under 2 Williams Tenn.Code §§ 1126-1147, for the privilege of storing government-owned gasoline in the State for the Government. 194 Tenn. 377, 250 S.W.2d 659. On appeal, to this Court, affirmed, p. 345 U. S. 501.
These are appeals from the Supreme Court of Tennessee, affirming a Chancery Court judgment for some $196,000 in favor of the State Commissioner of Finance and Taxation, against Esso Standard Oil Co., the party of record in No. 330. Ultimately liable, the United States intervened in that litigation and brought a separate appeal here, No. 378. It contended that the State tax involved in barred by principles of sovereign immunity. This is a test case. We are told that, if the tax is sustained, a liability for upwards of $4,000,000 will result.
the Services and the Allies. The Air Force, in particular, then arranged for transportation of its various allotments -- sometimes by government carrier -- from the refineries to the nearest consuming point.
We are concerned with certain lots of Air Force fuel produced in the South at various plants and shipped through Memphis, Tennessee. It appears that, in 1943, a shortage of storage facilities developed in the area, forcing resort to privately owned tanks. Appellant Esso and the Lion Oil Company were able to provide such service through tanks at various points near Memphis. As a result, the Government entered into extensive contracts with Esso, which, in turn, rented the Lion tanks, providing that the Company would "render services . . . in receiving, storing, handling and loading Government-owned fuel." The Company's service charge ranged from 18/100 of a cent to 6 3/10 cents per gallon. The United States agreed to assume liability for all state taxes. Pursuant thereto, allotments of gasoline were moved by barge from refineries to these private tanks, stored there pending need, and later reshipped by truck to consuming air fields on order of the Air Force. The operations continued from 1943 through 1946 under several contracts of similar import.
cents for each gallon of distillate refined, manufactured, produced, or compounded by such distributor and sold, stored or distributed by him in this state, or shipped, transported or imported by such distributor into, and distributed, stored or sold by him within this state, during such year. . . ."
"every person who engages in the business in the state of refining, manufacturing, producing, or compounding gasoline or distillate, and selling or storing the same in this state, and also every person who engages in the business in this state of transporting, importing, or causing to be imported, gasoline or distillate into this state, and distributing, storing, or making original sales of the same in this state, for any purpose whatsoever."
Esso paid the required tax for the privilege of storing gasoline measured by the amount stored during the month of January 1944 -- the statute of limitations having run in regard to 1943 operations -- and sued to recover. The Government intervened in the trial court and entered its plea, echoed by Esso, that the tax was barred by the constitutional doctrine of intergovernmental immunity; that to construe the Tennessee statute as applicable to storage off gasoline owned by the United States makes it repugnant to the Constitution and void. Both the Chancery Court and the Court or Appeals rejected the claimed immunity and held the statute valid as applied. We noted our probable jurisdiction on appeal. 28 U.S.C. § 1257(2).
property of the Federal Government than it was in that case, and, in support of this claimed similarity, they point to the following factors: that the statute grew out of the state's effort to tax sales to the final consumer, that the tax is paid but once, and this by the first producer or importer, and that refunds when the fuel is subsequently exported are provided. Thus, the "true character" of the tax, as one "on property of the United States," it is claimed, is precisely the same as that, in Allegheny County.
Allegheny County, however, was quite different. The United States had leased certain machinery to the Mesta Machine Company. In imposing the state ad valorem property tax, Pennsylvania included in the Mesta assessment both the privately owned land and buildings and the government machinery. Id. at 322 U. S. 179-180, 322 U. S. 186. So the value of the federal property was, in part, the measure of the tax. We held the substance of this procedure was "to lay an ad valorem general property tax on property owned by the United States," Id. at 322 U. S. 185, and therefore invalid. Our holding was not "dependent upon the ultimate resting place of the economic burden of the tax." Id. at 322 U. S. 189.
Neither condition applies to the kind of governmental operations here involved. There is no claim of a stated immunity. And we find none implied. The United States, today, is engaged in vast and complicated operations in business fields, and important purchasing, financial, and contract transactions with private enterprise. The Constitution does not extend sovereign exemption from state taxation to corporations or individuals, contracting with the United States, merely because their activities are useful to the Government. We hold, therefore, that sovereign immunity does not prohibit this tax.
different results in the two cases thus accord with our conception of the operation of the Tennessee statute as a privilege tax.
THE CHIEF JUSTICE, MR. JUSTICE BLACK and MR. JUSTICE JACKSON dissent.
MR. JUSTICE FRANKFURTER, not having heard the argument, took no part in the consideration or decision of this case.
*Together with No. 378, United States v. Evans, Commissioner of Finance and Taxation, et al., also on appeal from the same court.
Pittman v. Home Owners Loan Corporation, 308 U. S. 21; Carson v. Roane Anderson Co., 342 U. S. 232; Dameron v. Brodhead, 345 U. S. 322.
Mayo v. United States, 319 U. S. 441, 319 U. S. 447; United States v. Allegheny County, supra.

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