Source: https://case-law.vlex.com/vid/347-u-s-110-606536010
Timestamp: 2020-05-27 22:51:23
Document Index: 780064170

Matched Legal Cases: ['§ 2', '§ 7', '§ 2', '§ 84', '§ 84', '§ 84', '§ 151', '§ 7', '§ 7', '§ 400', '§ 2', '§ 4']

347 U.S. 110 (1954), 115, Kern Limerick, Inc. v. Scurlock - Federal Cases - Case Law - VLEX 606536010
Citation: 347 U.S. 110, 74 S.Ct. 403, 98 L.Ed. 546
Party Name: Kern Limerick, Inc. v. Scurlock
74 S.Ct. 403, 98 L.Ed. 546
Kern Limerick, Inc.
The Arkansas Gross Receipts Tax Law of 1941, which levies on sellers an excise tax of 2% on the gross receipts from all sales in the State, held unconstitutional as applied to the transactions here involved, whereby private contractors procured in Arkansas two tractors for use in constructing a naval ammunition depot for the United States under a cost plus fixed fee contract entered into with the Navy Department under §§ 2(c)(10) and 4(b) of the Armed Services Procurement Act of 1947, and providing that, in procuring articles required for accomplishment of the work, the contractor should act as purchasing agent for the Government, title to the articles purchased should pass directly from the vendor to the Government, and the Government should be directly liable to the vendor for payment of the purchase price. Pp. 111-123.
(c) The restrictions in § 7(b) on delegations of authority are not applicable to actions under § 2(c)(10). Pp. 115-116.
(d) Under the contract here involved, the United States was the real purchaser; the naming of the Government as purchaser was not merely colorable, and did not leave the contractor the real purchaser. Alabama v. King & Boozer, 314 U.S. 1, distinguished. Pp. 116-122.
in Arkansas for use in the construction of a naval ammunition depot for the United States. 221 Ark. 439, 254 S.W.2d 454. On appeal, to this Court, reversed, p. 123.
The applicable sections of the Gross Receipts Tax Law levy an "excise tax of two (2%) per centum upon the gross proceeds or gross receipts derived from all sales to any person." § 84-1903. This is a sales tax, not a use tax.1 It is to be paid to the Tax Commissioner by the seller, § 84-1908. He is the taxpayer, § 84-1902(e), and "shall collect the tax levied hereby from the purchaser."
The construction contract had, so far as pertinent here, the provisions as to "Materials Purchases" which are set out in the margin.2 It was entered into by the Department of the Navy "under the authority of Sections 2(c)(10) and 4(b)" of the Armed Services Procurement
Act of 1947. 62 Stat. 21, 41 U.S.C. (Supp. V) § 151 et seq. These sections authorized this cost plus a fixed fee contract by negotiation without advertising.3
to buy nails, lumber, cement, tractors, etc., which were not to be used by the Navy but by WHMS [in this instance] to construct, as independent contractors, the Ammunition Dump.
SEC. 9. (b) The term "supplies" shall mean all property except land, and shall include, by way of description and without limitation, public works, buildings, facilities, ships, floating equipment, and vessels of every character, type and description, aircraft, parts, accessories, equipment, machine tools and alteration or installation thereof.4
Supreme Court is, as we understand it, that the Procurement Act does not permit [74 S.Ct. 407] a delegation to private contractors of any authority to purchase for or pledge the credit of the United States, even though these contractors have contracts for construction or supplies on a cost-plus basis. Further, it follows from the Arkansas contention, that without such statutory authority, the purchase by the contractor was not for the United States, but for itself. This contention is based on the language of the Procurement Act, §§ 7(a) and (b).5 Pursuant to § 7(a), the Secretary of the Navy, somewhat obscurely, appears to have delegated his authority to determine the necessity for a negotiated contract to a Navy Contracting Officer asserted in the contract, without exception, to be the Chief of the Bureau of Yards and Docks. See 32 CFR §§ 400.201-5 and 402.101. That official negotiated the contract, as it stated and as is admitted by stipulation, under the authority of § 2(c)(10) of the Procurement Act -- "for supplies or services for which it is impracticable to secure competition."
The Government asserts that §§ 4(a) and (b) authorize this contract. Under them, negotiated contracts such as this "may be of any type which . . . will promote the best interests of the Government." Under such a provision, it seems that the determination to use purchasing agents is permissible. Where there is no prohibition of a particular type of contract and no direction to use a particular type, the contracting officers are free to follow business practices.6 We conclude that the Navy Department has power to negotiate contracts which provide for private purchasing agents for supplies and materials.
With this determination that the provisions of the contract are within the authority of the Procurement Act, we turn to examine the validity of the argument that the naming of the Government as purchaser was only colorable, and left the contractor the real purchaser and the transaction subject to the Arkansas tax. Alabama v. King & Boozer, 314 U.S. 1, is relied upon primarily. We consider this argument under the assumption, made by the Supreme Court of Arkansas, that the contract was designed to avoid the necessity in this cost-plus contract of the ultimate payment of a state tax by the United States.
We are mindful, too, of the careful attention Congress has given in recent years to a proper adjustment of tax [74 S.Ct. 408] liabilities between the federal and the state sovereignties. Congress has been solicitous to see that states and their subdivisions are not unduly burdened by federal acquisition
of property taxable by the states when otherwise held. It understands the burdens on local public agencies from the new federal installations and their accompanying personnel. Provisions deemed suitable have been made.7 These...
40 T.C. 408 (1963), 93310, Bateman v. C. I.R.