Opinion ID: 1771648
Heading Depth: 1
Heading Rank: 3

Heading: Inclusion of postage

Text: The parties stipulated that, with respect to the Second Audit Period only, the use-tax base included plaintiff's postal charges incurred in mailing catalogs and flyers to Mississippi residents. The stipulated amount of use tax allocable to said postage charges is $100,965.00, plus interest of $44,455.00. Plaintiff raises several arguments challenging the inclusion of postage in the use-tax base. Relying upon Mississippi Sales and Use Tax Rule 51(b) and Mr. Beck's testimony, plaintiff asserts it was error to impose a compensating use tax on postage where no sales tax would be imposed. This argument fails because plaintiff fails to establish its premise, i.e., that no sales tax would be imposed. Although Mr. Beck testified that no sales tax would be imposed on the sale of postage, he also testified that postage would be subject to sales or use tax when included in the sales price as a cost of shipment. Statutory support for Mr. Beck's testimony may be found at section 27-67-3(f) (defining purchase price or sales price for use-tax purposes to include freight charges to the point of use), section 27-65-3(h) (defining gross proceeds of sales for sales-tax purposes to include delivery charges), and section 27-65-13 (levying sales tax on the gross proceeds of sales or gross income or values, as applicable). Further, Mr. Beck testified that Rule 51(b), which provides that printers may reduce their gross proceeds of retail sales by the amount of postage where stamped envelopes or post cards are purchased and printed for the customer, is applied only where the customer takes possession of the postage-paid envelopes or post cards from the printer. In contrast, the evidence showed that plaintiff did not take possession of the advertising which is the subject of the challenged tax, but that the printer arranged for a distribution of the finished advertising materials in accordance with plaintiff's mailing profile. See Trial Exhibit Number 6, Plaintiff's Example Printing Contract. Citing, M'Culloch v. Maryland, 17 U.S. (4 Wheat.) 316, 4 L.Ed. 579(1819), plaintiff summarily argues that taxing postage conclusively offends the venerable federal doctrine of intergovernmental tax immunity, as implemented by 4 U.S.C. ง 107 and 31 U.S.C. ง 3124. This argument is not persuasive. The modern interpretation of this doctrine is that [a]bsolute tax immunity is appropriate only when the tax is on the United States itself `or on an agency or instrumentality so closely connected to the Government that the two cannot realistically be viewed as separate entities, at least insofar as the activity being taxed is concerned.' California State Board of Equalization v. Sierra Summit, Inc., 490 U.S. 844, 848, 109 S.Ct. 2228, 104 L.Ed.2d 910 (1989) (quoting United States v. New Mexico, 455 U.S. 720, 102 S.Ct. 1373, 71 L.Ed.2d 580 (1982)). Significantly, the tax at issue in the present case was on plaintiff, not the United States or any inseparable entity thereof. Further, there is no clear showing that either section 107 or section 3124 applies on the facts of this case. See generally Calif. State Bd. of Equalization, 490 U.S. 844, 109 S.Ct. 2228, 104 L.Ed.2d 910 (observing that courts must proceed carefully when asked to recognize an exemption from state taxation that Congress has not clearly expressed). Section 107 preserves the doctrine of intergovernmental-tax immunity where state use tax is imposed on or from the United States or any instrumentality thereof or any authorized purchaser therefrom, the latter term denoting purchases from commissaries, ship's stores, or certain organizations of Armed Forces personnel. United States v. State Tax Commission of the State of Mississippi, et al., 421 U.S. 599, 95 S.Ct. 1872, 44 L.Ed.2d 404 (1975). In the present case, the challenged tax was imposed on plaintiff, not a federal agency or authorized purchaser. Section 3124 exempts from state taxation certain interest-bearing obligations of the United States which are needed to secure credit to carry on the necessary functions of government. Rockford Life Ins. Co. v. Department of Revenue, 482 U.S. 182, 107 S.Ct. 2312, 96 L.Ed.2d 152 (1987) (decided under prior formulation of section 3124, which was without substantive changes). This Court is aware of no authority extending the section 3124 exemption to postage.