Document: 378 U.S. 39 84 S.Ct. 1518 12 L.Ed.2d 713 UNITED STATES et al., Appellants,v.B. J. BOYD, Commissioner. No. 185. Argued April 20, 21, 1964. Decided June 15, Sol. Gen. Archibald Cox and R. Kramer, Knoxville, Tenn., for appellants. Milton P. Rice, Nashville, appellee. Mr. Justice WHITE delivered the opinion of Court. 1 In Carson v. Roane-Anderson Co., 342 232, 72 257, 96 L.Ed. it was held that § 9(b) Atomic Energy Act1 barred collection Tennessee sales use tax in connection with to private companies personal property used by them fulfilling their contracts Commission. 1953, Congress repealed statutory immunity activities properties AEC contained order place Commission contractors on same footing as other performing work Government.2 1955 amended its statute adding a contractor's which imposes upon using performance others, irrespective ownership where goods are purchased. This tax, at rate, is measured purchase price or fair market value contractor be collected only when local purchases compensating out-of-state has not previously been property.3 2 Union Carbide Corp. H. K. Ferguson Co. have relating services performed Oak Ridge, Tennessee, complex. Carbide's contract obligates manage, operate maintain Ridge plants facilities accordance such directions instructions inconsistent deems necessary issue from time time. absence applicable instructions, best judgment, skill care all matters pertaining performance. charged duty procuring materials, supplies, equipment although Government retains right furnish any these items. Payment made government funds, title passes directly vendor United States.4 generally free make up $100,000 without prior approval. 3 Although exercises considerable managerial discretion day contract, contrtol, direct supervise issued governing large areas operation. no investment facility this litigation employed some 12,000 employees supervisors perform contract. Its annual fee, renegotiated periodically, $2,751,000 suit. 4 The construction both new modification existing plant. called those projects ordered also operated under AEC, owned none were handled manner similar case except consent $10,000. Ferguson's compensation negotiated twice year basis during preceding six months, fee $20,000 having paid months 5 thei sued recover taxes claiming infringed implied constitutional States. Supreme Court refused permit tax5 but sustained tax. held, imposed tangible whether him another, state taxation. 'was intended per se contractor. * (T)he (his) own profit gain, Government.' 211 Tenn. 139, 163, 164, 363 S.W.2d 193, 203, 204. We noted probable jurisdiction resolve another recurring conflicts between power State persons doing business within borders Federal Government, instrumentalities 375 808, 55, 11 46. affirm. 6 Constitution immunizes States taxation States, M'Culloch Maryland, Wheat. 316, 579, does forbid whose legal incidence even though economic burden otherwise, ultimately borne James Dravo Contracting 302 134, 58 208, 82 155; Graves New York, 306 466, 59 595, 83 927; Alabama King & Boozer, 314 1, 62 43, 86 3. Nor forbidden beneficial federal Government's property, City Detroit, 355 78 474, 424, his Curry 14, 48, 9; Esso Standard Oil Evans, 345 495, 73 800, 97 1174; Township Muskegon, 484, 483, 436. ends—in commercial carried profit—is separate distinct taxable activity. 7 accepts insists present advantage may exclusively benefit Since they only, products sale Facility, do stand gain lose efficient nonefficient take entrepreneurial risks, claimed, reality 8 persuaded. first place, facts record incredible conclude government-owned sole Government. Both substantial stake operation interest. sizable number men times over 1,000, fees above cost, $2,000,000 year. No one suggests either put aside contracting Commission, company set commercial, profit-making considerations mind operations an important part regular operations. 'The vital thing' Carbide, well Ferguson, activities.' 486, 485, 436.6 9 Secondly, help say engaged furnishing had risks others. Undoubtedly service industry different characteristics than manufacturing operation, differences irrelevant purposes. world replete profitmaking industries cost-plus basis, pursuing ends meaning supra. Whether services, undertaken contractual obligations. If he properly performs earns fee; if not, liable damages forced liquidate organization built Whatever limitations there derive fact cost-plus-fixed-fee contracts, widespread method argument, accepted, would insulate management who result foreclosed Court's decisions seems accept. supra; 10 supra, remarked '(t)he might reserved con rol financial Continental could 'servant' agency terms.' urges case. According should viewed through employees, therefore falling it. But, we cannot believe 'so assimilated become constituent parts.' U.S., 485. Because extraordinary range complexity research development atomic energy, empowered choose undertakings directly, facilities, personnel staff, seeking assistance enterprise means grants contracts. Act August 30, 1954, c. 1073, 68 Stat. 919, 927—928, 42 U.S.C. 2051(a), 2052. utilize skill, technical know-how, knowledge experience American industry, has, since inception energy program, chosen conduct various sundry involved undertaking, including plants. See As stated preface contract: '(S)uch agreement arose out need proved capabilities, administrative, manage certain Commission; recognizes Corporation personnel, initiative, ingenuity qualifications exercised fullest extent practicable *.' 13 sought merely supply skilled manpower employment argued somehow rather Carbide. Powell Cartridge 339 497, 70 755, 94 1017; Mahoney 216 F.Supp. 523 (D.C.E.D.Tenn.). Of course governmental directives must obeyed, decides uses needs fissionable material; and, course, sensitive area Commission's controls subject change light developments.7 But brought judgment needed did room exercise both, broad Should intend build plant servants aware so familiar ways It chose here. profit, incorporated into structure thus enjoy immunity. 14 undoubtedly true, points out, subjection will future liability. attention debates repeal 9(b),8 exempted taxation; indeed substantially increase cost program subjecting 'sales taxes' 'business occupation' taxes.9 Nonetheless, Congress, principle 'constitutional limited States,' S.Rep. 694, 83d Cong., 1st Sess. 2, U.S.Code Congressional Administrative News pp. 2379, 2380, exemption declared purpose placing position contractors. 13, 432, 67 575.10 principles laid down Curry, Esso, think, strike proper judicial accommodation interests States' concerns Nation, workable, adhere them. unduly intrude valid powers, Court, desirable adjustment. 15 Affirmed. 16 HARLAN, concurring. 17 legislative history opinion, ante, 49—50, notes 8—10, I thought appropriate thorough reconsideration taxation, long troubled my 'Michigan cases,' 505, 492. view history, concur 60 765, 724, (1952 ed.) 1809(b). section read pertinent part: activities, income hereby expressly form State, county, municipality, subdivision thereof.' 575, 432. Retailers Sales Tax provides part, Tenn.Code Ann. 67—3004 (1963 Cum.Supp.): 'Where subcontractor hereinafter defined dealer, con- tract, fulfill subcontract obligations, contractor, subcontractor, contractee, subcontractee, person, holder pay church construction, shall rate prescribed 67—3003 whichever greater, unless subjected due thereon paid. 'Provided, further, provision chapter, application respect by, to, weapon parts, source special nuclear materials by-product atom c act excluded industrial paragraph (c) 67—3002 items referred proviso sold leased in, experimental with, processes behalf commission processes.' following included among terms conditions attached forms making purchases: 'It understood agreed Order entered Company Government; supplies furnished hereunder Seller pass purchaser, point delivery; authorized payment funds advanced assets administer respects otherwise specifically provided herein; administration transferred designee, transfer notice thereof further responsibilities nothing herein preclude liability reason funds.' Relying Kern-Limerick, Inc., Scurlock, 347 110, 74 403, 98 546, court determined itself actual acted purchasing agents. question correctness determination raised appeal validity against claim immunity, way depends legality reliance Livingston, D.C., 179 9, aff'd curiam, 364 281, 80 1611, 1719 misplaced. There South Carolina use, 'by transaction possession given,' 'purchasing agents instrumentalities.' enjoin du Pont Company, many Carbide's, AEC. difference, however, costs plus nominal dollar entire undertaking. Passing doubts 'use tax' District invalid principally because solely 'out high sense public responsibility' profit. Pont's activities. affirmed, 1719, citation, jurisdictional papers, stressed ruling below based close analysis 'extraordinary' relationship *' factual received benefits Livingston decision controlling. general purposes control direction 'Whereas, attainment overall objectives discharge responsibility economy efficiency require supervision Government-financed organizations managing related functions assure conformity law policies full access information concerning activities; requires integration coordination perform, utilization information, most advantageous Sess., 1—3, 2383. Id., 4—6. stated: 'Reducing several million dollars annually added apparent consideration regarded decisive policy forego savings evidenced components exempt delimited Boozer decision. feel, aspects impact fiscal affected localities taken account determining broader preserved.' 5. went note installations favorable located performed, conceded few problems small communities. recommended payments lieu acquired adjustment internal state-local arrangements insure distribution revenues locales. then added: 'Eliminating taxes, occupation minor now comprehended modify burdened 6. (Emphasis supplied.) revealed excerpt Senate Report: (342 232 (72 .Ed. 257) (1952)) interpreted last sentence foregoing subsection exempting transactions involving taxes. 'activities' term 9(b), independent agents, that, consequence, function scope 'This effect affording much available departments agencies rely (314 (62 3)), established extend Thus, contractors, entitled enjoyed comparably situated departments. 'A expressed carves deprives units revenue, particularly carries scale 2380.

Category: 9