Document: 460 U.S. 536 103 S.Ct. 1344 75 L.Ed.2d 264 WASHINGTON, et al., Appellantsv.UNITED STATES. No. 81-969. Argued January 10, 1983. Decided March 29, Syllabus Washington state statutes impose a sales tax on federal contractors with respect to the sale of materials such for work projects, but regard nonfederal construction is imposed landowner, who pays full price project, including contractor's labor costs and markup as well cost tangible personal property sold contractor. The United States filed suit in Federal District Court, seeking declaratory injunctive relief an order requiring refund taxes which Government had reimbursed its contractors. Court granted partial summary judgment States, holding that discriminate against violation Supremacy Clause Constitution, Appeals affirmed. Held: are not invalid under Clause. Pp. 540-546. (a) Government's constitutional immunity from taxation may be conferred third party simply because has effect or even shoulders entire economic burden levy. Nor can falls earnings contractor providing services Government. v. New Mexico, 455 720, 734, 102 1373, 1382, 71 580. "So long directly laid Government, it valid if nondiscriminatory . until Congress declares otherwise." County Fresno, 429 452, 460, 97 699, 703, 50 683. P. 540. (b) Washington's asserted ground State circumvented by identifying activity different treatment. imposes same rate all purchases only deviation equality between one hand, every other taxpayer former taxed smaller proportion value project than latter. Thus better off taxpayers, mistreatment protects. A treats those deal differently others. Phillips Chemical Co. Dumas Independent School District, 361 376, 80 474, 4 384, distinguished. Cf. supra; City Detroit, 355 466, 78 2 424. 541-544. (c) important consideration whether differentiates determining what entity shall bear legal incidence tax, discriminatory burdens result. does whom deals unless someone else them. Here, singled out It merely accommodated fact owner. 544-546. 654 F.2d 570, reversed. Kenneth O. Eikenberry, Atty. Gen., Olympia, Wash., appellants. Stuart A. Smith, Washington, D.C., appellee. Justice REHNQUIST delivered opinion Court. 1 principal source revenue use buyer consumer retail uses property.1 In this case contends aspect statute—its application building construction—is Constitution. statutory provisions most easily understood light their history. Before 1941, were treated consumers purposes. All property, materials, subject tax. was contractor; collected suppliers contractors, remitted them state. 3 changed system applied defining landowner contractor, rather "consumer." now paid project. net result contractors' markups added base, previously included post-1941 could not, however, prohibits states taxing directly. 580 (1982). Thus, when did collect any either finished 5 1975, Legislature acted eliminate complete exemption purchased States.2 so re-imposing pre-1941 government ("federal contractors").3 non-federal projects measured lesser amount base. 6 Shortly after new statute enacted, sued Western permanent injunction assessment collection already collected, States' motion judgment, On appeal, Ninth Circuit 570 (1981). appealed pursuant 28 U.S.C. § 1254(2), we noted probable jurisdiction. --- ----, 2231, 72 843 7 recent years examined some detail history government's taxation. supra, U.S., at 730-738, S.Ct., 1380-1384; 457-464, 702-705, 683 (1977). There no reason repeat these discussions here; suffices restate our conclusions. explained "immunity Similarly, cannot Government." 1382. stated rule that, "[s]o Id., 703 (citing James Dravo Contracting Co., 302 134, 150, 161, 58 208, 216, 221, 82 L.Ed. 155 (1937)). Accord, Memphis Bank & Trust Garner, 692, 696, 74 562 (1983). 8 argument Brief 21-31; Tr. Oral Arg., 29-33, 40-41. Because do goes, discriminates deals. 9 does, transaction, everyone. other, latter.4 both taxpayers they pay less anyone This hardly seems, face, 10 relies upon 384 (1960), Texas lessees owned leasehold interest, premises. However, there rejected others.5 382, 478. We plainly determination "requires 'an examination whole structure state.' " 383, 479 (quoting Tradesmens National Oklahoma Tax Comm'n, 309 560, 568, 60 688, 693, 84 947 (1940).6 "a heavier of" property.7 387, 479, 481. See 696. 11 county owners real property. Of course, exempt Rather forego federally land, private lessees' interests rented tax-exempt owners.8 non-exempt contention discriminated owner ordinarily passed lessee, leased worse counterparts sector. 464-465, 705-706. 12 473-474, 478-479, 424 (1958), Michigan owners, owners. Instead, parties' upheld "equate enterprise using carried similar businesses property."9 473, "[t]hose required greater placed business lessees." 13 case, buyers sought distinguish Detroit necessarily shifted F.2d, 576. But proof Fresno would pass lessees; opportunity parties allocate among themselves sufficient. No more should here. 14 consideration, therefore, difference here vendor receives benefit To rest distinction elevate form over substance. trend decisions since been avoid "wooden formalism." 737, 1383. 460-461 n. 9, 703-704 9. generally, Comment, Immunity Taxation, 45 U.Chi.L.Rev. 695, 700-702 (1978). them.10 15 thought provide "political check abuse power," 463, 705, "there broad constituency prime government." 577. check" provided significant group citizens counted votes keep raising excessively, thus placing unfair necessary have direct voice legislatures. 458-459 6, 702-703 6. 16 focused levied "the state." Phillips, Tradesmens, 693). part structure, rate, transactions landowners Indeed, single scheme transaction Washington; virtually citizen affected way. As integral applies state, little chance will take advantage increasing tax.11 17 short, without running afoul 737-738, 1383-1384, (1982): 18 "If expanded beyond narrow limits, must responsibility decision, expressly respects contracts particular form, programs. 221; Carson Roane-Anderson 342 232, 234, 257, 258, 96 257 (1952). And allocation wholly appropriate, political process 'uniquely adapted accommodating competing demands' area. Massachusetts 435 444, 456, 98 1153, 1161, 55 403 absent congressional action, emphasized power denied 'the clearest mandate.' Michelin Tire Corp. Wages, 423 276, 293, 535, 544, 46 495 (1976)."12 19 Reversed. BLACKMUN, WHITE, MARSHALL, STEVENS join, dissenting. 20 ruling continues tendency1 sympathetic urgent quest taxes. my view, oversteps boundary separates appropriate taxation, having incidental operations, inappropriate indirectly therefore Clause, Art. VI, cl. 2, circumvent absolute litigation protest incursion relief. reversing considered upholds circumvention. 21 * foundation M'Culloch Maryland, Wheat. 316, 579 (1819), where down principle functions, instrumentalities immune constituent parts. Since M'Culloch, "has never questioned propriety taxation." 733, consistent lay 'directly States,' Mayo 319 441, 447 [63 1137, 1140, 87 1504] (1943)." Ibid. unavoidable consequence supremacy constitution declared." Wheat., 436. 22 An established corollary basic though fall operates deals." 478, (1958). Accord: Specifically, "remains true constitutionally substantially interfere activities." 735, 11, 1383, 11. sure, function render unconstitutional equally similarly situated constituents State." 462, 704, 23 here, special within Washington. One simple that. follows violates just States. hold otherwise, measuring perceived burden, demeans Maryland. II 24 I agree best "in history." Ante, 538. reveals, seems me, clear purpose "get at" overcome immunity. contrast usual silence legislative behind enactments, specific. 25 came into being 1935. 1935 Wash.Laws, ch. 180. Under original legislation, precisely manner. Sales subjected first exceptions pattern. dealt governments, local parties. 26 B. major change effected State's taxable longer instead, became 1941 178, 2. Klickitat Jenner, Wash.2d 373, 130 P.2d 880 (1942). items then nontaxable wholesale transaction. change, purposes present two consequences. base expanded. Now total charge charge, material, profit well. second related Here diminished. Most wholesale. also vendee status 27 Clearly, knowing one. accepted exchange, were, substantial expansion construction. through half nonroad choice legislature generally enlarge C. happy situation Legislature's concern disapproval 1975. attempt material incorporated redefined terms "retail sale" "consumer" statutes.2 conceded target specific purposefully made catch burgeoning State. Appellants 6-8; Arg. 7. result, performing projects. stark contrast, 1975 legislation amend laws like obligations persons. With these, continued obligation project's enlargement effectuated preserved. 29 divided separate distinct categories. consisted States; liable person; therein. "consumers" material. persons taxed. III 30 easy convenient argue, ante, 540-542, everyone, really others inasmuch latter alleged fact, endeavor point out, glib and, unwarranted assumption. 31 Three cases, particular, decided demand affirmance Appeals. Miller Milwaukee, 272 713, 47 280, 487 (1927). struck Wisconsin income provision similarly, held corporation-owned bonds fraction corporate dividends equal corporation's derived bonds. selection exclusion income, basis decision. Holmes, speaking stated: 32 "A stockholders corporations might corporation invested matter selected alone. familiar conduct situations law protects become unlawful reach prohibited result." 714-715, 280-281. 33 Such selectivity forbidden analysis reaffirmed unanimous Dist., (1969), pronounced Milwaukee stands proposition capacity another, situated."3 34 case. demonstrates discrimination need explicit There, users realty lease three more. termination event sale, lessee qualify preferential Accordingly, unconstitutional. said: 35 "Here, leases while leases, subdivisions, leaseholds all. differences seem too impalpable warrant gross differentiation. [the statute], unconstitutionally lessee." 36 continuing validity recognized few weeks ago. 562. acknowledges, 542, said "because 'a of' property." reference comparative weight quantity interest So away. 37 Moses Lake Homes, Inc. Grant County, 365 744, 81 870, 66 (1961). attempted improvements privately Wherry Act housing developments military leaseholds, lands, lower valuation. void, reversed court's Constitution collectible reduced level leaseholds. today Homes saying "does support position Phillips." 542-543, 38 me Miller, require conclusion submission burdens. For apparently remained content restructuring gain enhanced sources sacrificing behalf brought attention prized increased singling serve equated itself. 39 asserts, appears agree, 541-542 543, monetary others, acceptable. words, complaint competitive disadvantage market place. 40 misguided law. decision establishes guarantees disadvantage, resulted lessees. guarantee equality; absolutely immunizes 41 Court's questionable fact. That include components mean hence Only required, system, put additional money "up front," progresses, maintain records, hire personnel record keeping, prepare file returns. inexpensive activity, exceed increment components. disclose facts.4 event, facts inconsequential, discrimination, quality carries "absolute taxation" questioned." 42 reliance (1977), deserves passing mention. possessory solely used land. individual appellants Forest Service employees lived houses. concluded, employees. expressedly abandoned claim 464, 13, 706, 13. 43 Finally, note obvious discomfort evaluating relative methods business. Minneapolis Star Minnesota Comm'r Revenue, today, 12, 1365, 1374, struggles problem says remains free discriminatory, explains mere accommodation. This, says, "force us, compare taxes." approach flies face simultaneously expressed view "that courts institutions poorly equipped evaluate various Post, 1374; see post, 1380 (REHNQUIST, J., dissenting). measure improper matter. prevent abuse, dissect carefully 44 respectfully dissent. Chapters 82.04, 82.08 82.14 Revised Code 82.12 82.14. "buyer" quite broadly defined Wash.Rev.Code §§ 82.08.010, 82.04.190. places public authorities category argued circumstance affects disregarded throughout opinion. branches way explained, 573 (1981): "The manner accomplished somewhat complex. substitute House Bill 86, enacted Chapter 90, Laws (amending 82.04.050 82.04.190); Section Substitute 2736, 291, 82.04.050) 1229, 1, 1975-76 82.12.010 82.12.020). These following definition 'consumer' 82.04.190: ' "Consumer" means following: (6) Any person engaged constructing, repairing, decorating, improving existing buildings structures under, above instrumentality thereof, city authority created chapter 35.82 RCW, installing attaching article therein thereto, becomes virtue installation. meaning subsection into, installed in, attached person.' further excluded RCW rendered property.' 82.04.190(4). amended redefine 'retail sale' 'sale retail' exclude scope calling improvement, repair federally-owned liability arose basically inclusion term 'consumer,' 82.12.020, levied." argues consider together, focus pay. When viewed light, told, apparent argument. looking unrealistic. question considering working faced he party. If works buys. count his setting Depending bargaining power, sets price. party, purchaser remit building. reduce make up same, amounts purchasers receive identical cases. makes (or purchasers) State, adjusting acknowledged Macallen Massachusetts, 279 620, 49 432, 73 874 (1929), supported argument, "to extent precedential value." 472 477 "nothing [v. (1927), seeks rely], least interpreted later read indicating required." 479. valuation held, invalid. 751, 874. Phillips. reducing if" lessee. 752, revise cure defect. nothing severability bearing Nothing turned existence answers switches another immune. respect, Detroit. Department Revenue Illinois, 371 21, 83 117, 95, aff'g 202 F.Supp. 757 (ND Ill.1962). Illinois retailer purchaser. permitted Although retailers goods them, nonetheless Retailers economically burdened adjust prices Nevertheless, summarily affirmed conclusion, F.Supp., 760, disparate treatment resulting presented entirely kind head payroll That, field, nondiscrimination rule. See, e.g., (1983) (construing 742(a)). test protect reasonable expect would, situation, devised (1977); ----. 1st Ex.Sess., 5, 2nd 1. away, attempts do, intimating cases cut back Miller. quotation set forth footnote, page positive statement quoted text. Additionally, assumption, 541-542, 4, able highly suspect. First, assumption contract prior legislation. trapped tax; risk. Second, believe counterpart contractual partner. suspect circumstances correct. charges client top price; far

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