Legal Document

347 U.S. 110 74 Supreme Court Reporter 403 98 L.Ed. 546 KERN-LIMERICK Inc., et al.v.SCURLOCK, Com'r of Revenues for State Arkansas. Number 115. Argued Jan. 4, 1954. Decided Feb. 8, Mr. Cleveland Holland, Asst. Atty. Gen., appellants. O. T. Ward, Little Rock, Ark., appellee. Justice REED delivered the opinion Court. 1 This appeal brings here legality application Arkansas Gross Receipts Tax Law 1941, Ark.Stat. 1947, § 84 1901 seq., to a transaction by which certain private contractors engaged in joint venture, abbreviated WHMS, procured two diesel tractors costing $17,146, use construction there United States naval ammunition depot estimated cost over thirty million dollars. The were from Kern-Limerick, local dealer. circumstances would concededly make Kern-Limerick liable tax if real purchaser not States. 2 applicable sections levy an 'excise (2%) per centum upon gross proceeds or receipts derived all sales any person'. 84—1903. is tax, tax.1 It be paid Commissioner seller, 84—1908. He taxpayer, 1902(e), and 'shall collect levied hereby purchaser.' s Government are exempt. 84—1904. 3 contract had, so far as pertinent here, provisions 'Materials-Purchases' set out margin.2 was entered into Department Navy 'under authority Sections 2(c)(10) 4(b)' Armed Services Procurement Act 1947. 62 Statutes-at-Large 21, 41 Code KF62 (Supp. V) 151 Annotated KF65 U5 seq. These authorized this cost-plus-a-fixed-fee negotiation without advertising.3 4 demand under protest amount brought action refund accordance with state law. intervened taxes contractor required pay reimbursable it Government. held WHMS claimed payable 'seller.' denied contention that purchaser. 'to purchase supplies services its own use,' but did authorize buy nails, lumber, cement, tractors, etc., used (in instance) construct, independent contractors, Ammunition Dump.' court further that, even had could not, delegate power WHMS. Parker versus 254 South Western Reporter, 2nd Series 454. 5 Appellants seek reversal decision on grounds authorizes cannot statute constitutionally applied 6 court's interpretation deny equipment dump is, we think, too restrictive. gives broad powers obtaining cheaply promptly possible 'purchases contracts * such agency otherwise,' 2(a), provides: 7 Sec. 9. '(b) term 'supplies' shall mean property except land, include, way description limitation, public works, buildings, facilities, ships, floating equipment, vessels every character, type description, aircraft, parts, accessories, machine tools alteration installation thereof.'4 8 We hold allows machinery. 9 seems us, also, may agents, other than official personnel, handle detail purchase. accepted understand it, does permit delegation pledge credit though these have cost-plus basis. Further, follows contention, statutory itself. based language Act, §§ 7(a) (b).5 Pursuant 7(a), Secretary Navy, somewhat obscurely, appears delegated his determine necessity negotiated Contracting Officer asserted contract, exception, Chief Bureau Yards Docks. See 32 Federal Regulations 400.201—5 402.101. That stated admitted stipulation, Act—'for impracticable secure competition'. 10 calls attention restrictions 7(b) commented. But 7(b), words show, do cover actions 2(c)(10), section's prohibition instances inapplicable. find nothing bars persons. 11 asserts 4(a) (b) contract. Under them, 'may will promote best interests Government.' provision, determination purchasing agents permissible. Where no particular direction type, contracting officers free follow business practices.6 conclude has negotiate provide materials. 12 With within turn examine validity argument naming only colorable left subject tax. Alabama King & Boozer, 314 1, 43, 86 3, relied primarily. consider assumption, made Arkansas, designed avoid ultimate payment 13 mindful, too, careful Congress given recent years proper adjustment liabilities between federal sovereignties. been solicitous see states their subdivisions unduly burdened acquisition taxable when otherwise held. understands burdens agencies new installations accompanying personnel. Provisions deemed suitable made.7 include legislation carrying activities Atomic Energy Commission taxes.8 recommending Joint Committee Energy, while providing voluntary contributions, propose purchases taxes. enactment them free.9 recognition constitutional immunity exactions rests, course, unquestioned authority. From McCulloch Maryland, Wheat. 316, 579, through Gillespie Oklahoma, 257 501, 42 171, 66 338, People New York ex rel. Rogers Graves, 299 401, 57 269, 81 306, host cases upheld freedom taxation also salaries persons carried work. James Dravo Co., 302 134, 58 208, 82 155, reviewed judicial history, adopted reasoning subjected contractor's earnings income state's ground interfere 'in substantial performance functions'. Id., at page 161, 221. question relation commodities open. 153, 218. Graves O'Keefe, 306 466, 59 595, 83 927, overruled supra, Gillespie, fell Oklahoma Comm. Texas 336 342, 365, 69 561, 573, 93 721. 14 A phase reserved case came up 3. declared sovereignty 'does spell paying added costs, attributable those who furnish granted immunity.' 9, 45. involved usual collectible him buyer. There there, sellers, notwithstanding bore economic burden. few excerpts clear purport ruling. 15 'As sale lumber Boozer cash, precise whether became obligated whom taxes, immunity. provided title materials 'entitled reimbursed' should vest 'upon delivery site work approved storage inspection acceptance writing Officer'.' 10, 46. 16 '* think mentioned, read together, plainly contemplate names required, unless elect them; bound contracts, reimburse purchased delivered, inspected site.' 11, 17 'But however extensively right restrict control respects, neither reservation nor exercise gave status enter credit.' 13, 47. 18 issue differs form effect Nation bears burden Alabama. significant difference lies this. Both request bids order, arrangements making Government, note 2, contain identical, specific provision: 19 '3. Vendor price, Contractor payments hereunder behalf vendor agrees claim price submitting invoice Contractor. Title directly Vendor. acquire thereof.' 20 order headed Docks, signed agent, requires seller certification payment: 21 "I certify above bill correct just; therefor received; requirements American production labor standards, conditions transactions complied with; included amounts billed.' 22 'In event 'and billed' struck following additional added: 23 "The sales, use, occupational, receipts, similar license fees imposed Vendee reason _ _. Vendor, Vendee, be, appropriate refund, thereof States." 24 stipulation facts shows course conform requiring approval agent each bid circumstances, disclosed liability arises transaction.10 25 comment about another excerpt Boozer. referred effective case. quotation this: 26 'The soundness conclusion turns terms rights obligations parties it. taxing statute, courts held, makes 'purchaser' add price' collected, cash credit. Who, like present, meaning law can speak final authority.' pages 9—10, 27 Read literally, one might saying interpret throw where chose, arbitrarily eliminated exempt sovereign. Such quoted long establishes principle duty rests decide itself constructions issues rest.11 refers, owner responsible exaction. formulation 'precise question' first 45, indicates 28 Thus, controlling for, case, legal incidence fall States.12 doctrine sovereign embedded history practice congressional mandate. No instance submission shown. 29 Nor drafting conserve funds, purpose, changes character transaction. As indicated, intergovernmental primarily problem finance legislation. since taxation, governmental waived Congress, agencies,13 decisions consistently prohibit itself.14 30 Reversed. 31 BLACK, THE CHIEF JUSTICE DOUGLAS concur, dissenting. holds subordinates goods them. 47, rejected contention. points either expressly fair implication grants agents. 33 Experiences caused hedge many detailed safeguards competitive bidding after advertising.* Due supposed haste, chosen officials sometimes temporary discretion. occasions, perhaps fortunately, rare, usually limited items little. however, authority, tremendous break established buying practices embodied wisely prevent needless waste money. Maybe power, N Dec. Immigration Nationality Decisions am sure has, spending contractors. Even so, purpose handled loose manner attributed absence much more explicit able cite here. 34 sustaining State's supra. overrules In doing moves back discredited immunities sustained later disapproved. sustain affirm Court's judgment. 35 DOUGLAS, BLACK join, 36 laid, majority out, person. Ark.Stat.1947, spells detail. 'Sales service tangible personal including materials, same consumers users resale.' 84—1903(e). 'consumer' 'user' means person *. All consumed performing act.' 84—1902(i). 37 On basis taxable. matter law, common-law view. Of impose discriminate against attempted 38 What done define uses. Obviously corporation rather tried States, clearly so. Mayo 319 441, 63 1137, 87 1504. collected word statute. falls. If falls because assumed placed there. Curry 14, 18, 48, 49, 39 problem, disregarded When spoken, must 40 allowed exacted acting measured value exercised sort present one. point rejecting immunity, 'Who, (the State) immune authoritative therefore assumed, U.S., 46, sense. then went answer arguments rules. segment now uses practically overrule doubt was, some tractors. controls important substance nature paramount impossible distinguish concepts 'title,' 'agency,' 'obligation pay' adjudication. Today they government functionary draw line changing deliberates often has,1 worry passing technicalities. debates policy, need revenue, holder taxation. 43 followed2 step forward time nullified whenever treasury remotely affected. take equally backwards. until says differently, dispense fruitless talk agency, titles, pay. determine. today, decade ago, he constitutional, Cook Southeast Transportation 211 Ark. 831, 202 772. 'Materials—Purchases. Article 8—(a) Except provision Officer-in-Charge, articles, supplies, accomplishment furnished act effecting procurement vendors price. subparagraph (c) article. administer advance Officer-in-Charge direct. hereunder, pass vesting Contractor, (except obtained earlier date) whichever said events occur. passage relieve duties constitute waiver Government's absolute fulfillment hereof. '(c) excess $500 prior written may, discretion, reduce limitation $2,500 approval.' subcontractors. Section 'All advertising, section head advertising if— '(10) competition; *.' 4(b) prohibits cost-plus-a-percentage-of-cost prescribes operative limitations S.Rep.No. 571, 80th Cong., 1st Sess., Page say language: 'To relates services, nonappropriated subsection defines tools, thereof. really examples construed broadest possible.' corresponding House Report, 109, 23, omitted last sentence. 'Sec. (a) section, determinations decisions, discretion direction, officer agency. specified paragraphs (12), (13), (14), (15), (16) 2(c) 5(a) delegable, paragraph (11) delegable chief respect require expenditure $25,000.' Appellee refers 10. provides interservice procurement, pertinent. Linn, Pet. 209, 742; Muschany 324 63, 65 442, 449, 89 744. E.g., T.V.A., 831l, 831l; R.F.C., 607, 607; Cf. Dameron Brodhead, 345 322, 73 721, 97 1041. 67 575. S.Rep.No.694, 83d Sess. 1946, 60 765, 1809(b) amended, 1809(b), render financial assistance localities acquired previously governments lieu amounts, times, deems appropriate, guided policy condition acquired, special cast Commission, Manhattan Engineer District benefit accruing considered determining payment.' Hodgson Dexter, Cranch 345, 362, 130; Larson Domestic Foreign Commerce Corp., 337 682, 703, 1457, 1468, 1628; Restatement, Agency, 320; Williston, Contracts, 281. Shipping Board Merchants Fleet Corporation Harwood, 281 519, 525, 50 372, 373, 1011. Jersey Realty insurance company Division Appeals Taxation Finance Jersey, 338 665, 674, 70 413, 418, 94 439; Richfield Oil Equalization, 329 69, 83, 156, 163, 91 80; Allegheny County, 322 174, 182, 64 908, 913, 88 1209; Union Pacific R. Public Service Missouri, 248 67, 24, 25, 131; Dyer Sims, 341 22, 29, 71 557, 95 713. covers 'purchaser.' S.R.A., Minnesota, 327 558, 564, 749, 753, 90 851; National Metropolitan Bank 323 454, 456, 354, 355, 383; Standard California Johnson, 316 481, 483, 1168, 1169, 1611. 721: 'True remains most part. But, concerns claiming ordinary operations (even connection activities), implied rest merely hypothetical interferences functions exemption.' 3; Carson Roane-Anderson 232, 72 257, 96 257; Esso Evans, 495, 800, 1174. 1504; Pittman Home Owners' Loan Washington, D.C., 308 31, 15, 17, 11. For illustrations experience abuse wartime purchasing, Hearings Before Military Affairs, 74th H.R. 5293, Pages 590—616, discussing profiteering during Revolution, Civil War, War Spain, World I. hearings end wartime. See, example, Cong.Rec. 7528, 7532—7535; 2835, 3464—3466, 4814; Ways Means 6617, 77th 2d (1942). 155; 927.

Classification Label: 7