Court Opinion

ID: 9646978
Source: CourtListenerOpinion
Date Created: 2023-08-23 13:19:12.466504+00
Date Added: 2024-06-11T14:57:34.821264
License: Public Domain

TIMMERMAN, District Judge
(dissenting) .
This is an action by the United States and E. I. du Pont de Nemours and Company (hereinafter called du Pont), as plaintiffs, against the Members of the South Carolina Tax Commission (hereinafter called Tax Commission), both individually and officially, as defendants, to enjoin the collection from du Pont (not the United States) of sales and use taxes imposed by valid Statutes of the State of South Carolina.
There is no contention that the tax statutes are unconstitutional because they apply unequally or discriminatorily to du Pont. The rates and conditions of the relevant tax statutes apply to du Pont just as they apply to all others in like situation. The taxes are imposed for the desirable and lawful purpose of providing and maintaining a system of public education, among the beneficiaries of which are the thousands of children of du Pont’s employees, working in South Carolina on the Savannah River Project.
In considering this case a few fundamentals should be kept in mind. Without them as guides a wrong decision could be easily reached. They are, (a) that the plaintiffs have the burden of proof; (b) that self-serving declarations are not evidence where no opportunity for cross examination is afforded; (c) that information aliunde the record is not proof in the case; (d) that there is no presumption that a State remedy is not plain, speedy and efficient; and (e) that one invoking the jurisdiction of a court of equity must come into court with clean hands.
The first and primary prayer of the complaint is for the Court to hold “that the South Carolina Sales and Use taxes * * * cannot validly be imposed against the plaintiff du Pont”. The basis of this prayer is the fact that the Atomic Energy Commission (hereinafter called AEC), an admitted agency of the United States, entered into a contract with du Pont to design and construct and, after construction, to operate the government project, now commonly referred to as the Savannah River Project, for the considerations and benefits expressed in the contract. In the contract du Pont is referred to both as “Contractor” and as “prime contractor”.
Of first consideration is the issue of this Court’s jurisdiction. Section 1, Ar-*25tide III, of the Constitution of the United States provides that, “The judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish * * * Since Congress alone has the power to create inferior Courts, such as this district court, it alone has the power to fix the bounds of their jurisdiction; and it alone may legally change the limits of that jurisdiction from time to time. Congress, acting in fulfillment of this constitutional responsibility, has denied jurisdiction to this Court in this case in these words:
“The district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State”. Section 1341, Title 28 U.S.C.A.
Does State law afford du Pont a plain, speedy and efficient remedy for testing the legality of the taxes imposed on it? If it does, then this Court is denied jurisdiction to grant an injunction as prayed for. The plaintiffs contend that the State does not afford an adequate remedy because, as they argue, it doesn’t provide “for the payment of interest upon the amount of the tax so paid in the event that the taxpayer is successful in his suit for recovery of the taxes” (Plaintiffs’ brief).
There is nothing in the federal constitution that requires a sovereign state to pay interest, unless it obligates itself to do so; and no constitutionally empowered legislative body, except a State’s own legislature, has the power to enact a law requiring a sovereign State to pay interest on refunded taxes. The proposition that a taxpayer is not afforded an adequate remedy for testing the validity of a state tax, where the taxpayer is required to pay the tax before instituting proceedings to recover it, and when no provision is made for the payment of interest on the amount refunded, was first advanced by Judge Learned Hand in Procter & Gamble Distributing Co. v. Sherman, D.C.N.Y., 2 F.2d 165. See also Procter & Gamble Co. v. Newton, D.C., 289 F. 1013, for background. Section 1341, as quoted above, was not in existence at the time Judge Hand’s opinion was rendered. He laid down that doctrine, unsupported by any precedent decision or existing legislation and without constitutional sanction. Judge Hand’s opinion is in direct conflict with the opinion in United States v. State of North Carolina, 136 U.S. 211, 216, 10 S.Ct. 920, 922, 34 L.Ed. 336, wherein Mr. Justice Gray, speaking for the Court, said, “Interest * * * is not to be awarded against a sovereign government, unless its consent to pay interest has been manifested by an act of its legislature, or by a lawful contract of its executive officers”.
It was agreed by Judge Hand that he had been referred to no decision that sustained his point; and he evidently knew of no case that supported his position, else he would have cited it. It is no justification for the position to say that “a dollar to-day is worth more than a dollar next year” [2 F.2d 166]. That is but a trite saying, a cliche, too unsubstantial to supplant the sovereignty of a sovereign state, if indeed a mere court decision could accomplish that result. Whether or not the district court has jurisdiction of this case must be determined on the basis of the inhibition against jurisdiction found in Section 1341. If the State has provided a plain, speedy and efficient remedy, jurisdiction does not exist in this Court.
It is no answer to the jurisdictional issue to say that the United States is not mentioned in Section 1341 and, therefore, that said Section does not limit or defeat the government’s right to avail itself of the district court’s jurisdiction. That is a non sequitur. The government cannot avail itself of a non-existing jurisdiction, and no one is arguing that the United States cannot avail itself of a jurisdiction that does exist. The Attorney General of the United States cannot invest a court pleasing to him with jurisdiction to hear an issue simply be*26cause he wishes to avoid a court that does have jurisdiction. He must take that issue to a court that has jurisdiction to hear it. It isn’t the government’s right to invoke a jurisdiction that exists, but it is the government’s right to invoke a jurisdiction that doesn’t exist that is in question. Certainly this case could not have been brought in the original jurisdiction of the Circuit Court of Appeals. The simple reason for that is that Congress has not conferred power on the Circuit Court to hear such cases as a part of its jurisdiction. Congress created the Court of Claims that sits in Washington and defined its jurisdiction. That Court cannot exceed the jurisdiction which Congress intrusted to it even though the Attorney General of the United States might want it to do so. Here we have an Act of Congress that prohibits this Court from doing what the plaintiffs have asked it to do, to wit: to enjoin the assessment, levy and collection of the State’s sale and use taxes, although State law provides a plain, speedy and efficient remedy for determining the validity of such taxes. The issue here is not whether the parties themselves are within the jurisdiction of this Court. It is that this Court doesn’t have jurisdiction of the subject matter because an Act of Congress denies it such jurisdiction. Since the district courts are statutory courts their jurisdictions are established by statute. It makes no difference who may request a district court to do so, it cannot legally go beyond the limits of its jurisdiction as fixed by Congress.
The effect of the majority opinion, if allowed to stand, will be to restrict the sovereignty of the states; it will take away from them the power to determine when they will or will not pay interest on their obligations. The remedy that the State provides for a taxpayer feeling himself aggrieved is in effect this: The taxpayer pays his tax, under protest, before it is in default. He then has thirty days within which to commence an action in the appropriate State Court to recover the tax paid under protest, and thereby to test the validity of the tax. If the tax is held valid, the State retains what was paid and uses it for the purpose for which it was imposed, and the contesting taxpayer by following the State remedy' saves penalties and interest that otherwise would be chargeable against him. If the tax is held invalid, the taxpayer is refunded the amount paid with or without interest as the State Court may determine.
If the remedy afforded the taxpayer by the State is given fair consideration, it will lead unerringly to the conclusion that the remedy afforded the taxpayer by the State is both fair and considerate. There is nothing abstruse about the remedy; it is plain enough for the average high school student to understand, and it is. quite speedy. If it were speedier, no. doubt plaintiffs would now be complaining that it is too speedy. The majority has pointed out no lack of efficiency in-the remedy, and there is no legitimate-presumption that the remedy is inefficient. The object of the remedy is to determine the validity of the tax. If that object is attained, as undoubtedly can be-done under the State procedure, it certainly will not prove its inefficiency. There is no fact established in this record to which the majority can point as establishing the inefficiency of the remedy. Surmise is its only support. Hence I would hold that this Court has no jurisdiction of this case and I would dismiss it. Failing in that, I would stay proceedings in this Court and give the plaintiffs a reasonable time within which to have their cause heard in the State Court, retaining jurisdiction in the meantime. See: Leiter Minerals, Inc. v. United States, 352 U.S. 220, 77 S.Ct. 287, 1 L. Ed.2d 267; City of Meridian v. Southern Bell Tel. & Tel. Co., 358 U.S. 639, 79 S.Ct. 455, 3 L.Ed.2d 562; George F. Alger Co. v. Peck, 74 S.Ct. 605, 347 U.S. 984, 74 S.Ct. 853, 98 L.Ed. 1148; and Shipman v. Du Pre, 339 U.S. 321, 70 S.Ct. 640, 94 L.Ed. 877.
Now, as stated by the majority in their opinion, “we come to the merits”.
At the outset, I think it well to call attention to the fact that in another *27case growing out of the Savannah River Project, in which du Pont was the sole defendant and was represented by the Attorney General of the United States, it was held that du Pont was the prime contractor, that it was bound by the terms of an agreement it had with a subcontractor, and that neither the United States nor the AEC was a necessary party to the action, although the government was obligated by its contract with du Pont to reimburse du Pont for any recovery had against it by the subcontractor. E. I. Du Pont De Nemours & Company v. Lyles & Lang Construction Company, 4 Cir., 219 F.2d 328, certiorari denied 349 U.S. 956, 75 S.Ct. 882, 99 L. Ed. 1280.
The contract between AEC and du Pont was entered into September 30, 1953, and made retroactively effective August 1, 1950. Thus du Pont was made the prime contractor and it was engaged in designing and constructing the Savannah River Project from the beginning, or for three years and two months before the final contract was executed. The plaintiffs claim that du Pont’s operations during the first three years and two months were pursuant to a “Letter Contract”.
Section 1 of Article II of the 1953 contract provides in part as follows:
“The Contractor is requested and authorized, subject to the approval of the Commission as hereinafter set forth, to furnish or procure in the shortest practicable time the labor, materials,. tools, machinery, equipment, facilities, supplies and services (not furnished or procured by the Government) and to do all things which in the Contractor’s judgment are necessary or desirable for the development, design, construction, installation and operation of new production facilities * * * ”. (Emphasis added.)
Section 2 of the same Article provides in part:
“The new production facilities contemplated hereunder will involve certain technical developments which go beyond any experience which has been had at the Hanford Project or any other installation of the Commission and the attainment by the Contractor of the objectives of the project cannot be assured. The Contractor undertakes to use all reasonable efforts to carry out the project and to attain the objectives thereof * * * ”. (Emphasis added.)
Section 3 of Article III provides:
“The Contractor shall furnish or procure architect-engineer and other services incident to design, procurement of materials and equipment, inspection and supervision of the construction of the Plants”. (Emphasis added.)
There are other provisions in the contract that need not be quoted here but which, when considered with those already cited, clearly indicate the relationship between du Pont and the government. All of them point unerringly to the one conclusion, that du Pont was and is an independent contractor on the Savannah River Project.
I do not agree with the majority that du Pont entered into the contract here in question “without hope of gain, except the nominal one dollar, payable on final completion of the contract”. This in effect says that the majority believes that du Pont accepted the prime contrac-torship of an enterprise that has already cost well over a billion dollars, and would keep it engaged for more than eight years for the pittance of twelve and a half cents per year or less.
There is no contention that du Pont is an eleemosynary corporation. It would be impossible for it to possess the immense wealth which it does possess doing what it is now claimed it has been doing for the past eight years — working for nothing. What right has the management of a highly competitive business corporation to use its skills and managerial abilities for the sole benefit of others without pay? By way of explanation of this unusual conduct it is claimed that the President of du Pont wrote a letter to the stockholders, but there is no *28proof that the stockholders were consulted in an effective way and that they agreed for du Pont to do what is now claimed it has been doing for eight years —working for nothing. Did the stockholders agree to forego dividends for the benefit of the Government? If so, where is the proof ? All that I have seen in the record bearing directly on this point is what purports to be a copy of a letter written by the President of du Pont “To the Stockholders of E. I. du Pont de Nemours & Company”, under date October 18, 1950, and without any addresses given. This circular letter by Mr. Green-wait the President of du Pont, didn’t ask the stockholders, it told them that “the du Pont Company has executed a Letter Contract covering the design, construction and operation of new production facilities for atomic materials”.
It is the duty of a Court to take into consideration the reasonableness of any statement or contention made by a litigant, or in its behalf. It is conceded that du Pont sold to itself as contractor a little less than one and a half million dollars' of its products at retail prices. No one has testified in open court under oath what rightfully was the producer’s profit, what rightfully was the middleman’s profit, or what rightfully was the retailer’s profit; nor do we know the sum of those profits. Whatever they amounted to in the aggregate, du Pont got. Did the total amount to three-fourths of a million dollars or to half a million dollars? Whatever the amount, plaintiffs claim it is inconsequential. Had du Pont produced the facts, the Court would not now be left to conjecture. Moreover, nothing has been told the Court about profits on products purchased from other large corporations in which du Pont may have held large blocks of stock, as for instance, the General Motors Corporation.
The contract obligates the government to reimburse du Pont for an undisclosed percentage of du Pont’s overhead. The amount to be paid du Pont was to be calculated on the basis of an agreed formula. The Court was shown a copy of the formula after all essentials of the formula had been x’d out. In that form it does not give information; it conceals information. All the Court has is the plaintiffs’ contention that the amount contributed by the government to du Pont’s overhead is a top secret.
Section 2, Article XVI of the contract also obligates the government to make another- contribution to du Pont. It is to pay du Pont for all extra compensation, awarded as incentive pay to the du Pont employees assigned to the Savannah River Project. As stated in this Section “ * * * all * * * extra compensation hereunder shall be in the form of common stock of E. I. du Pont de Nem-ours and Company acquired by the Contractor [du Pont], or in the form of cash to be invested in new common stock of E. I. du Pont de Nemours and Company issued by the Contractor [du Pont] directly to the employees, or in the form of cash, or in two or more of such forms; * * * ff
No value is fixed for the du Pont stock given to the employees as extra compensation. Since du Pont was the owner of the stock awarded and was reimbursed for it, shouldn’t it be known what du Pont received for it? How else can it be known whether a profit was or was not made. I have seen no facts and I have heard none testified to that would form the basis of an opinion as to whether du Pont has or has not profited by the sale of its stock to the government, or in effect to the government. The plaintiffs have the burden of proof, and there is no presumption that what they contend is true in the absence of proof.
It is hard to know without a complete disclosure of all the facts what profit du Pont will derive out of the Savannah River Project, but we do know enough to know that it has amounted to, or will amount to far more than the plaintiffs admit. We also know, historically speaking, that those who were the first to learn the potentials of petroleum were the ones who first grew immensely wealthy in the *29development of them. Will not the same hold true in the development of the vast potentials of the atom for peace time uses?
Upon the hearing of this case, the suggestion that du Pont may have been the recipient of a wide and valuable atomic experience in designing, constructing and operating the Savannah River Project was made light of by plaintiffs. The same notion appears in the majority opinion. In Section 1, Article II of the Contract, cited above, it was agreed that, “The Contractor [du Pont] is * * * authorized [at public expense] * * * to furnish or procure in the shortest practicable time the labor, materials, tools, machinery, equipment, facilities, supplies and services * * * and to do all things which in the Contractor’s [du Pont’s] judgment are necessary or desirable for the development, design, construction, installation, and operation of new production facilities * * * (Emphasis added.) Why all the hurry to develop, construct and operate new production facilities ? Has all the propaganda coming out of Washington about the peace time uses of the atom been a hoax? I think not. What were the uses to which petroleum was put in the 1880’s, and what now ?
Sections 1 and 2, Article II of the Contract clearly indicate the purpose of the Savannah River Project to be the development of production facilities theretofore unknown in the atomic energy field. The Savannah River Project was to become the last word in that field, and as we are now led to believe it is the last word in the atomic field. Du Pont knows the process from a to z, but its competitors do not. How any one, even a rabid partisan, could actually believe that such knowledge and experience as du Pont gained on the Savannah River Project has little or no material value is hard to understand.
The taxes which plaintiffs seek to have declared not legally assessable against du Pont are South Carolina sales and use taxes which were imposed by appropriate legislation, Act No. 379, Acts of the General Assembly of South Carolina, approved April 19,1951. This legislation is incorporated in the 1952 South Carolina Code of Laws, Chapter 15, Title 65. Pertinent amendments to the code sections since its codification are shown in the Supplement to the 1952 South Carolina Code of Laws.
One of the periods involved in this action is the period from July 1, 1951 (effective date of the South Carolina Sales and Use Tax Act) to October 1, 1953, when Congress deleted the last sentence of Section 9(b) of the Atomic Energy Act of 1946 (42 U.S.C.A. § 1809(b)). This provision was commonly referred to as “the activities clause”. It expressly exempted from state, county or municipal taxation the AEC and its property, activities and income. While this provision was a part of the Atomic Energy Act, the United States Supreme Court, in 1952, decided the case of Carson v. Roane-Anderson, 342 U.S. 232, 72 S.Ct. 257, 96 L.Ed. 257, in which it was held that the State of Tennessee could not collect sales or use taxes from management contractors nor their direct suppliers on items of tangible personal property in the performance of atomic energy functions by reason of Section 9(b) of the Atomic Energy Act. Under the South Carolina Sales and Use Tax Act (Section 65-1421 of the 1952 South Carolina Code of Laws), the use tax is imposed upon the user, storer or consumer of tangible personal property purchased at retail, which, in this case, is du Pont. The decision in Carson v. Roane-Ander-son, measured in the light of the aforementioned section of the South Carolina Use Tax Act, would preclude assessment and collection of use taxes during the period from the enactment of the South Carolina Sales and Use Tax Aet in July, 1951, to October 1, 1953, that is to say during the existence of Section 9(b) of the Atomic Energy Act, “activities” being therein held to be broad enough to cover the use tax during that period.
*30As regards the sales tax during the aforementioned period, July 1, 1951, to October 1, 1953, the provisions of the South Carolina Sales Tax Act must be regarded as having been considered by the South Carolina Supreme Court in State ex rel. Roddey v. Byrnes, 219 S.C. 485, 66 S.E.2d 33, where the sales tax was held to be a tax on the privilege of selling at retail measured by the amount of business done. The Sales Tax Act, therefore, imposed the sales tax on the seller of the goods. The Sales Tax Act has other provisions not passed upon by the South Carolina Supreme Court that must be considered along with the above principle. One of these provisions, as contained in the South Carolina statute during the existence of Section 9(b) of the Atomic Energy Act, was Section 65-1407 of the 1952 South Carolina Code of Laws, which required the seller to add to the purchase price an amount sufficient to make the seller whole by reason of his liability and to pass the same on to the purchaser. Equally important, however, in relation to this aspect are the provisions of Section 65-1409 of the 1952 South Carolina Code of Laws which specifically provide that the provisions of Section 65-1407 of the 1952 South Carolina Code of Laws shall, in no wise, relieve the seller from the tax imposed by the statute either because of inability, impracticability, refusal or failure to add to the sales price and to collect same from the purchaser the amounts provided therein. Therefore, the South Carolina sales tax is one imposed on the seller and being such is not a tax on the “activity” of the AEC. Of course, for the period after March 20, 1954, when the South Carolina Legislature amended the Sales Tax Act so as to make the pass-on provisions permissive instead of mandatory, the plaintiffs are not contesting the liability for sales taxes thereafter, that is, after March 20, 1954 (Allegation 6 of the complaint). On the other hand, plaintiffs are contesting use taxes for the entire period.
One aspect of this case, injected by plaintiffs, has to do with the question of implied constitutional immunity from state taxation. Plaintiffs admitted, at the trial of this case, that except for alleged implied constitutional immunity the South Carolina Sales and Use Tax Act would be sufficient for the imposition and collection of those taxes. The plaintiffs contend that such doctrine extends to cover the purchases of tangible personal property by du Pont and the use of such items by du Pont. The defendants contend that such is not the case.
A review of the cases dealing with the implied constitutional immunity theory reflects that the subject has been treated as it relates specifically to the realm of sales and use taxes. The United States Supreme Court in State of Alabama v. King & Boozer, 314 U.S. 1, 62 S.Ct. 43, 86 L.Ed. 3, held that the application of the Alabama sales tax to sales of tangible personal property, made to a contractor with the United States, infringed no constitutional inhibitions against State taxation of the United States. In the companion case of Curry v. United States, 314 U.S. 14, 62 S.Ct. 48, 86 L.Ed. 9, the United States Supreme Court held the Alabama use tax to be constitutionally unobjectionable. In the later case of Kern-Limerick, Inc. v. Scurlock, 347 U.S. 110, 74 S.Ct. 403, 405, 98 L.Ed. 546, the United States Supreme Court found that the contractors there, under the express terms of the contracts, were purchasing agents for the government and differentiated the case of State of Alabama v. King & Boozer in that important and fundamental particular. A relevant part of the contract considered in Kern-Limerick, Inc. v. Scurlock reads: “The Contractor shall act as purchasing agent of the Government in effecting such procurement and the Government shall be directly liable to the vendors for the purchase price”. Being expressly designated as agents of the government for the specific purpose of buying items of tangible personal property, the legal incidence of the tax fell directly upon the *31United States, and thus infringed the government’s constitutional immunity from taxation. In the case of State of Alabama v. King & Boozer, there was no expressed authority for the contractor to act as an agent of the United States, and the legal incidence of the taxes fell upon the contractor and not upon the United States. The same is true in Curry v. United States.
As has been shown hereinbefore du Pont has not been acting as an agent of the government, but on the contrary as an independent contractor in designing, constructing and operating the Savannah River Project.
In considering plaintiffs’ claim that the doctrine of implied constitutional immunity from state taxation is applicable here, reference must be had to the contract to ascertain du Pont’s status. It expressly made du Pont agent of the government for one purpose and one purpose alone, that is, for the purpose of leasing government owned houses, stores and other buildings. That was the very thing done in the contract between du Pont and the United States respecting the Hanford Project of the AEC, as shown in the case of E. I. Du Pont de Nemours & Co., Inc. v. State of Washington, 1954, 44 Wash.2d 339, 267 P.2d 667, where the Court held du Pont to be an independent contractor and not an agent of the United States. The United States intervened in that case but there was no appeal. Nothing could be clearer than that the contract did not create du Pont an agent to purchase tangible personal property for the government, although the minds of the contracting parties adverted to agency for the purpose of leasing government property for which du Pont was made an agent. Since the contract does not constitute du Pont an agent of the government for the purchase of tangible personal property, the principles laid down in Kern-Limerick v. Scurlock would not be met so as to provide tax immunity to du Pont. That decision by no means holds that agency is to be implied between the parties but rather that the contract to which the parties have agreed shall govern.
The principal items of taxation at issue in this case relate to use taxes, as most of the items of tangible personal property were purchased outside of South Carolina and were brought or caused to be brought into South Carolina for use, storage or consumption by du Pont. The South Carolina Use Tax Act imposes a tax in such circumstances. Section 65-1421 of the 1952 South Carolina Code of Laws; State ex rel. Roddey v. Byrnes, 219 S.C. 485, 66 S.E.2d 33.
The plaintiffs contend that du Pont is not liable for use taxes because title to most of the tangible personal property vested in the United States at points outside of South Carolina and was thereby insulated from state taxation. The defendants, on the other hand, rely on the provisions of the South Carolina Use Tax Act particularly the statutory definition of the word “use” and contend that du Pont is liable for the use taxes under a proper construction and application of the South Carolina statutes dealing therewith. Section 65-1367 of the South Carolina Code of Laws defines “use” in part as the “exercise of any right or power over tangible personal property incident to the ov/nership of that property”. If the statute had stopped right there the position of the plaintiffs might have some merit. However, the statute does not stop there but rather it has another complete clause disjoined from the foregoing quoted portion by the word “or” reading, “or by any transaction in which possession is given”. Thus, “possession” is made the key word. Here du Pont had possession of a large amount of tangible personal property, which it necessarily used in carrying out its obligations to the government, as prime contractor, on the Savannah River Project. Certainly the tangible personal property was used by du Pont, even though it was apart from ownership, precisely what the statute contemplates. The South Carolina statute is different in that particular from the Connecticut *32and Kansas statutes which were considered in the cases of Avco Manufacturing Company v. Connelly, 19 Conn.Sup. 323, 113 A.2d 364, and General Motors Corporation v. State Commission of Revenue and Taxation, 182 Kan. 237, 320 P.2d 807. The holdings in those cases were predicated on the language of the use tax statutes involved.
The March 3, 1958, decisions of the United States Supreme Court in City of Detroit v. Murray Corporation of America, 355 U.S. 489, 78 S.Ct. 458, 2 L.Ed.2d 441, United States of America and Borg-Warner Corporation v. City of Detroit, 355 U.S. 466, 78 S.Ct. 474, 2 L.Ed.2d 424, and United States of America v. Township of Muskegon, 355 U.S. 484, 78 S.Ct. 483, 484, 2 L.Ed.2d 436, support the validity of the South Carolina use tax.
The last cited cases should settle the use tax issue once and for all. It is quite manifest from what is stated in those cases that our Supreme Court does not intend, by strained constitutional construction, to restore to the Atomic Energy Act what was deleted therefrom by the Congress of the United States pursuant to strong public demand that it do so. In the Borg-Warner case it was pointed out by Mr. Justice Black in the leading opinion that the Michigan statute challenged in that case imposed a tax on a private lessee and user of tax exempt property in the conduct of his own business. Further that the taxes imposed by the statute were personal obligations of the private user; that the owner was not liable for the payment of the tax nor was the property itself subject to a lien for the satisfaction of the tax, and that no attempt had been made to levy against the leased property belonging to the government. “Nevertheless”, as Mr. Justice Black went on to say, “the Government argues that since the tax is measured by the value of the property used it should be treated as nothing but a contrivance to lay a tax on that property. We do not find this argument persuasive. A tax for the beneficial use of property, as distinguished from a tax on the property itself, has long been a commonplace in this country. See Henneford v. Silas Mason Co., 300 U.S. 577, 582-583, 57 S.Ct. 524, 526-527, 81 L.Ed. 814.” [355 U.S. 466, 78 S.Ct. 476.]
Obviously, the federal government may not impose federal taxes by contract, since the power to impose federal taxes is vested in the Congress of the United States, or impose state taxes by contract, since the power to impose state taxes is vested in the several States. For the same obvious and basic reasons, the federal government is without power to grant relief from federal or state taxes by the expediency of a contract with a private corporation, since the power to impose taxes necessarily includes the power to grant relief therefrom and that power as respects federal taxes is vested in the Congress and as respects state taxes is vested in the legislative bodies of the several States.
Therefore, whether du Pont may be relieved of state taxes in the performance of its contractual obligations in South Carolina for the government can by no stretch of the imagination be determined by a contract with the AEC in the absence of some valid statute exempting du Pont from such taxation, as by making du Pont an agent with power to bind the government.
Even assuming, without agreeing, that du Pont has rendered without charge services that are valuable to the government, and that the commendable character of the services merit relief from State taxes in the performance of those services it does not follow that the State of South Carolina should bear the sole burden of that relief. This is particularly true since the effect of such relief would not be for the benefit of du Pont, but solely for the government, in relieving it from its contractual obligation to reimburse du Pont for such taxes.
I would dismiss the complaint and enter judgment for the defendants.