Court Opinion

ID: 9427459
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:20:53.03709+00
Date Added: 2024-06-11T17:23:07.349537
License: Public Domain

Mr. Justice White,
dissenting.
I disagree that the Government was estopped from litigating its claim in federal court by virtue of the earlier action in the courts of Montana. And on the merits I think the Montana gross receipts tax is constitutionally infirm. Thus, I would affirm the decision below.
*165I
It is basic that the principle of collateral estoppel "must be confined to situations where the matter raised in the second suit is identical in all respects with that decided in the first proceeding and where the controlling facts . . . remain unchanged.” Commissioner v. Sunnen, 333 U. S. 591, 599-600 (1948). The Court does not dispute this, but maintains that discrepancies in the facts underlying the state and federal actions were of no moment. It is clear, however, that the Montana Supreme Court assumed in Kiewit I that the tax under scrutiny was a tax-enforcing, rather than a revenue-collecting, measure. The significance of that supposition, in my view, is refuted neither by the opinion in Kiewit I nor by the state court’s subsequent pronouncements in Kiewit II. That the assumption lost its force by the time of the federal litigation is undisputed. By then the Federal Government had abandoned its policy of requiring contractors with whom it dealt to forgo credits available under the gross receipts law. Though federal contractors accordingly availed themselves of the credits and refunds allowable under the law, “the uncontroverted evidence in this case establishes that . . . federal contractors are still subject to a [net] gross revenue tax of one-half of one percent.” Ante, at 158-159. Because the facts developed before the three-judge court cast the constitutional issues in a wholly different light, I think the court properly proceeded to decide those issues uninhibited by the prior state adjudication.
At the outset of its discussion in Kiewit I, the Montana Supreme Court labored to demonstrate that the gross receipts tax in issue was a tax-enforcing measure, in that funds collected pursuant thereto would be applied, or credited, against taxes otherwise due. The court understood that the tax had not in practice resulted in a total washout of gross receipts payments, but it attributed this to the Federal Government’s policy prohibiting certain contractors — such as the Kiewit Co. *166itself' — from taking refunds and credits available under the law, and to ignorance of, and indifference to, the credit provisions on the part of other contractors. The court maintained that, aside from such aberrations, the Act was intended to and would “operate as a revenue enforcing measure.” Peter Kiewit Sons’ Co. v. State Board of Equalization, 161 Mont. 140, 146, 505 P. 2d 102, 106 (1973) (emphasis added).
The majority surmises that the state court’s extensive characterization of the tax was irrelevant to the court’s constitutional analysis. But that view relegates to dicta the state court’s careful appraisal of the operation and impact of the tax. By inspecting the state court’s constitutional analysis independently of that court’s evaluation of the nature of the tax, the majority assumes that the constitutional adjudication proceeded in vacuo. The logic of the state court’s decision may well extend to a revenue-raising measure. But to say that Kiewit I may be persuasive authority on that score is not to establish that it has adjudicated the issue.
Moreover, the Court’s reliance on Kiewit II to demonstrate the immateriality of the “washout” nature of the tax to the decision in Kiewit I is misplaced. I recognize that the Montana Supreme Court regarded Kiewit’s second attack— launched after the contractual credit restrictions were removed by the Government — as foreclosed by the judgment in the first suit. But in addressing Kiewit’s objection to the application of the tax in a manner to raise revenue, the court acknowledged that “it may be that Kiewit would be entitled to a refund or some other administrative remedy.” Peter Kiewit Sons’ Co. v. Department of Revenue, 166 Mont. 260, 262, 531 P. 2d 1327, 1328 (1975). The statute, of course, contemplates no such remedy, nor did the court affirmatively construe it to authorize one.1 Yet the court’s remark leaves *167unclear whether, absent such a remedy, the court would persist in holding the tax constitutional. The statement underscores the court’s assumption in Kiewit I that the gross receipts tax was a tax-enforcing device and suggests correla-tively that the decision there did not condone imposition of an unmitigated positive tax solely on public contractors.2 The majority is unsound in inferring from Kiewit II that the ruling in Kiewit I was insensitive to the then-presumed “washout” character of the gross receipts tax.
As I see it, then, there was a “modification of the significant facts” that rendered the prior state “determination obsolete ... at least for future purposes,” Commissioner v. Sunnen, supra, at 599; and the Government was free to litigate its constitutional challenge in federal court.
II
On the merits, the judgment below should be sustained. There is nothing wrong, of course, with a state gross receipts tax of general applicability that incidentally applies to contractors who deal with the Federal Government thus increasing its construction costs. United States v. County of Fresno, 429 U. S. 452, 460 (1977); James v. Dravo Contracting Co., 302 U. S. 134, 160 (1937). “So long as the tax is not directly laid on the Federal Government, it is valid if nondiscriminatory ... or until Congress declares otherwise.” United States v. County of Fresno, supra, at 460.
In Fresno, we stressed the requirement that the state tax be “imposed equally on the other similarly situated constituents of the State.” 429 U. S., at 462. Such concern for discrim*168inatory taxation “returns to the original intent of M‘Culloch v. Maryland[, 4 Wheat. 316 (1819)].” Id., at 462-463. We observed that “[t]he political check against abuse of the taxing power found lacking in M‘Culloch ... is present where the State imposes a nondiscriminatory tax only on its constituents or their artificially owned entities; and M‘Culloch foresaw the unfairness in forcing a State to exempt private individuals with beneficial interests in federal property from taxes imposed on similar interests held by others in private property.” Ibid.
The Montana gross receipts tax cannot survive application of the foregoing principles. It is not a law generally embracing all similarly situated state constituents doing business in the private and public sectors. While mandating collection of revenue from contractors who transact with public entities, the law passes over all contractors who deal with private parties. Thus, the “political check” that would have been provided by private-sector contractors “against abuse of the taxing power [is] lacking.” Ibid.
Appellants maintain that contractors who deal with private enterprises are not situated similarly to those who transact with public bodies. They point to special problems associated with enforcement of state tax laws against contractors prone to move about the State in pursuit of large public contracts. The gross receipts tax measure was necessary, it is argued, in order to facilitate enforcement of other tax laws against such contractors. Concededly, however, the same problems exist with respect to large private contractors; and even assuming that differentiation between public-sector and private-sector contractors is warranted in the context of tax enforcement measures, appellants’ representations provide no basis for discriminating in regard to revenue raising.
The Montana Supreme Court in the Kiewit litigation defended the classification for equal protection purposes by submitting that the public’s stake in the safety of building *169projects, and hence in the qualifications of public contractors, warranted treating public-sector contractors differently from their private-sector counterparts. But these considerations, like the matters advanced by appellants, fail to explain why a tax is collected from the former but not the latter.3 Moreover, though the law may be sustainable against an equal protection assault, the indulgent standard used in that area will not be applied when federal supremacy is threatened. See Phillips Chemical Co. v. Dumas Independent School Dist., 361 U. S. 376, 383-385 (1960). In such circumstances, disparate treatment “must be justified by significant differences between the two classes”; there must be “considerations pro-vid[ing] solid support for the classification.” Id., at 383-384 (emphasis added). It seems plain, then, that private-sector and public-sector contractors are similarly situated for purposes of this litigation.
Ill
Appellants contend, nonetheless, that it is enough that the tax reaches contractors dealing with all public entities — state or federal. Appellants root their contention in this Court’s statement in Phillips Chemical Co. v. Dumas Independent School Dist., supra, at 385, that a State must “treat those who deal with the Government as well as it treats those with whom it deals itself.” (Emphasis added.) But Phillips furnishes no support for appellants’ position. There, the Court held unconstitutional a state tax scheme that treated lessees *170of federal property more severely than lessees of state property. Even before addressing that issue, however, the Court ascertained that there was “no discrimination between the Government’s lessees and lessees of private property.” 361 U. S., at 381. Thus, the Court in Phillips evinced concern for equal treatment of all similarly situated persons connected with both the private and public sector, not just of persons within the public sector.
In any event, I see no basis whatsoever for extracting from the principle that a State may not favor itself over the Federal Government the further proposition that a State may favor its private-sector constituents so long as contractors working for public bodies are taxed. Indeed, in Fresno the Court sustained the tax only after assuring itself that persons who rented federal property were “no worse off under California tax laws than those who work for private employers and rent houses in the private sector.” 429 U. S., at 465. Such laws, reaching broadly across the public and private sectors, are characteristic of those this Court has sustained. E. g., United States v. Detroit, 355 U. S. 466 (1958); Detroit v. Murray Corp., 355 U. S. 489 (1958); Alabama v. King & Boozer, 314 U. S. 1 (1941); James v. Dravo Contracting Co., 302 U. S. 134 (1937); Silas Mason Co. v. Tax Comm’n, 302 U. S. 186 (1937).
There is good reason to insist that a state tax be “imposed equally” on all “similarly situated constituents of the State,” United States v. County of Fresno, 429 U. S., at 462, whether connected with the public sector or private. Broad application of a tax is necessary to guarantee an efficacious “political check” on potentially abusive taxation. The Montana gross receipts tax, limited as it is to public-sector contractors, provides little such assurance. Taxation of contractors dealing directly with the State or state agencies affords no safeguard against discriminatory treatment of federal contracting agencies and the contractors with whom they deal. Any tax *171increase passed along by a contractor would be borne fully by a federal agency but would be offset by the corresponding tax revenues in the case of the State; from the State’s perspective the tax is a washout.
Municipalities and local districts, it is true, do not enjoy the same advantage, and they may resist tax increases that would, if successfully enforced, burden them and the Federal Government alike. But, at least potentially, local subdivisions may secure offsetting state assistance by indirection,4 and that may diminish their incentive to oppose tax hikes. Even assuming, however, that local public bodies share an interest with the Federal Government in restraining taxes, it escapes me why the Government must acquiesce in the limited protection they provide when an enhanced political check would ensue from extension of the tax to other similarly situated state constituents. As I have indicated, there is no support for such a notion in the decisions of this Court. McCulloch, itself, condoned state taxation of private interests in federal property “in common with other property of the same description throughout the State.’’ McCulloch v. Maryland, 4 Wheat. 316, 436 (1819) (emphasis added). And in Fresno we observed that escalation of a state tax so as to destroy or impair a federal function might be forestalled by imposition of the tax “on the income and property interests of all other residents and voters of the State.” 429 U. S., at 463 n. 11. These decisions counsel against nice determinations regarding the political leverage of this group or that and establish the simple but fundamental proposition that the Federal Government is entitled to the full measure of protection *172derivable from inclusion of all similarly situated state constituents in the class subject to the tax.
Appellants suggested at oral argument that private-sector contracting comprises a relatively small percentage of all contracting in the State and argue that exclusion of private-sector contractors from the ambit of the gross receipts tax is therefore excusable. But appellants do not seriously contend that private-sector contracting in Montana is de minimis, nor would any such assertion find support in the record.5 Private contracting parties, if subjected to this tax, would provide significant additional protection against abuse of the state taxing power. Exempting the private sector from the Montana gross receipts tax was accordingly contrary to the Constitution.
As I believe the three-judge court properly reached and decided the merits of the Government’s claim, I dissent from reversal of the judgment below.

 The Administrator of the Miscellaneous Tax Division of the Montana Department of Revenue testified in the federal proceedings that no administrative remedy existed and that none was contemplated. Deposition of James Madison, Record Doc. No. 68, p. 16.

 It is true that the court indicated that its first opinion held that there were reasonable grounds for distinguishing between private and public contractors for tax purposes. But the discussion differentiating private and public contractors to which the court alluded was addressed to Kiewit’s equal protection claim, not its supremacy claim. See Peter Kiewit Sons’ Co. v. State Board of Equalization, 161 Mont. 140, 146-151, 505 P. 2d 102, 106-109 (1973).

 The court suggested that public contractors warrant special tax treatment because public construction projects are more extensively regulated than private jobs and are subject to mandatory supervision or inspection. But the State has stipulated that no “federal contracts [are] subject to state standards, review or supervision, nor [does the State] have any right or authority to suspend any federal contractor’s license, nor can the [State] interfere with selection of bidders for the Federal Government.” App. to Juris. Statement 79. Thus, the considerations posited by the state court do not distinguish private-sector contractors from those who deal with the Federal Government.

 Montana has authorized payment of state funds to local political entities in certain contexts. E. g., Mont. Rev. Codes Ann. §§ 50-1802 to 50-1810 (Supp. 1977) (funding for certain highway improvements and expansion, of services due to coal development); § 11-1834 (Supp. 1977) (state payments to municipalities with police departments); § 11-1919 (Supp. 1977) (state payments to municipalities with fire department relief associations).

 The record indicates, if anything, that private-sector contracting is nonnegligible. See App. 108-109, 166-167, 179, 183. See also Bureau of the Census, 1972 Census of Construction Industries 39-2, 39-4, 39-7 (1975).