Court Opinion

ID: 9675040
Source: CourtListenerOpinion
Date Created: 2023-08-24 04:40:14.499205+00
Date Added: 2024-06-11T18:16:31.181124
License: Public Domain

ROBSON, District Judge
(dissenting)..
I am impelled to disagree with the-Court’s conclusion because of the firmness of my conviction that the United' States Government has been discriminated against and its sovereignty disregarded and impaired by the imposition of the-instant tax. I believe there is a serious-doubt that an exemption from the tax of a classification limited to charities,, religious, and educational institutions has; a sound basis in the law, as stated by the-Court in its opinion.
While this classification may be appropriate under ordinary circumstances, I *761■am of the opinion there is no legal justification for eleemosynary institutions being elevated to a position superior to that of the Federal Government, which .has the primary responsibility of protecting our welfare and serving the public good. Assuming, as is pointed out in ‘the cases, that technically there is a basis ■for differentiating between the two clas.sifications because the Government has .a means for self-support, whereas charities do not, it does not follow that the •classifications exempted are entitled to receive or may receive any more favored treatment than the Government itself ■which, as the Illinois Supreme Court recognized, “is sharing more and more the responsibilities formerly committed •solely to the State and its local governments.” (The People ex rel. Holland Coal Company v. Theodore J. Isaacs, Director of Revenue, 22 Ill.2d 477, 484, 176 N.E.2d 889, 893 (1961)). This difference, therefore, under the instant facts, •could be said to be dubious and illusory.
A fundamental principle of law proscribes discrimination in the treatment •of the Federal Government in the imposition of taxes. It was said in United States, et al. v. City of Detroit, 355 U.S. 466, at p. 473, 78 S.Ct. 474, at p. 478, 2 L.Ed.2d 424 (1958):
“It still remains true, as it has from the beginning, that a tax may be invalid even though it does not fall directly on the United States if it operates so as to discriminate against the Government or those with whom it deals. Cf. McCulloch v. Maryland, 4 Wheat. 316 [4 L.Ed. 579].”
There could be no stronger emphasis of the immutability of this principle than was stated in the Moses Lake Homes, Inc., et al. v. Grant County decision, 365 U.S. 744, 751, 81 S.Ct. 870, 874, 6 L.Ed.2d 66, that “If anything is settled in the law, it is that a State may not discriminate against the Federal Government * * (Italics supplied.) That statement was made by the United States Supreme Court in 1961. In Phillips Chemical Co. v. Dumas Independent School District, 361 U.S. 376, at p. 387, 80 S.Ct. 474, at p. 481, 4 L.Ed.2d 384 .(I960), the Court said “[I]t still remains true * * * that a state tax may not discriminate against the Government or those with whom it deals.” In upholding the validity of a state tax in the case of City of Detroit et al. v. Murray Corporation of America et al., 355 U.S. 489, at p. 495, 78 S.Ct. 458, at p. 462, 2 L.Ed.2d 441 (1958), the same Court said: “There was no discrimination against the Federal Government, its property or those with whom it does business.” (Italics supplied.)
The items here subjected to the Illinois tax were aircraft engine starter cartridges for the United States Air Force aircraft, required for national defense. They must be deemed indispensable to the functioning of the Government in its most basic aspect. The Supreme Court decisions would indicate that the State may not impede such functions of the Government by imposing taxes. In the case of Panhandle Oil Company v. Mississippi ex rel. Knox, Attorney General, 277 U.S. 218, at pp. 221-222, 48 S.Ct. 451, at p. 453, 72 L.Ed. 857 (1928), it was said:
“The United States is empowered by the Constitution to maintain and operate the fleet * * *. That authorization and laws enacted pursuant thereto are supreme * * * and, in case of conflict, they control state enactments. The States may not burden or interfere with the exertion of national power or make it a source of revenue or take the funds raised or tax the means used for the performance of federal functions. * * * The right of the United States to make such purchases is derived from the Constitution. The petitioner’s right to make sales to the United States was not given by the State and does not depend on state laws; it results from the authority of the national government under the Constitution to choose its own means and sources of supply. * * [7]i [Mississippi] may not lay any *762tax upon transactions by which the United States secures the things desired for its governmental purposes.
“The validity of the taxes claimed is to be determined by the practical effect of enforcement in respect of sales to the government. * * * The amount of money claimed by the State rises and falls precisely as does the quantity, of gasoline so secured by the government. * * * The necessary operation of these enactments when so construed is directly to retard, impede, and burden the exertion by the United States of its constitutional powers to operate the fleet * * *. To use the number of gallons sold the United States as a measure of the privilege tax is in substance and legal effect to tax the sale. * * * And that is to tax the United States * * *.
“The exactions demanded * * * infringe its right to have the constitutional independence óf the United States in respect of such purchases remain untrammeled.” (Italics supplied.)
Not only do I believe this tax to be illegal because discriminatory, but also because it is in violation of the sovereign immunity of the United States. This principle of sovereignty was stated in the United States v. Allegheny County case, 322 U.S. 174, at p. 177, 64 S.Ct. 908, at p. 911, 88 L.Ed. 1209, thus:
“ * * * [Ujnshaken, rarely questioned * * * is the principle that possessions, institutions, and activities of the Federal Government itself in the absence of express congressional consent are not subject to any form of state taxation.”
It was there said (at p. 183, 64 S.Ct. at p. 913) that the “purpose cf the supremacy clause was to avoid the introduction of disparities, confusions and conflicts which would follow if the Government’s general authority were subject to local controls.”
The rule of sovereignty was clearly recognized in the case of Kern-Limerick, Inc., et al. v. Scurlock, Commissioner of Revenues for Arkansas, 347 U.S. 110, at p. 122, 74 S.Ct. 403, at p. 411, 98 L.Ed. 546 (1954), where the Supreme Court said:
“The doctrine of sovereign immunity is so embedded in constitutional history and practice that this Court cannot subject the Government or its official agencies to state taxation without a clear congressional mandate.”
In that case the Government was, as here, under a contract to stand the burden of the state taxes imposed. The Court said that the recognition of the constitutional immunity of the Federal Government from state exactions rests upon unquestioned authority. A somewhat similar statement is made. in United States et al. v. County of Allegheny, 322 U.S. 174, 176, 64 S.Ct. 908 (1944). The Court also said in that case, at p. 186, 64 S.Ct. at p. 915 that
“The fact that materials are destined to be furnished to the Government does not exempt them from sales taxes imposed on the Contractor’s vendor. But in all of these cases what we have denied is immunity for the contractor’s own property, profits, or purchases. We have not held either that the Government could be taxed or its contractors taxed because property of the Government was in their hands. The distinction between taxation of private interests and taxation of governmental interests * * * is fundamental in application of the immunity doctrine as developed in this country.” (Italics supplied.)
I am impressed with the importance of the principle that “in passing on the constitutionality of a state tax ‘we are concerned only with its practical operation,’ * * * we must look through form and behind labels to substance.” (City of Detroit et al. v. Murray Corporation of America et al., 355 U.S. 489, 492, 78 S.Ct. 458, 460 (1958)). As the Government points out in its brief, the tax, in legal incidence as well as practical operation, falls on the vendee — the *763United States. This was recognized by the Illinois Supreme Court in its second opinion in People ex rel. Holland Coal Company v. Theodore J. Isaacs, Director of Revenue, 22 Ill.2d 477, at p. 480, 176 N.E.2d 889, at p. 891 when it said:
“It is the common and accepted practice of persons subject to the retailers’ occupation tax to quote and collect the tax separately from the selling price. In such circumstances the burden of the tax is shifted forward to the purchaser.”
But irrespective of that statement we are not bound “where a federal right is concerned * * * by the characterization given to a state tax by state courts or Legislatures, or relieved by it from the duty of considering the real nature of the tax and its effect upon the federal right asserted.” United States v. County of Allegheny, 322 U.S. 174, 184, 64 S.Ct. 908, 914 (1944).
The pleadings in this case disclose the very real and substantial effect which the Illinois tax actually has upon the United States which is required to pay nearly a million dollars in taxes on the aircraft parts it purchased. No charity, educational institution or religious organization is required to pay any tax on its purchases made to fulfill its functions. It therefore seems self-evident that for the United States Government to be subjected to the incidence of the tax in the purchase of parts for defense is highly discriminatory and unjust, as well as an impairment of sovereignty, and therefore unconstitutional under the ancient doctrine of McCulloch v. Maryland, 4 Wheat. 316, 4 L.Ed. 579 and all the numerous later cases which have adhered to its pronouncement.
It would follow from my conclusion that the tax act here involved is invalid and unconstitutional as being discriminatory against the United States and impairing its sovereignty, that I would deny defendant’s motion to dismiss and allow plaintiffs’ motion for entry of judgment in accordance with the prayer of the second amended complaint.